Case Study Financial and Cost Accounting

6.  Financial and Cost Accounting

6.1 Document Processing 

Enter the following document types. If necessary add the appropriate 

  • DR  Customer invoice
  • DS  Customer Credit memo
  • DZ  Customer payment
  • KR  Vendor invoice
  • KG  Vendor credit memo
  • KZ  Vendor Payments
  • SA  G/L accounts
Use an internal number assignment with the corresponding number range intervals.

6.2 Organization Information 

Both of the two company codes will roll up into one corresponding area. Define the controlling area and allocate it to the respective company codes.

Enter the basic data as follows:

  • Activate cost center accounting.
  • The cost accounting currency in identical with the group currency of the company.
  • Activate the charts of accounting. 
  • The periods correspond to the periods of financial accounting, i.e. 12 accounting periods and four special periods.
  • Company code check.
  • Maintain the controlling area currency and the two main currencies for the company code.
  • Implement number range groups for activity related and period –related activities in and actual.
  • Allocate number ranges for those groups within cost center accounting.
  • Complete data entry is only required in one company. Partial data entry is necessary in the other company to demonstrate aggregation of data at the corporate level.
  • Design a line for AR, AP and GL to display all assigned currencies.
6.3 Cost Element Accounting 

For primary cost entry and primary cost allocation take over the G/L accounts of 4xxxxxFrom financial accounting into cost accounting. Therefore you need to analyze the chart of accounts and determine the appropriate cost element types.

Implement the respective secondary cost elements, statistics ratio and activity types for the internal cost allocation.

The validity period for cost elements and activity elements is from 01.01.2002 till 12.31.9999.

  • Statistical figures                                  91000 (employees in ea.) 
  • Statistical Key figure                               7800 (energy consumption in kWh)
  • Activity  type                                          1410 (repair hours)
  • Activity  type                                          1440 (assemble brakes )
  • Activity  type                                          1450 (assemble motorcycles) 
  • Cost element for internal allocation        610000 
  • Cost elements for cafeteria assessment   510000 
  • Internal  Order settlement cost element   650000
To group similar cost elements, implement the following cost elements groups:
Group Cost Elements
GOAS All other groups, object analysis sheet
Material  40xxxx, 4150000
Energy 4161000, 416200, 416300 
Personnel  42xxxx, 43xxxx, 44xxxxx 
Plant maintenance  45xxxx
Taxes  46xxxx
Rents 47xxxx
Assessment 510000
Activity allocation 610000
Settlements 650000

6.4  Cost Center and Internal Order Accounting.

6.4.1 Cost Center Hierarchy 

Set up appropriate standard hierarchies for your controlling area:

K00  Standard hierarchy, ABC Motors.

K99  Clearing cost centers 

K99X6   Clearing cost center
              X16099  Clearing cost center

K00X  ABC Motors International,

K00X1   General cost center
              X11000  general cost center
              X11100  real estate/buildings
              X11200  cafeteria

K00X2   Service cost center
              X12000  service cost center
              X12100  plant maintenance
              X12200  internal transportation

K00X3   Production center
              X13000  production center
              X13100  street motorcycle assembly
              X13200  motocross motorcycle assembly

K00X4   Material center
              X14000  material center
              X14100  material purchase
              X14200  operating funds purchase

K00X5   Distribution and Administration
              X15000  administration
              X15100  management 
              X15110  sales Laguna
              X15210  sales Chicago
              X15310  administration Laguna
              X15410  administration Chicago

Create the standard hierarchy for the PH (where X=1) and US (where X=2) following the chart above. K001 e.g. would represent the cost centers assigned to the Philippine Company code and K002 would represent all cost centers in the US Company code.

Not all cost centers are relevant for both companies.

Configure cost centers for all primary and secondary costs for actual and planned postings. Service cost centers also have to be managed on a quantity basis.

  • The cost center currency corresponds to the company code currency.
  • The validity period for the cost centers is from 01.01.2002 until 12.31.9999
  • Assign the cost centers to a business area of your choice.
6.4.1 Internal Orders

The ABC Motors international has decided to attend a rally held in Clark Field, Pampanga  each year to promote their street motorcycle model. In an attempt to prove that there is actual business value to this annual free for all, the marketing manager has requested to see a detailed analysis of the commitments and the actual costs. An internal order will be used to track and report these costs. The costs will be settled to the sales Laguna cost center once all costs have been accounted for. In addition AMI maintains strict budget controls over the actual costs.

Create an internal order type for promotions and marketing events that allows recording commitment items.

6.5 Planning –KP34 create planner profile

The prices for activity types should represent given standards and not calculated values. Generate a plan for the following key figures, activity types and cost elements in the PH Company. Check with production for additional requirements.

6.5.1 Statistical Key Figure Planning 91000 – No. of employees. 

To apportion the cost of the cafeteria corresponding to the no. of employees of the single cost center, the ratio for the following cost centers must be planned as a constant.

  • General Cost center                    15 employees
  • Service cost center                     45 employees
  • Street motorcycle assembly        50 employees
  • Motocross motorcycle assembly 60 employees
  • Material                                    25 employees
  • Distribution and administration   20 employees
6.5.2 Statistical Key Figure Planning 7800- Energy consumption

To apportion the cost of energy corresponding to the planned energy consumption rates of the single cost center, the key figure for the following cost centers must be planned as a constant:

  • General cost center  1000kwh
  • Service cost center  1500kwh
  • Production              13000kwh
  • Material                  1500kwh
  • Distribution             3000kwh
6.5.3 Activity Type Planning 1410 –Repair

The activity type “repair” must be planned on cost center X12100 plant maintenance with the following values:

  • Planned activity  2000hr
  • Standard rate      PhP45.00/hr
6.5.4 Activity Type planning 1440- Assembly Brakes
The activity type “assemble brakes” must be planned on cost center x13100 street motorcycle assembly with the following values:
  • Planned activity   20000 hr.
  • Standard time      PhP15.00/hr.
The activity type “assemble brakes” must be planned on cost center X13200 motocross motorcycle assembly with the following values:
  • Planned activity   25000hr
  • Standard time      PhP15.00/hr.
6.5.5 Activity Type planning 1450-Assembly Motorcycles

The activity type “assemble motorcycles” must be planned on cost center X13100 street motorcycle assembly with the following values:

  • Planned activity   40000hr
  • Standard time      PhP18.00/hr
The activity type “assemble motorcycles” must be planned on cost center X13200 motocross motorcycle assembly with the following values
  • Planned activity  45000hr
  • Standard time     PhP19.00/hr
6.5.6 Direct Planning

Generate a plan for the following cost elements in ABC Motors International:

Cost center X11000- General CC 

  • 430000   salaries    PhP150, 000.00 yr.
  • 415000   salaries    PhP 80,000.00 yr.
Cost center X11200 - Cafeteria
  • 415000  cost for external procurement PhP120, 000.00 yr.
  • 421000  indirect labor costs                PhP60, 0000.00 yr.
  • 430000  salaries                                 PhP100, 000.00 yr.
Cost center X12000 - Service 
  • 415000  cost for external procurement PhP150, 000.00 yr.
  • 421000  indirect labor cost                  PhP80, 000.00 yr.
Cost center X13000 - production 
  • 415000  cost of external procurement  PhP100, 000.00 yr.
  • 430000  salaries                                 PhP100, 000.00 yr.
Cost center X13100 – Street motorcycle assembly 
  •  400000  other raw material                 PhP400, 00.00 yr.
  •  420000  direct labor cost                    PhP480, 000.00 yr.
  •  430000  salaries                                 PhP100, 000.00 yr.
Cost center  X13200 – Motorcross motorcycle assembly 
  • 400000  other raw material                  PhP500, 000.00 yr.
  • 420000  direct labor cost                    PhP500, 000.00 yr. 
  • 430000  salaries                                 PhP110, 000.00 yr.
Cost center X14000 – material center 
  •  415000  cost of external procurement PhP350, 000.00 yr.
  •  430000  salaries                                PhP200, 000.00 yr.
  •  476000  office supplies                      PhP25, 000.00 yr.
Cost center  X15000 - administration 
  •  430000  salaries                                 PhP200, 000.00 yr.
  •  476000  office supplies                       PhP40, 000.00 yr.
  •  476500  general management costs      PhP100, 000.00 yr.
Cost center X16099 - Clearing 
  •  416100  Electricity, fix                        PhP10, 000.00 yr.
  •  416200  Electricity, variable                PhP190, 000.00 yr.
Add some plan data for the AMI Ltd. 

6.5.7 Planned Assessment

Costs have been planed and entered into the cafeteria cost center. Within the framework of plan assessment, the costs will be assessed based on the number of employees within the corresponding cost centers. Enter the corresponding sender recipient relationship.

6.5.8 Internal Order Planning

Plan the following costs for the Clark Field Rally & Beer Drinking Exhibition order:

  •  Travel Expenses                                10,000
  •  Exhibition Booth Rental                      1,200
  •  Promotion Material (including beer)    36,000
  •  Miscellaneous Expenses                     250
6.6 Actual Costs recording

6.6.1 Business transactions

Ensure that primary costs from MM and SD have been recorded in the cost centers. Create purchase requisitions for accessories and liquid supply you intent to use on the rally. Process the requisitions forward to partial goods received.

In addition, enter the following FI transactions:

  • Customers and vendors invoices, debit and credit memos on  cost center
  • Energy cost on the collective cost center
  • Direct labor costs and salaries on material cost center
  • Indirect labor costs on overhead cost center
  • Actual costs for the Clark Field Rally
6.6.2 Internal cost Allocation

Reproduce the following actual transactions for the internal cost allocation posting of statistical key figure 9100

  • General cost center                  15 employees
  • Service cost center                   45 employees
  • Material                                  25 employees
  • Distribution and administration 20 employees
6.6.3 Actual Assessment

Perform an actual assessment similar to the planned assessment.

6.6.4 Actual Order Settlement

Perform a settlement of your Clark Field Rally Order To the Roces Avenue sales cost center.

6.7 Reporting

  • Analyze the corresponding transactions in view of cost centers and cost elements.
  • Perform a customer account analysis.
  • Display vendor or customer’s line items and drill down to originating documents.
6.8 Closing operations

A limited month-end closing should be completed in the respective company codes based on the current month. Therefore, it is necessary to close the accounting period by the last day of the month and to open the new period for the next month. Maintain the corresponding tables. Draw up the preparation of balance sheet and a profit and loss statement. Identify the account balance changes from prior month and reconcile the differences to the corresponding transactions.

6.8.1 Financial Statements

In order to prepare balance sheet and profit and loss statement at the subsidiary level, a financial statement version with the corresponding hierarchy levels has been created.

Version Name: MSCA

Each group is totaled and sub-totaled. Each position has its allocated text. G/L accounts have been allocated to the lowest level. Revise if necessary.

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