Thursday, June 19, 2008

SAP-ASSETS ACCOUNTING MANAGEMENT IN FI/CO

Assets accounting

Assets account.

The assets accounting component consists of the following parts:

1. Traditional accounting

2. Processing leased assets

3. Preparation of consolidation

4. Information system

Fixed assets structure

Balance sheet level

Classification level

Asset related level-----------Group assets, Main assets, Asset sub master, Line items.

Group assets + Main asset = Asset class.

Assets types

Ø Tangible assets

Ø Intangible assets

Ø Financial Assets

Every asset transaction is linked to a transaction type.

1. Type of Asset Acquisition

Goods receipt – an asset is received via the logistical process when acquired from a

supplier.

Direct invoice – an asset is purchased via direct invoice, for example, on credit card

from a supplier.

Settlement of a construction in progress – when the costs that are involved in a project,

consisting of multiple items, is completed.

2. Transfer

To an affiliate fund – transfer to another fund within the organization

Due to reclassification – an asset is reclassified

3. Retirement

With revenue or without revenue

When a request to dispose of an asset is received, assets that are in usable condition

must be screened to determine if they can be used by another area. If the asset cannot be

used by another area, the asset will be retired/disposed as follows:

Trade-ins

Sale

Donations

Scrap

Lost/stolen

Once an item has been retired, the information about the retirement will be captured,

including the type, date and related proceeds or trade-in value if applicable.

Both groups of assets or portions of single assets may need to be disposed. The system

has the capability of performing partial and mass disposition of assets. Disposed assets

can be returned to service.

Financial and Controlling

Asset Life Cycle

The life cycle of an asset consists of 5 phases:

1. Create the Asset Master Record

2. Acquire the Asset

3. Change / transfer asset

4. Depreciation

5. Retire

Asset Procurement Summary

The overall asset procurement process is comprised of the following steps:

1. The request for an asset purchase. This is usually in the form of a purchase requisition

created manually.---MM

2. The source of supply is determined for the needed item by either the purchasing

department or the system.---MM

3. The requisition is assigned to a vendor.---MM

4. A purchase order is created with reference to the requisition. An asset master record can

be created at the time the purchase order is created in SAP or prior to the purchase order.---MM

5. The system provides automated expediting and follow-up reminders to ensure prompt

delivery of the order.---MM

6. The asset is received into the warehouse via purchase order goods receipt. The asset is

valued at the time of goods receipt. The asset's quantity is updated at time of goods

receipt.—MM/WM

7. The invoice is validated by comparing it to the original purchase order price and to the

quantity received. The asset value will be adjusted for any price difference at the time of

invoice.---FI/MM-GR/IR> PRICE DIFF BETWEEN GR AND INV.

8. Vendor payment will be made based on payment terms and conditions defined in

accounts payable.---FI

9. The Asset will depreciate monthly.—FI-AA

Assets include:

• Buildings

• machinery

• Vehicles

FF&E

In SAP, assets will fall into different asset classes. Each asset class has been assigned to a

specific general ledger account. The tables below and on the next page outline specific

details about each asset class.

Account determintion

Asset class

GL account

Depreciation

EXP

Useful life

Cost center

10000

land

200000

400000

10

Primary

20000

building

300000

400001

10

Primary

30000

vehicle

400000

400002

10

primary

40000

Plant & machinery

500000

400003

10

primary

50000

Furniture

600000

400004

10

Primary

60000

Capital work in progress

700000

400005

10

Primary







Cost centers must always be G&A for asset classes 171000 – 179000, APF, and OTHER.

All of these asset classes must have cost centers that map to RAMCAS department 00

though some may be posted to the actual activity as long as the department is 00. See the

chart below for which activity a cost center must be posted to.

Accumulated depreciation on building

Accumulated depreciation on plant

Accumulated depreciation on furniture

Accumulated depreciation on vehicles

Loss on sale of assets

Profit on sale of assets

Loss on sale of scrap

Sale of assets

Account determination

One of the most important functions of the Assets class is to establish the connection between the assets master record and the corresponding accounts in the general ledger in financial accounting. The connection is created by the account determination key in asset class.

Functions of Asset Accounting include:

1. Acquisition

2. Transfers

3. Depreciation

4. Settling of construction in progress

5. Retirements, disposals and trade ins

Acquisitions occur when a fund acquires a new asset.

Asset transfers are required whenever an asset is moved.

This can occur when:

An asset is moved between funds or bases.

Assets used during the duration of a project or contract may have to be transferred to

single or multiple locations upon completion of the task. This is referred to as Assets under

Construction (Construction in Progress).

Depreciation

Depreciation is the reduction of the book value of an assets due to its usage over time or due to legal framework for taxation reporting. The depreciation is usually calculated taking into consideration the economic life of assets. Expected value of the assets at the end of the time.

Depreciation either can be planned and unplanned.

Planned depreciation in one which brings down the value of the assets after every planned period. Say every month ,till the ssets value is fully depreciated over its life period. By the this you will know what will be the value of the asset at any period of time in its active life.

Unplanned depreciation is a sudden happening of an event or occurrence not foreseen resulting in a permanent reduction of the value of the assets.

ASSETS CLASS;

Assets class is the basis for classifying an assets based on business and legal requirements.It is essentially a grouping of assets having certain common characteristics. Each assets in the system needs to be associated with an assets class.

When a current asset depreciates in value the value of the asset is re-established

Assets class is the link between the assets master record and the relevant accounts in the gl and account determination in the assets class enables you to post the relevant gl account.

Retirement of an asset

When a current asset reaches the end of its useful life or expires in a different way, it can

be retired by:

Sale of the asset

Scrapping of the asset

An old asset is traded in for a new one

Depreciation Policies

Book depreciation

Cost depreciation

Tax depreciation

Depreciation method

WDV METHOD

STRAIGHT LINE METHOD

SUM OF YEARS DIGITAL METHOD

CHART OF DEPRECIATION

The chart of depreciation contains a list of Country specific depreciation areas. It provides the rules for the evaluation of assets that are valid in a given country or economic area. Sap comes supplied with default chart of depreciation that are based on the requirements of each country.

These default chart of depreciation also serve as the reference charts from which you can create a new chart of depreciation by copying one of the relevant charts of depreciation.

ü You are required to assign the chart of depreciation to company code.

ü The one COD can be assigned to multiple company codes.

The prime difference between chart of depreciation and chart of accounts are :

A. Chart of depreciation is a collection of Country specific depreciation areas.

B. The chart of accounts is a list of GL accounts used in company code. The Chart of accounts contain

1. Chart of accounts area

2. Company code area

There are three types of chart of accounts

1. Operating chart of accounts

2. Group chart of accounts

3. Country specific chart of accounts

1.Chart of depreciation is only country specific

The first step of Assets accounting Management

Step -1 Define company codes

Step-2 Assign company code to chart of accounts

Step-3 Define chart of depreciation

Step- 4 Assign nontaxable tax code to company code

Step-5 Assign chart of depreciation to company code

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