SAP FICO Interview Questions
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SAP FICO Interview Questions
Q. Explain the term SAP FICO?
SAP FICO stands for FI ( Financial Accounting) and CO (controlling). In SAP FICO, SAP FI take cares about accounting, preparation of financial statements, tax computations etc, while SAP CO take cares of inter orders, cost sheet, inventory sheet, cost allocations etc. It is the software that stores data, and also computes them and retrieves the result based on the current marketing scenario. SAP FICO prevents data lost and also does the verification and reporting of data.
Q. What are the other modules to which ‘Financial Accounting’ is integrated?
The other modules to which ‘Financial Accounting’ is integrated are
- Sales and Distribution
- Material Management
- Human Resource
- Production Planning
- Controlling of financial transaction
Q. In SAP FI what are the organizational elements?
The organizational elements in SAP FI are:
- Company Code
- Business Area
- Chart of Account
- Functional Area
Q. Explain what is posting key and what does it control?
In order to determine the transaction type which is entered in the line item, a two digit numerical is used known as ‘Posting Key’
Posting key determines
- Account Types
- Types of posting. Debit or Credit
- Field status of transaction
Q. What is the company code in SAP?
To generate financial statements like Profit and Loss statement, Balance sheets etc. company code is used.
Q. How many Chart of Accounts can company code have?
You can have one Chart of Account for one company code which is assigned.
Q. For a Company Code how many currencies can be configured?
There are three currencies that can be configured for a Company code, one is a local currency and two are the parallel currencies.
Q. What are the options in SAP for Fiscal years?
Fiscal year in SAP is the way financial data is stored in the system. In SAP, you have 12 periods and four special periods. These periods are stored in fiscal year variant that is:
- Calendar Year: From Jan-Dec, April-March
- Year dependent fiscal year
Q. What is a ‘year shift’ in SAP calendar?
SAP system does not know what is broken fiscal year e.g April 2012 to March 2013 and only understand the calendar year. If, for any business, the fiscal year is not a calendar year but the combination of the different months of two different calendar year and then one of the calendar year has to classified as a fiscal year for SAP and the month falling in another year has to be adjusted into the fiscal year by shifting the year by using the sign -1 or +1. This shift in the year is known as ‘year shift’.
Example: April 2012 to Dec 2012 is our first calendar year, and Jan 2013 to March 2013 is our second year, now if you are taking April-12 to Dec-12 as your fiscal year, then Jan-13 to March-13 automatically becomes the second year, and you have to adjust this year by using -1 shift, and vice versa if the scenario is reversed, here you will use +1 shift.
Q. What is year dependent fiscal year variant?
In a year dependent fiscal year variant, the number of days in a month is not as per the calendar month. For example, in year 2005, month January end on 29th, month Feb ends on 26th etc.
Q. In SAP how input and output taxes are taken care?
For each country tax procedure is defined, and tax codes are defined within this. There is a flexibility to either expense out the Tax amounts or capitalise the same to stocks.
Q. Explain what is validations and substitutions in SAP?
For each functional area in SAP Validation or Substitution is defined eg, Assets, Controlling etc. at the following levels
- Document Level
- Line item Level
Q. What are the application areas that use validation and substitutions?
- FI- Financial accounting
- CO-Cost accounting
- AM-Asset accounting
- GL-Special purpose ledger
- PS-Project system
- RE-Real estate
- PC-Profit center accounting
Q. In SAP what is the use of FSV ( Financial Statement Version)?
FSV ( Financial Statement Version) is a reporting tool. It can be used to extract final accounts from SAP like Profit and Loss Account and Balance Sheet. The multiple FSV’s can be used for generating the output of various external agencies like Banks and other statutory authorities.
Q. What is a field status group?
‘Field status groups’ control the fields which come up when the user does the transactions. In FIGL (Financial General Ledger) master, the field status group is stored.
Q. What is FI-GL (Financial- General Ledger) Accounting does?
To get an overview of external accounting and accounts, G L (General Ledger) accounting is used. It does the recording of all business transactions incorporated with all other operational areas in a software system and also ensures that the accounting data is always complete and accurate.
Q. What is the default exchange rate type which is picked up for all SAP transactions?
For all SAP transaction, the default exchange rate is M (Average Rate).
Q. What are the methods by which vendor invoice payments can be made?
- Manual payment without the use of any output medium like cheques etc.
- Automatic payments like DME (Data Medium Exchange), cheques, Wire transfer
Q. What are the problems when business area is configured?
The problem faced when a business area is configured, is splitting of account balance which is more pertinent in the case of tax accounts.
Q. For document clearing what are the customizing prerequisites?
The customizing pre-requisite for document clearing is to check the items cleared and uncleared, and this is done by open item management. Open item management manages your outstanding account, i.e account payable and account receivable. For instance, an invoice item that has not yet been paid is recorded as open account until it is paid.
Q. What is the importance of GR/IR ( Good Received/ Invoice Received) clearing account?
GR/IR ( Good Received/ Invoice Received) is an interim account. In the legacy system, if the goods are received and the invoice is not received, the provision is made, in SAP at the goods receipt. It passes the accounting entry debiting the Inventory and crediting the GR/IR account. Similarly, when an invoice is received the vendor account is credited, and the GR/IR account is debited, the GR/IR will show as an un-cleared items till the time the invoice is not received.
Q. What is parallel and local currency in SAP?
Each company code can have two additional currencies, in addition to the company code, currency entered to the company code data. The currency entered in the company code creation is called local currency and the other two additional currencies are called parallel currencies. Parallel Currencies can be used in foreign business transactions. In order to do international transaction, parallel currency can be used. The two parallel currencies would be GROUP CURRENCY and HARD CURRENCY.
Q. Where can you use the internal order?
To track the cost, internal orders are used; they are proposed to be incurred over on a short term basis.
Q. Is it possible to calculate depreciation to the day?
Yes, it is possible to calculate depreciation, to do that you have to switch on the indicator Dep. to the day in the depreciation key configuration.
Q. In Asset Accounting what is the organizational assignments?
In Asset Accounting, chart of depreciation is rated as the highest node, and this is assigned to the company node. All the depreciation calculations are stored under the chart of depreciation.
Q. What is the importance of asset classes? What asset classes are there?
The asset class is the main class to classify assets. Every asset must be assigned to only one asset class. Example of asset class is Furniture & Fixtures, Plant & Machinery, and Computers etc. The asset class also contains G1 account, when any asset is procured, G1 account is debited. Whenever you create and asset master, it becomes mandatory to mention the assest class for which you are creating the required assets. So, whenever any asset transaction occurs, the G1 account attached to the asset class is automatically picked up and the entry is passed. You can also specify the default values for calculating the depreciation values and other master data in each asset class.
Q. How capital WIP (Work In Process) and Assets accounted for in SAP?
‘Capital WIP’ is referred to as Assets under construction in SAP and is represented under specific asset class. Depreciation is not charged under ‘Capital WIP’ usually. The cost incurred on building a capital asset can be booked to an ‘internal order’ and through the settlement procedures, and can be posted onto an ‘Asset Under Construction’.
Q. What are the major components of Chart of Accounts?
The major components of Chart of Accounts are:
- Chart of account key
- Maintain Language
- Length GL account number
- Controlling Integration
- Consolidation-Group chart of accounts
- Block indicator
Q. What is credit control area in SAP?
To immune your company from the risk of bad debts and multiple outstanding receivable, you can set a credit limit for your customer by using credit control area in SAP. With the help of SAP, you can block the deliveries to your customer based on the credit limit and the accounts receivable balance in their account which is maintained by you.
Q. How can you create Credit Control Area in SAP?
By using transaction code OB45 or path you can create Credit Control Area in SAP
SPRO> enterprise structure >maintain structure>definition>financial accounting>maintain credit control area and then enter the following description
- Name of the credit control area in SAP
- Credit Limit
- Risk Category
- Fiscal Variant
- Rep group
Q. What is posting period variants?
In fiscal year posting period is a period for which the transactions figures are updated. The posting period variants in SAP is accountable to control which accounting period is open for posting and ensures that the closed periods remain balanced.
Q. Explain in simple terms what is field status and what does it control?
Field status group is a group configured in FSV (Field Status Variant) to maintain field status for G/L (General Ledger) accounts. It controls which field should suppress, display, optional and required.
Q. What is short-end fiscal year?
A short-end fiscal year results when you change from a normal fiscal year to a non-calendar fiscal year, or other way around. This type of change happens when an enterprise becomes part of a new co-corporate group.
Q. What is an account group and where it is used?
To control the data that needs to be entered at the time of the creation of a master record an account group is used. Account group exist for the definition of GL account, Customer Master and Vendor.
Q. What is the purpose of “Document type” in SAP?
The purpose of “ Document type” in SAP is
- Number range for documents are defined by it
- Types of accounts that can be posted are controlled by it, e.g Assets, Vendor, Customer, Normal GL account
- It is used for the reversal of entries
Q. Is business area at company code level?
No. Business area is at client level which means other company codes can also be posted to the same business area.
Q. In SAP, Customer and Vendor code are stored at what level?
The Vendor and Customer codes are stored at the client level. It means that by extending the company code view any company code can use the customer and vendor code.
Q. How are tolerances for invoice verification defined?
Tolerance determines whether the payable places matching or tax hold on the invoice. The following are the instances of tolerance can be defined for Logistic Invoice Verification.
- Small differences
- Moving average price variances
- Quantity variances
- Price variances
Q. What is a country Chart of Accounts?
Country Chart of Accounts contains G/L (General Ledger) accounts needed to meet the country’s legal requirements.
Q. What is APP in SAP Fico?
APP stands for ‘Automatic Payment Program’; it is a tool provided by SAP to companies to pay its vendors and customers. APP tools help to avoid any mistakes taken place in posting manually. Also, when number of employees is more in the company, payment through APP becomes more feasible.
Q. In SAP FICO what are the terms of payment and where are they stored?
Payment terms are created in the configuration and determine the payment due date for vendor/customer invoice.
They are stored on the customer or vendor master record and are pulled through onto the customer/vendor invoice postings. The due date can be changed on each individual invoice if required.
Q. What are one-time vendors?
In certain companies, especially the one dealing with high cash transactions, it is not practical to create new master records for every vendor trading partner. One time vendors allows a dummy vendor code to be used on invoice entry and also the information which is usually stored in the vendor master.
Q. What are the standard stages of the SAP payment run?
The following steps are the standard stages of the SAP payment run
- Entering of parameters ( Vendor Accounts, Company Codes, Payment Methods)
- Proposal Scheduling – the system proposes the list of invoice paid
- Payment booking- the booking of the actual payments in the ledger
- Printing of payment forms ,example cheques
Q. In Accounts Receivable, what is the difference between the ‘Residual Payment’ and ‘Part Payment’ methods of allocating cash?
‘Residual payment’ and ‘Part payment’ are the two methods for allocating partial methods from customers. For example, an invoice for $100 is generated, customer has paid $70. Now this $70 will be off-set and leaving the remaining balance $30. With residual payment, the invoice is cleared for the full value of $100 and a new invoice is generated for the remaining balances $30.
Q. What is “dunning” in SAP?
‘Dunning’ is the process by which payment chasing letters are issued to customers. SAP can determine which customers should receive the letters and for which overdue items. Different letters can be printed in SAP depending on the overdue payment date, with a simple reminder. With the help of dunning level on the customer master, we can know which letter has been issued to the customer.
Q. What is the purpose of the account type field in the GL (General Ledger) master record?
At the end of the year, profit and loss accounts are cleared down to the retained earnings balance sheets account. The field contains an indicator which is linked to a specific GL (General Ledger) accounts to use in this clear down.
Q. Explain what is recurring entries and why are they used?
Recurring entries can eliminate the need for the manual posting of accounting documents which do not change from month to month. For example, an expense document can be generated which can be scheduled for the last days of each month or whenever an individual wants it. Usually multiple recurring entries are created at one go and then processed all together as a batch month end using transaction.
Q. What is a ‘Value Field’ in the CO-PA module?
Value fields are number or value related fields in profitability analysis such as quantity, sales revenue, discount value etc.
Q. What are the statistical internal orders?
Statistical internal orders are dummy cost objects used for reporting and analysis purposes. It must be posted to in conjunction with a real object such as a cost center.
Q. For what purposes internal orders can be used?
You can use internal orders for
Overhead Orders: It monitors internal jobs settled to cost centres
Investment Orders: It monitors internal jobs settled to fixed assets
Accrual Orders: Offsetting posting of accrued costs calculated in CO
Orders with Revenue: It display the cost controlling parts of Sales and Distribution, it does not affect the core business of the company
Q. Additional Log
What is the additional log in the AP payment program and how can it be used for troubleshooting?
A: The additional log is an important setting when performing a payment run. The amount of information stored in the log can be selected
If there are any errors with the payments run, due to either missing or incorrect master data settings, negative balances due to credit memo’s etc, the system will report these in the additional log.
Support position interviews often ask this Q as a way of determining if you know how to troubleshoot day-to-day Accounts Payable operations.
Q. Master Data
How can you link customer and vendor master records and what is the purpose of doing so ?
A: On the customer master there is a field “vendor” and likewise on the vendor master there is a field “customer”. By entering these master data numbers, a link can be created between the AP/AR subledgers for use in the payment program, dunning routine and the clearing of open items.
For example in the payment program, if a specific business partner is your vendor but also your customer, linking their master records together will allow the open AR invoices to be offset against the outstanding AP invoices.
Q. Payment Terms
What are terms of payments and where are they stored?
A: Payment terms are created in configuration and determine the payment due date for customer/vendor invoices.
They are stored on the customer/vendor master record and are pulled through onto the customer/vendor invoice postings. The due date derived via the payment can be changed on each individual invoice if required
Q. Baseline Date
What is meant by a “baseline date” in SAP AR and AP?
A: The baseline date is the date from which the payment terms (specified in IMG transaction OBB) apply
Usually this is the document date on the invoice but can also be the date of entry or posting date from the ledger
Q. One Time Vendor
What are one-time vendors ?
A: In certain industries (especially where there are a high volume of cash transactions), it is not practical to create new master records for every vendor trading partner.
One-time vendors allow for a dummy vendor code to be used on invoice entry and the information which is normally stored in the vendor master (payment terms, address etc) , is keyed on the invoice itself.
Q. AP Vendor Group
What factors should be considered when configuring an Accounts Payable Vendor Group?
A: The following are determined by the creation of a new AP vendor group (transaction OBD3)
- Whether the vendors in this group are one-time vendors – i.e. no master record is created but the address and payments details are entered against each invoice to this vendor
- Field status group – which fields on the vendor master are suppressed, optional or mandatory when creating vendors belonging to this group
Additionally the vendor number ranges defined in transaction XKN1 need to be assigned to your vendor account groups in transaction OBAS. The decision needs to be made whether to assign an external number range (where the user chooses the master record number) or an internal number range (system assigned)
Q. Payment Run
Name the standard stages of the SAP Payment Run.
A: The following steps are usually performed during the payment run
- Entering of parameters (company codes, payment methods, vendor accounts etc)
- Proposal Scheduling – the system proposes list of invoices to be paid
- Payment booking – the booking of the actual payments into the ledger
- Printing of payment forms (cheques etc)
Variations on the above may be found in different SAP customers, but the interviewer will be looking for the basis steps above.
Q. Payment Methods
What is the purpose of payment methods and where are they stored?
A: Generally payment methods are one digit alphanumeric identifiers that indicate the type of payments made to vendors or received from customers.
There are many standard delivered SAP entries for each country.
For example for the UK, the following are pre-delivered:-
The payment methods are stored in the vendor/customer master record as well on vendor/customer line items. (The default from master record can be changed during manual postings)
Q. Electronic Banking
Explain briefly how you can import electronic bank statements into SAP.
A: A text file is received from the bank which is then uploaded into the SAP system. The file contains details of the company’s bank movements e.g. cheques, bank interest, bank charges, cash receipts etc. Depending on the system configuration SAP will attempt to book these transactions automatically to the correct accounts to avoid the need for manual entries by SAP users.
Any postings which the system cannot derive automatically can be booked through “post-processing”
Part II: Accounts Receivable (AR)
Q. Residual Payments
In Accounts Receivable, what’s the difference between the ‘residual payment’ and ‘part payment’ methods of allocating cash?
A: These are the two methods for allocating partial payments from customers.
As an example, lets say invoice A123 exists for 100$ and a customer pays 60$.
With partial payment, the 60$ simply offsets the invoice leaving a remaining balance of 40$
With residual payment, invoice A123 is cleared for the full value 100$ and a new invoice line item is booked for the remaining balance of 40$.
Q. Correspondence Types
What are correspondence types in AR/AP ?
A: Correspondence types are different outputs which can be printed and sent to your business partners based around either customer vendor or GL information.
Popular correspondence types include customer statements, payment notices and line items lists. Within the most common AP/AR functions (such as ‘Display vendor line items’ below there is the option to generate correspondence requests. At the end of the working day these can be printed together as a batch and sent out.
What is “dunning” in SAP ?
A: Dunning is the process by which payment chasing letters are issued to customers. SAP can determine which customers should receive the letters and for which overdue items.
Different letters can be printed in SAP depending on how far overdue the payment is; from a simple reminder to a legal letter.
The dunning level on the customer master indicates which letter has been issued to the customer.
Q. Reason Codes
What are “reason codes” used for in the Accounts Receivable module and what are the factors to be considered in their configuration?
A: Reason codes are tags which can be assigned to explain under/overpayments during the allocation of incoming customer payments. They should not be confused with ‘void reason codes’ used when outgoing checks are generated.
During configuration the following are determined
- Whether the items booked with these reason codes are to be flagged as disputed items for the purposes of credit management (disputed items do not increase a customer credit exposure)
- The type of correspondence (if any) to be generated for this reason code as a result of the under/over payment
- Whether a separate line item should be created to charge off the payment differences to a separate G/L account.
Part III: Document Postings
Q. Rate factors
What are exchange rate “factors” ?
A: Exchange Rate factors are the relationships between one currency and another to which an exchange rate is applied.
For example you may define the Indonesia Rupiah to US$ factor as 10000 : 1
Combined with an exchange rate of 0.95 this would equate to 9500 IDR to 1 USD
Q. Parking Documents
What is document parking and why is it important when consideration internal control procedures and “segregation of duties” ?
A: Parking is a SAP term which means a posting (AP/AR/GL) can be temporarily saved (possibly with incomplete information) without hitting the affected ledger(s). A separate person can then release the posting to the ledger when required.
This is useful for example if junior staff are to initially enter the invoices, before their supervisor checks it and books it to the ledger.
Another popular use is when entering GL journals with many hundreds of line items. The document can be part-saved allowing for completion at a later date.
Q. Document Currency
Explain the document currency (WRBTR) and local currency fields (DMBTR) when posting a document in SAP FI.
A: On the document header, the currency key is entered. If this is different from the entity currency (or local currency), an equivalent amount in local currency is calculated automatically by the system and stored in the field “local currency”. It is possible however to overwrite the system proposed value in this field manually.
If the local amount is manually overwritten, and the difference between the implied exchange rate is sufficiently different to the rate used by the system, a warning or error message is displayed (depending on system configuration)
Q. Substitution Rules
What are FI substitution rules?
A: Defined in configuration they are similar to the FI validation rules above. Substitution rules allow field values to be replaced when certain pre-requisites conditions are met.
Q. Exchange Rate Types
What are exchange rate “types” in SAP ?
A: Exchange rate types are how SAP categorizes the different sets of exchange rates in the R’3 system.
By default exchange rate type “M” is used for the rates used to calculate local currency in the SAP system
Q. Calculated Rate v Header Rate
During document postings, under what circumstances would SAP display the following warning / error message: “Calculated rate deviates from document header rate by x%”
A: This occurs when the exchange rate in the document header (either entered by the user or derived from the exchange rate table) differs by a larger amount than that specified as the maximum tolerance.
(The message can changed to be either an error or a warning)
Q. What is a Company Code and what are the basic organizational assignments to a company code?
A Company Code is a legal entity for which financial statements such as a Profit and Loss statement and a Balance Sheet are generated.
The basic organizational assignments to a Company Code are :
- Purchasing Organization
- Sales Organization
Q. How many “Chart of Accounts” can a Company code have?
A Company code can have only one Chart of Accounts assigned to it, called the Operational Chart of Accounts.
The Chart of Accounts is simply a list of General Ledger Accounts.
SAP also provides an option of mapping two additional Chart of Accounts to a Company Code. i.e.:
- Country Chart of Accounts
- Group Chart of Accounts
These assignments are not mandatory.
Q. Explain the importance of the GR/IR clearing account?
GR/IR is an interim account. In the legacy system of a client, if the goods are received and the invoice is not received, the provision is made for the same. In SAP, at the Goods receipt stage, the system passes an accounting entry – debiting the Inventory and crediting the GR/IR Account.
Subsequently, when an invoice is received, the GR/IR account is debited and the Vendor account is credited. That way, till the time that the invoice is not received, the GR/IR is shown as uncleared items.
Q. Where do the characteristics in Profitability Analysis come from?
The characteristics that are defined above, basically come from either the Customer Master or the Material Master.
Q. What is the difference between Profitability analysis and Profit center accounting?
Profitability analysis lets you analyze the profitability of segments of your market according to:
It provides your sales, marketing, planning and management organizations with decision support from a market oriented viewpoint.
Profit center accounting lets you analyze profit and loss for profit centers. It makes it possible to evaluate different areas or units within your company.
Profit center accounting can be structured according to:
- Products (product ranges)
Q. Explain the organizational assignment in the controlling module?
Company codes are assigned to the controlling area. A Controlling Area is assigned to the operating concern.
Controlling Area is the umbrella under which all controlling activities of Cost Center Accounting, Product costing, Profitability Analysis and Profit Center are stored.
Operating Concern is the highest node in Profitability Analysis.
Q. What is a primary and secondary cost element?
Every Profit and Loss GL account, that needs to be controlled, has to be defined as a cost element in SAP. Just as in FI, General Ledger Accounts exist, in Controlling we have cost element.
Each FI General Ledger Account that is a Profit and Loss Account is also created as a cost element in SAP.
- Primary Cost Elements
Those which are created from the FI General Ledger Accounts and impact the financial accounts.
For example, traveling expenses, consumption account and in fact, any Profit and Loss GL account.
- Secondary Cost Elements
Those which are created only in controlling and do not affect the financials of the company. They are used for internal reporting only. The postings to these accounts do not affect the profit or loss of the company.
The following categories exist for secondary cost elements:
- 21 Internal Settlements
Cost elements of this category are used to settle order costs to objects in controlling. For example, cost centers and pa segments.
- 31 Order/Results Analysis
Used to calculate WIP on the order/project.
- 41 Overheads
Used to calculate indirect costs from cost centers to orders.
- 42 Assessment
Used to calculate costs during assessment.
- 43 Internal Activity Allocations