SAP Finance Basics Flashcards

Question 1

What is a company code in SAP Finance?

Accepted Answer

A company code is the smallest organizational unit for which a complete, self-contained set of financial accounts can be maintained and external financial statements can be produced. It is the legal entity level in most implementations. Balance sheets and profit and loss statements are typically created for each company code.

Question 2

What is a chart of accounts and how does it relate to company codes?

Accepted Answer

A chart of accounts is a list of general ledger account numbers and descriptions used to classify every financial posting. A chart of accounts can be assigned to one or more company codes, and in many setups a group chart of accounts is used to harmonize reporting across them.

Question 3

What is a fiscal year variant and why does it matter?

Accepted Answer

A fiscal year variant defines the number of posting periods in a fiscal year and the calendar months they cover, including any special periods used for adjustments at year end. It matters because every posting date is mapped to a specific posting period, which controls when transactions can be entered and reported.

Question 4

What is a controlling area and how does it differ from a company code?

Accepted Answer

A controlling area is an organizational unit used by Controlling to manage internal cost and revenue accounting, and it can span one or several company codes. A company code is a legal and financial accounting unit, while the controlling area supports management reporting. Each company code must be assigned to exactly one controlling area.

Question 5

What is a document in SAP Finance and what does it contain?

Accepted Answer

An accounting document is the record created whenever a business transaction is posted in SAP Finance. It contains header information such as company code, document date, posting date, and document type, along with line items that show account numbers, amounts, debit and credit indicators, and cost objects.

Question 6

Why does every accounting document need to balance in double-entry bookkeeping?

Accepted Answer

Every accounting document must balance because double-entry bookkeeping requires total debits to equal total credits for each transaction. SAP Finance enforces this rule during posting, so an unbalanced document cannot be posted. This balance keeps the general ledger internally consistent and makes trial balance checks meaningful.

Question 7

What is the difference between a debit and a credit in SAP Finance?

Accepted Answer

A debit is an entry on the left side of an account, and a credit is an entry on the right side. Whether a debit or credit increases an account depends on its type: debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts.

Question 8

What is master data in SAP Finance and why must it be maintained carefully?

Accepted Answer

Master data is the long-lived reference information, such as G/L accounts, vendors, customers, and cost centers, that transactions draw on when documents are posted. Because every posting inherits its classification from master data, errors in these records spread into reports. Careful maintenance, with defined approval and change controls, keeps financial results reliable.

Question 9

What is the general ledger in SAP Finance?

Accepted Answer

The general ledger is the central record of all financial accounts for a company code, where summarized balances for assets, liabilities, equity, revenue, and expenses are maintained. In SAP S/4HANA, the general ledger is built on the Universal Journal, which stores line items for financial and management accounting together.

Question 10

What is the difference between a G/L account and a reconciliation account?

Accepted Answer

A G/L account is any account in the chart of accounts used to record balances. A reconciliation account is a G/L account linked to a subledger, such as accounts payable or accounts receivable, so its balance must agree with the total of open items in that subledger. Postings usually come through the subledger.

Question 11

What is a manual journal entry and when is it used?

Accepted Answer

A manual journal entry is a general ledger document that an accountant enters directly, rather than one generated automatically by a subledger or another module. It is typically used for accruals, reclassifications, depreciation adjustments, and corrections that have no originating business document in another module.

Question 12

What is an accrual and why is it posted at period end?

Accepted Answer

An accrual records an expense or revenue in the period it was incurred or earned, even though the invoice or cash movement occurs later. It is posted at period end so that financial statements follow the matching principle and do not understate costs or overstate income.

Question 13

What is a clearing document and what does clearing do?

Accepted Answer

Clearing is the process of matching an open item, such as an invoice, with a payment or other offsetting item so that both are marked as settled. The clearing document records this link and the open item no longer appears in the open item list. Clearing keeps subledger balances accurate.

Question 14

What is a parked document and how does it differ from a posted document?

Accepted Answer

A parked document is saved with incomplete or unapproved data and does not update account balances. A posted document has been fully validated and immediately updates the general ledger and subledger balances. Parking lets users save work in progress and route it for review before it is posted.

Question 15

What is a document type and how does it affect posting?

Accepted Answer

A document type is a two-character key that classifies an accounting document, such as a customer invoice, vendor invoice, or general journal entry. It determines the number range used, the account types allowed, and the posting rules and reference controls that apply.

Question 16

How does a foreign currency posting affect the general ledger?

Accepted Answer

A foreign currency posting records the transaction amount in the document currency and translates it into the company code currency using an exchange rate. The general ledger stores both amounts, so balances can be reported in local currency. Exchange rate differences arising later are posted as gains or losses at revaluation.

Question 17

What is the purpose of the accounts payable subledger?

Accepted Answer

The accounts payable subledger tracks the amounts a company owes to each vendor, showing individual open invoices, payments, and running balances. It supports payment runs and vendor reporting while the total of all vendor balances reconciles to the accounts payable reconciliation account in the general ledger.

Question 18

How does a vendor invoice typically get posted into accounts payable?

Accepted Answer

A vendor invoice is entered as a vendor invoice document, which debits the expense or inventory account and credits the vendor's account in the accounts payable subledger and reconciliation account. When the invoice references a purchase order and goods receipt, SAP can check quantities and prices before posting.

Question 19

What is a payment run in accounts payable?

Accepted Answer

A payment run is an automated process that selects due vendor invoices based on criteria such as due date, company code, and payment method, then creates payment documents for them. It can produce payment media for the bank and clears the open items when payments are posted.

Question 20

What is the accounts receivable subledger and what does it track?

Accepted Answer

The accounts receivable subledger records the amounts customers owe the company, tracking individual customer invoices, credit memos, incoming payments, and open items by customer. Its total must agree with the accounts receivable reconciliation account in the general ledger. This allows collection follow-up and aging analysis.

Question 21

What is a dunning procedure and why is it used?

Accepted Answer

A dunning procedure is a set of rules that identifies overdue customer invoices and generates payment reminder letters at defined levels. It is used to encourage timely collection, and each dunning level can apply different wording, due date rules, and charges depending on how overdue the item is.

Question 22

What is a three-way match in accounts payable?

Accepted Answer

A three-way match compares the purchase order, the goods receipt, and the vendor invoice before an invoice is released for payment. The quantities and prices must agree within defined tolerances, which helps prevent overpayment and invoices for goods never received. Invoices outside tolerance are blocked for review.

Question 23

What is an incoming payment, and how is it matched to customer invoices?

Accepted Answer

An incoming payment is a receipt of money from a customer, recorded against the customer's account in the accounts receivable subledger. It is matched to open invoices either automatically, using reference data such as invoice numbers, or manually, by selecting the items to clear. Once matched, the invoices are cleared and no longer show as open.

Question 24

What is an aging report and why do finance teams use it?

Accepted Answer

An aging report lists open receivable or payable items grouped by how long they have been outstanding, such as current, 30 days, 60 days, and beyond. Finance teams use it to prioritize collections, judge customer credit risk, and plan cash needs for supplier payments.

Question 25

What is a cost center and what is it used for?

Accepted Answer

A cost center is an organizational unit, such as a department, that incurs costs and is responsible for controlling them. Costs posted to a cost center are collected and reported by the controlling area so managers can compare planned and actual spending.

Question 26

What is a cost element and how does it relate to a general ledger account?

Accepted Answer

A cost element classifies costs and revenues in Controlling, and primary cost elements are created from general ledger accounts that represent expenses or revenues. In many setups the cost element and the G/L account share the same number, which links financial postings to management reporting.

Question 27

What is an internal order and what is it used to track?

Accepted Answer

An internal order is a controlling object used to collect costs for a specific task, project, event, or short-term activity that does not belong to a permanent cost center. Settlement moves the accumulated costs to a final receiver, such as a cost center, asset, or G/L account, when the work is complete.

Question 28

What is a profit center and how does it differ from a cost center?

Accepted Answer

A profit center is an organizational unit that is responsible for both revenues and costs, so its results can be measured as a profit or loss. A cost center is responsible only for costs. Profit center accounting allows management to evaluate business segments, product lines, or regions as if they were separate businesses.

Question 29

What is an activity type and how is it used in cost allocation?

Accepted Answer

An activity type is a unit of service, such as machine hours or labor hours, that a cost center provides to other objects. Sending objects record activity quantities, and SAP charges receivers at a planned or actual activity price, which allocates the cost center's costs to the objects that consumed the service.

Question 30

What is the difference between planned and actual costs in Controlling?

Accepted Answer

Planned costs are the budgeted amounts entered for a period, often based on plan prices and quantities, while actual costs are the amounts recorded from real postings and allocations. Comparing the two shows variances, which managers use to explain why spending differed from expectations and to adjust future plans.

Question 31

What is a cost object and which objects can receive costs?

Accepted Answer

A cost object is any entity to which costs are assigned for measurement, such as a product, project, order, customer, or cost center. Controlling objects like internal orders, WBS elements, and sales orders can act as cost objects, so costs posted to them are tracked and reported separately.

Question 32

What is a secondary cost element and when is it used?

Accepted Answer

A secondary cost element is created in Controlling to record internal allocations, such as overhead distributions, activity charges, and settlements between objects. It has no counterpart in external financial accounting, so it appears only in management reporting. Its postings net to zero across the controlling area.

Question 33

What is period-end closing in SAP Finance and why is it done?

Accepted Answer

Period-end closing is the set of steps that finalizes a posting period so no further postings can change its results. It typically includes posting accruals and adjustments, running depreciation, revaluing foreign currency balances, reconciling subledgers, and then closing the period for posting. This ensures reports for the period are accurate and complete.

Question 34

Why must subledgers be reconciled with the general ledger before closing?

Accepted Answer

Subledgers must be reconciled because the totals of accounts payable, accounts receivable, and other subledger balances should equal the matching reconciliation accounts in the general ledger. A difference signals missing postings, failed postings, or manual entries that bypassed the subledger, and it should be investigated before the period is closed.

Question 35

What is a depreciation run and why does it matter at period end?

Accepted Answer

A depreciation run is a process in Asset Accounting that calculates periodic depreciation for fixed assets and posts the resulting expense and accumulated depreciation to the general ledger. It matters at period end because it allocates asset costs over their useful lives, so expense is recognized in the correct period.

Question 36

What is foreign currency revaluation and when is it performed?

Accepted Answer

Foreign currency revaluation adjusts open balances in foreign currency, such as open receivables and payables, to the exchange rate in effect on the period-end date. The resulting unrealized gains or losses are posted to the general ledger. It is normally performed during period-end closing, and the postings are often reversed in the following period.

Question 37

What is the difference between a balance sheet and a profit and loss statement?

Accepted Answer

A balance sheet reports a company's assets, liabilities, and equity at a specific point in time. A profit and loss statement reports revenues and expenses over a period and calculates net income. In SAP Finance, both are generated from general ledger balances.

Question 38

What is a trial balance and what does it show?

Accepted Answer

A trial balance is a report listing every general ledger account with its debit or credit total for a period, and the sum of all debits must equal the sum of all credits. It is used as a check on the integrity of postings before financial statements are prepared.

Question 39

What is a financial statement version and how is it used in reporting?

Accepted Answer

A financial statement version is a configured layout that maps general ledger accounts or account groups to report lines, such as assets, liabilities, and revenue. It defines the structure of the balance sheet and profit and loss statement, so reports can be generated and rearranged without changing the underlying postings.

Question 40

What is a posting period lock and why is it used?

Accepted Answer

A posting period lock is a control that prevents new postings, or restricts them to authorized users, in a closed period. It is used to protect reported results after close, so that late transactions are recorded in an open period and reviewed through established adjustment processes.

SAP Finance Basics Flashcards

1Core Concepts and Organizational Structure

2General Ledger Accounting Fundamentals

3Accounts Payable and Receivable

4Controlling and Cost Accounting

5Period-End Closing and Reporting

Learning Resources