Monday, September 30, 2013

SAP FICO Interview Questions and Answers - 3


126. What are all the Prerequisites for Posting in a ‘Foreign
Currency’?
The following are the prerequisites you need to consider before posting in a foreign currency:
􀂃 Local currency already defined for the Company Code (in the global parameters)
􀂃 Foreign currency defined in the currency code Table
􀂃 Exchange rate defined for the foreign currency and the local currency
􀂃 Translation Ratio maintained for the local and foreign currency
127. How are ‘Exchange Rates’ Maintained in SAP?
An ‘Exchange Rate’ is defined for each pair of currencies, and for each ‘exchange rate type’
defined in the system. The exchange rate is defined at the document header level.
128. What is an ‘Exchange Rate Type’? List some of them.
The ‘Exchange Rate Type’ is defined according to various purposes such as valuation,
translation, planning, conversion, etc. The commonly used exchange rate types include:
Figure 26: Exchange Rate Types
129. What is known as the ‘Translation Factor’?
The relation between a pair of currencies per ‘exchange rate type’ is known as the ‘Translation
Factor.’ For example, the translation factor is 1 when you define the exchange rate for the
currencies USD and INR:
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130. Is there an Easy Way to Maintain Exchange Rates in SAP?
SAP offers a variety of tools to maintain exchange rates on an on-going basis. The tools include:
􀂃 Exchange Rate Spreads
􀂃 Base Currency
􀂃 Inversion
Use the SAP supplied program, RFTBFF00, for populating the exchange rate table automatically
from an input file in a multi-cash format from a commercially available input file.
131. What is known as an ‘Exchange Rate Spread’?
The difference between the ‘bank-buying rate’ and the ‘bank selling rate’ is known as the
‘Exchange Rate Spread,’ which remains almost constant. When you maintain the exchange rate
spread, it is sufficient if you maintain the ‘average rate’ for that currency in question in the
system as you will be able to deduce the buying/selling rate by adding/subtracting the spread
to/from the average rate.
132. Explain the use of ‘Direct’ or ‘Indirect Quotations.’
It is possible to maintain the exchange rates, in SAP, by either of these two methods. What
determines the use of a particular type of quotation is the business transaction or the market
standard (of that country).
SAP adopts two prefixes to differentiate direct and indirect quotes during entering/displaying a
transaction:
􀂃 ‘’—Blank, no prefix. Used in Direct Quotation
􀂃 ‘/’—Used in Indirect Quotation
When there is no prefix entered, (blank), the quotation is construed as the ‘direct quote’ by the
system. Possible scenarios include:
􀂃 The company in question is mainly using the ‘Indirect Quotation.’
Use ‘’ (blank) as the prefix for default notation for indirect quotation. Use ‘*’ as the prefix for
the rarely used direct quotation. If someone tries entering a transaction using direct quotation,
but without the ‘*’ in the exchange rate input field, the system will issue a warning.
􀂃 The company in question is mainly using the ‘Direct Quotation.’
You do not need any specific settings as the default is the ‘’ (blank) prefix for the direct
quotation, and ‘/’ for the indirect quotation. So, unless you make a transaction entry with ‘/’
prefix, the system takes all the entries as that of direct quotation.
􀂃 There could be instances where you are required to configure in such a way that a prefix
is mandatory irrespective of the type of quotation. In this case, define the direct quotation
prefix as ‘*’, and the indirect one as the system default ‘/’ prefix. This necessitates a prefix
each of the entries either by ‘*’ or ‘/.’ Otherwise, the user will get a warning to correct the
entry.
133. Explain how ‘Taxes’ are Handled in SAP.
SAP takes care of tax calculation, tax postings, tax adjustments, and tax reporting through the
three FI components; namely GL, AP, and AR. The processing of the following kinds of taxes is
possible:
1. Tax on Sales and Purchases
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a. Input Taxes (Purchase Tax)
b. Output Taxes (Sales Tax)
2. Additional Taxes (these are country specific and in addition to the tax on sales and
purchases)
3. Sales Tax
4. Withholding Tax
a. Classic Withholding Tax
b. Extended Withholding Tax
SAP allows taxation at three levels:
1. National level or federal level (Europe, South Africa, Australia, etc.)
2. Regional or jurisdiction level (USA)
3. National and Regional level (India, Canada, Brazil etc.)
134. How is Tax Calculated in SAP?
SAP uses a technique called ‘Condition Method’ to calculate taxes (except Withholding Tax) in
the system. The system makes use of ‘Tax (Calculation) Procedures’ defined in the system
together with the Tax Codes for calculating the quantity of tax.
1. The Tax Code is the starting point in the tax calculation. The tax code is country specific,
with every country having a country specific Tax Procedure defined in the standard system,
which is used as the template for defining various tax codes. The system uses the tax
code to verify the following:
Figure 27: Condition Type (Tax Processing)
a. Tax type
b. Amount of tax calculated/entered
c. GL account for tax posting
d. Calculation of additional tax portion, if any
2. Tax Rates are defined for each of the tax codes. The tax rates are then associated with
Tax Types, which are included in the tax procedures. (Because of this relationship, it is
technically possible that a single tax code can have multiple tax rates for various tax types.)
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3. The tax code is assigned to a Tax Procedure, which is tagged to a GL master record. A
particular tax procedure is accessed whenever that GL account is used in document
processing.
Figure 28: Steps in Tax processing
A Tax Procedure contains the following:
􀂃 Steps— To determine the sequence of lines within the procedure.
􀂃 Condition Types— Indicates how the tax calculation model will work (whether the
records are for fixed amount or percentages and whether the records can be processed
automatically, etc.)
􀂃 Reference Steps— Where the system obtains the amount/value it uses in its calculation
(for example, the base amount)
􀂃 Account/Process Keys— Provide the link between the tax procedure and the GL
accounts to which tax data is posted. This helps in automatic tax account assignments. To
enable that these keys have the necessary information for automatic assignment, you need
to define the following:
o Posting keys (unless you have a specific requirement, it will be sufficient to use
the GL posting keys: Debit: 40, Credit: 50)
o Rules to determine on which fields the account determination is to be based
(such as the tax code or country key)
o Tax accounts to which the postings need to be made
SAP comes with a number of predefined account/process keys, and it is recommended that the
standard keys be used.
4. The Access Sequence helps in identifying the sequence of Condition Tables to be used
and identifying which field contents are the ‘criteria’ for reading the Condition Tables (a
group of Condition Types).
5. The tax amount so calculated is normally posted to the same side as the GL posting that
contains the tax code. When exchange rate differences occur (due to tax adjustments in
foreign currencies) these differences are generally posted to the specific account(s) for
exchange rate differences. However, it is possible to specify (per Company Code) that the
exchange rates for tax items can also be entered manually or determined by the posting or
the document date, and the resulting differences posted to a special account.
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Figure 29: Account/Process Key for tax processing
6. R/3 has a number of predefined account keys, and it is recommended that the standard
keys be used.
135. Explain the Configurations Required for Taxes in SAP.
You need to define the following to customize SAP for this purpose:
1. Base Amount for Tax Calculation
For each Company Code you need to define whether the Base Amount includes the cash
discount as well. If the base amount includes the discount, then the tax base is called
‘Gross,’ otherwise, it is ‘Net.’ You may also define a similar base amount for calculating
the ‘Cash Discount.’ This also has to be maintained for each of the Company Codes.
2. Tax Codes
The Tax Code is a 2-digit code specifying the percentage of tax to be calculated on the
base amount. While defining the tax code, you will also specify the ‘Tax Type’ to classify a
tax code relating to either ‘Input Tax’ or ‘Output Tax.’ The tax types are country specific
and determine how a tax is calculated and posted.
3. Tax Rate
The Tax Rate is the percentage of tax to be calculated on a base amount. You will be able
to define tax rates for one or more tax types when you define a single tax code.
4. Check Indicators
By using the check indicators, you configure the system to issue Error/Warning
Messages when the tax amount entered manually is incorrect.
136. What is a (Tax) ‘Jurisdiction Code’?
A ‘Jurisdiction Code,’ used in countries such as the United States, is a combination of the
codes defined by tax authorities. It is possible to define up to four tax levels below the federal
level. The four levels can be the:
􀂃 Sub-city level
􀂃 City level
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􀂃 Country level
􀂃 State level
Before you can use the jurisdiction codes for tax calculation, you need to define the following:
1. Access Sequence (to include the country/tax code/jurisdiction fields)
2. Condition Types (which references the access sequence as defined above)
3. Jurisdiction Codes
The tax rates are defined in the tax code by jurisdiction. When posting taxes with a jurisdiction
code, note that the taxes may be entered per jurisdiction code or per tax level.
137. Tell me about the ‘Tax Reports’ in SAP.
SAP comes delivered with country-specific default ‘Tax Reports’ to meet your tax-reporting
requirements. However, it is not uncommon to use third-party software for the same purpose. As
a process, it is recommended that the ‘closing operations’ are completed before running the tax
reports. This will ensure that the system makes relevant adjustment entries (between payables
and receivables, exchange rate differences, etc.) so that the correct tax amounts are reported.
138. How is ‘Master Data’ different from ‘Transaction Data’?
There are three kinds of data residing in any SAP system:
1. Table Data
2. Transaction Data
3. Master Data
Table Data refers to the customized information for a particular Client. This includes data such as
payment terms, discounts, pricing, tolerance limits, etc., which you do not normally change on a
day-to-day basis.
Transaction Data is the day-to-day recording of business information such as purchase orders,
sales returns, invoices, payments, collections, etc. This includes both system-generated data (tax,
discount, etc., automatically calculated by the system during document posting) as well as usergenerated
data.
Master Data is the control information required to decide how transaction data gets posted into
various accounts (such as customers, vendors, GL, etc.). The master data is usually shared
across modules (for example, customer master records are common both to FI and SD in SAP)
obviating the need for defining it in various application areas. The master data remains in the
system for fairly a long period.
In the case of GL Master Records, the data is created in two areas:
1. Chart of Accounts Area (common to all Company Codes: Chart of accounts, GL
account number, account name (short and long text), B/S or P&L indicator, account group,
etc.).
2. Company Code Area (specific to that particular Company Code: Company Code, tax
code, currency, open item management, line item display, sort key, etc.).
In the case of the Customer/Vendor Master Record, the data is created in two areas:
1. Client Specific (general data such as account number, name, telephone, bank
information, etc., which is common to all the Company Codes using this master).
2. Company Code Specific (valid only for the Company Code, this includes: terms of
payment, dunning procedure, reconciliation account, sort key, sales area, purchasing
information, etc.).
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139. Can You Post an A/C Document if the ‘Credit’ is not Equal to
the ‘Debit’?
In general, unless the ‘debits’ equal the ‘credits’ in a document, you will not be able to post the
document. However, the system allows you to post some of the documents, even if this not true,
which includes the following:
􀂃 Noted items: this will contain only a debit or credit. Since there is no updating of
accounting entries, the system will allow you to go ahead with the posting of these items.