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SAP query

CA.Vishal (service) (86 Points)

30 September 2009

Can anyone explain to me what general ledger refers to in SAP and the flow of accounting along with cost center and profit centre.....for what all entries it is mandatory to put cost centre and for what all entries it is mandatory to put profit center........for purchase of RM whether it is required to put cost centre or simply profit centre would do

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4 Replies

CA.Vishal (service) (86 Points)
Replied 30 September 2009

If possible plz explain to me how grouping of accounts is done.......similar debtors and vendors are grouped in to a GL......just like debtors all other accountheads are also grouped under any GL or not

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Pawan (CA FINAL) (271 Points)
Replied 30 September 2009

Originally posted by :CA.Vishal
"	Can anyone explain to me what general ledger refers to in SAP and the flow of accounting along with cost center and profit centre.....for what all entries it is mandatory to put cost centre and for what all entries it is mandatory to put profit center........for purchase of RM whether it is required to put cost centre or simply profit centre would do	"

only profit centre or purchase organisation required

Pawan (CA FINAL) (271 Points)
Replied 30 September 2009

Originally posted by :CA.Vishal
"	If possible plz explain to me how grouping of accounts is done.......similar debtors and vendors are grouped in to a GL......just like debtors all other accountheads are also grouped under any GL or not	"

vendor & customer account linked with reconciliation account like service vendor, store vendor, RM vendor. each & every account linked with GL account

Krishna Kishore (Employement) (24 Points)
Replied 30 September 2009

Hi Vishal,

'General Ledgers (GL) are the replica of Cost and Revenue ledgers.

Generally, 'Cost Centres ' refers to particular machine / particular dept or particular group of manpower etc where costs are incurred

Usage of Cost Centres in SAP is also derived from this theory and practice only.

For ex: You want to know, How much ' Sales Department ' spent during the year 2008.

This is possible only when you put 'Cost Centre' while entering General Ledgers Entries.

Examples of General Ledgers :a)Salaries b) Printing & Stationery, c)Incentives, d)Sales Commissions, e)Electricity ,f) Travelling exp etc etc.

Ex: Salary expense entry :

Salaries Account Dr.1,00,000 (Total Salaries of the company )

Cost Centres: Sales dept:40,000 Prodn dept :60,000 (This is allocation to different depts).

To Salary Payable Cr 1,00,000

If you do not put cost centre you cannot know that sales dept salary is Rs.40,000, from P&L account , you know Rs.1,00,000/- only as whole company from Salaries Expense

Profit Centres are useful to know the business results of each segment in the overall company like a)Reliance Petroleum b)Reliance Refinery Division c) Reliance Logistics etc.

For Raw materials, this Issue of cost centres come in case of Issues. For Issues there are different methods either Issue materials against Production Order or Work Order or against Cost Centre.

Grouping of accounts shall be based on Chart of accounts of the company. For this you need to know the general group principles like Fixed Assets , Investments, Current Assets (Debtors,Stocks,Bank), Liabilities : Capital, Long Term Liabilities, Current Liabilities.

And in P&L :Grouping of accounts : Sales, Raw Materials, Expenses :Production, Administration, Finance & Marketing group of expenses.

One has to study more theory and observe the practical side of accounting aspects.. then one can have better understanding.

Krishna Kishore.