What is SAP Financial Accounting (FI) - A Detailed Understanding with Quick Notes

SAP Financial Accounting (FI)

A Detailed Understanding with Quick Notes 

What is SAP Financial Accounting (SAP FI)?

SAP Financial Accounting (SAP FI) module or better know as SAP Finance is the back bone of SAP accounting as it records financial transactions of all movements of goods, services and all other business transactions between the company and its customers and vendors. SAP FI application represents from an accounting perspective a company general ledger (G/L).

SAP FI module can be tightly integrated with other SAP Modules like SAP Controlling (CO), Material Management (MM), Sales and Distribution (SD), Human Resources (HR), Production Planning (PP) and with various ERP modules.


Components or Sub-Modules of SAP Financial Accounting (FI)

The SAP Financial Accounting Application consists the following sub-components or modules:

General Ledger (FI-GL): – The statements of Balance Sheet and Profit & Loss accounting are extracted based on the general ledger accounting. The data that has been entered in SAP system is posted immediately to the GL and SAP CO system.

Accounts Payable: – SAP Accounts Payable sub module manages all the activities of Vendor transactions. FI-AP module links with SAP MM Module, Asset Accounting (AA), Travel Management, etc. In Accounting module you can create payment program for processing payments to vendors from time to time.

Accounts Receivable: – SAP Accounts Receivable (FI-AR) sub module manages all the activities of customers transactions. FI-AR module links with SAP SD module. In Accounts Receivable you can create “Dunning Program” for managements of credit functionalities.

Bank Accounting: – SAP Bank Accounting (FI-BA) sub module manages the bank transactions and cash management. It can be integrated with Accounts Payable, Accounts Receivable, travel management, MM, SD, etc.

Asset Accounting: – SAP Asset Accounting (FI-AA) sub modules manages all the actives of organisational assets like depreciation, Insurance, etc. FI-AA module can be integrated with other modules and sub-modules of SAP like General Ledger, Accounts Receivable, Controlling, MM module, PP module, etc. So asset accounting manages financial activities from procurement of assets to its final scrapping or sales.

Travel Management: – SAP Travel Management (FI-TM) sub module manages all actives of business trips of organization. It can be integrated with Accounts Payable, SAP HCM, SAP controlling, etc. In FI-TM you can manages travel request, travel planning and travel expenses.


Features of SAP Financial Accounting (FI)

SAP Financial accounting module components enables to meets all the requirements of financial accounting department of an organization. The important features of FI are:

• SAP FI records all the business transactions with an unbroken audit trial from financial statements to the individual documents.
• The postings made in sub ledger accounts always generate a postings in a corresponding G/L account.
• The data is available in real time, so the financial accounting data can be access through out the organization.
• All the transactions processed in logistics are posted to financial accounting module through automatic account determination. So ensuring that value of goods and services are exactly reflects in accounting.
• Prepares an operational information and provide effective decision making within the organization.

Where Do We Use SAP Finance (FI)?

SAP FI module enables you to manage financial accounting data within an international framework of multiple companies, currencies, and languages. SAP FI module mainly deals with the following financial components −

• Fixed asset
• Accrual
• Cash journal
• Accounts receivable and payable
• Inventory
• Tax accounting
• General ledger
• Fast close functions
• Financial statements
• Parallel valuations
• Master data governance

Important Concepts of SAP Finance (FI)

Chart of Accounts: – The chart of accounts in SAP (COA) is a group of general ledger (G/L) accounts that records the organizational transactions in a structured way. Each general ledger account consists account number, name and control information. Minimum one chart of accounts to be defined in SAP system. Each G/L is configured according to the chart of accounts. The chart of accounts consists a list of general ledger accounts that contains account number, account name and type of G/L account.

Currencies: – In Financial Accounting, the currencies need to be specify for each company codes in which currencies ledgers to be maintained. Different types of currencies in SAP are company code currency, document currency and group currency.

Fiscal Year: – A fiscal year is also known as financial year. Fiscal year can be defined as year independent or year dependent. To separate business transactions into different periods, a fiscal year with posting periods has to be defined in SAP.


SAP FI consultants are mainly responsible for implementing Financial Accounting and Cost Accounting with SAP ERP Financials.