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Introduction to FICO- General concepts

FICO module in SAP is used for managing and analyzing the financials of the organization.  This module helps the financials managers of the organization to analyze the financial position of the company in real time compared to other legacy systems. This module is divided into two main components.
FI – Financials
CO- Controlling
The FI component allows the financial transactions to be captured in real time and comprises of following sub modules.
1.      General Accounting
2.      Accounts receivables
3.      Accounts Payables
4.      Special Ledger Accounting
5.      Asset accounting
6.      Bank Accounts
7.      Funds management
8.      Legal consolidations
9.      Travel management etc.

The CO component allows the analysis on the financial data’s and comprises of following sub module.
1.      Cost Element Accounting
2.      Cost Controlling
3.      Cost Center Accounting
4.      Internal Orders
5.      Activity-Based Costing
6.      Product Cost Controlling
7.      Profitability Analysis
8.      Profit Center Accounting etc.

The FI module is integrated with other SAP Modules such as MM (Material Management), SD (Sales and Distribution), PP (Production Planning), PM (Plant Maintenance) ,PS (Project Systems), and HR (Human Resources).
As the first part of the tutorials we will go through the FI components and the CO part will be cover in the latter parts.

General Accounting:
Definition: GENERAL ACCOUNTING involves the basic principles, concepts and accounting practice, recording, financial statement preparation, and the use of accounting information in management.
General accounting is a process of recording all the financial transaction of the company on a day to day basis and measurable in terms of monetary value.

Accounts Receivables:
Definition: Money which is owed to a company by a customer for products and services provided on credit. This is often treated as a current asset on a balance sheet. A specific sale is generally only treated as an account receivable after the customer is sent an invoice.
Accounts receivables is the money owed by the business to its customers which means the company is supposed to receive some amount from its customers on behalf of sales or services.  These amounts are shown in the balance sheet as Assets.

Accounts Payables:
Definition: Money which a company owes to vendors for products and services purchased on credit. This item appears on the company's balance sheet as a current liability, since the expectation is that the liability will be fulfilled in less than a year. When accounts payable are paid off, it represents a negative cash flow for the company.
Accounts payables is the money the company is supposed to pay to its vendor or its supplier for the purchase of raw materials etc. These amounts are shown in the balance sheet as liabilities.

General Ledger:
Definition: A general ledger is a complete record of financial transactions over the life of a company. The ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.
A general ledger is typically used by businesses that employ the double-entry bookkeeping method - where each financial transaction is posted twice, as both a debit and a credit, and where each account has two columns. Because a debit in one account is offset by a credit in a different account, the sum of all debits will be equal to the sum of all credits

Special Ledger accounting:
Special Ledger, as the name suggests, a specialized version of the General Ledger. Special ledgers that could adopt a different set of accounting rules and could derive data directly from other ledgers.

As the graphic suggests, the significant advantage of using special ledgers is that they could be derived from general ledger or other specialized ledgers. When transiting the amounts to one ledger to another, specific rules could also be defined to modify attributes or amounts. In this way, it is possible to build an accounting system in parallel, with an official General Ledger accounting representing, for example, the local accounting rules, and other specialized ledgers that represent the international accounting principles or other purposes.

Asset Accounting:
Definition: Asset accounting is the accounting of the asset accounts such as: cash, accounts receivable, inventory, buildings, land, equipment and intangible assets.
Assets are divided into two categories--current assets and long-term assets. Current assets will be depleted within one year and include cash, accounts receivable and inventories. Long-term assets will be owned and held for more than one year and include land, buildings, equipment and intangible assets.
Bank Accounting:
Bank Accounting allows for management of bank transactions in the system including cash management.

Consolidation enables the combining of financial statements for multiple entities within an organization. These statements provide an overview of the financial position of the company as a whole.

Funds Management:
Funds Management allows management to set budgets for revenues and expenses within your company as well as track these to the area of responsibility.

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