Company Code and Accounts

Organizational Structures
Business organizations can have complex organizational structures, including divisions,
subsidiaries, joint ventures and facilities in different countries, so the R/3 system has been
developed with organizational structure “building blocks” that can be used to represent the
companies business organization in the R/3 system.

The highest level of organizational unit in the R/3 system is the client, which contains all of the
database tables required by the SAP system. Master records are created and maintained at the
client level. Master records are data that is shared between R/3 applications, like material master
records, customer master records, etc. The following chart graphically illustrates the
organizational structures in SAP:

Client

Company 100 Company 200 Company 300

US Chart of Accounts UK Chart of Accounts UK Chart of Accounts
Jan. 1 - Dec. 21 FY Jan. 1 - Dec. 31 FY July 1 - June 31 FY

Company Code 100 Company Code 200 Company Code 300 Company Code 400 Company Code 500

Company
The chart of accounts (list of all accounts used for financial reporting) and fiscal year (e.g. Jan. 1
to Dec. 31 like most US businesses, or July 1 to June 31 like most universities) defines the
company organizational level. At the company level, consolidated financial statements are
produced. Each company must have at least one company code associated with it.

Company Code
A company code is established in the R/3 system for a legal entity. A balanced set of books is
maintained for the company code. The company code level is the lowest level in the organization
where accounting can be carried out. It is the level at which business transactions are processed
and accounts are managed. Balance sheets and profit/loss statements are produced at this level.

University Cellular is a small company, so we will use one company and one company code.
Under the company code, we will be able to define different manufacturing plants and
warehouses. We can define University Cellular using one company code as there are no
independent divisions of the company and all facilities are located in the United States.

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1.1 Create Company Code for Our company

To create the company code for our company, follow the menu path

Tools Customizing IMG Edit Project

This will produce the following screen:

Click on SAP Reference IMG

Because SAP is so complex and configuration is such a challenge, the implementation project
team can define different projects that address only certain aspects of the implementation. We
will work using the SAP Reference IMG, which contains all configuration options. We could
copy the SAP Reference IMG and remove configuration categories that were not to be
implemented or that a team did not have responsibility for and should not be changing. After
clicking on the SAP Reference IMG, the following screen will appear:

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This screen provides the menu system for configuration, similar to the menu system for
transactions except that rather than running transactions that store and process data, we will be
running transactions that configure the SAP system and determine how it will function.

To establish the company code for our company, follow the menu path:

Enterprise Structure Definition Financial Accounting Edit, Copy, Delete, Check

Company Code (click clock icon )

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Click on clock icon to start transaction

This will produce the following screen:

Double-click on this line

Even though we are creating a new company code, we get to this transaction by double-clicking
on Edit Company Code Data, which will produce the following screen:

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Click on New Entries

Click on the New Entries icon to get the New Entries: Details of Added Entries screen. This
screen allows us to enter details about the new company. We will enter the following
information:

Company Code: ##UC (remember to replace ## with your ID number)

Company Name: ## University Cellular (remember to replace ## with your ID number)
City: Kalamazoo
Country: US
Currency: USD

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Language: EN

as shown below:

Then click here

Enter this information.

You should use ##UC
using your assigned
number for ##!

Then click on the address icon ( ) to display additional data fields:

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Enter the following information as shown above:

Title: Company
Name: ## University Cellular
Search Term: ##
Street: Business Court
House Number: 83
Postal Code: 49008

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City: Kalamazoo
Country: US
Region: MI

Next, click on the more fields icon ( ) in the address panel:

Click Here

This will bring up additional fields. Enter Tax Jurisdiction Code MI0000000 (MI followed by
seven zeros).

Enter Tax Jurisdiction Code

MI0000000 here (seven 0’s)

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Click the checkmark ( ) and then click on the save icon ( ). This will bring up the

address screen again for some reason. Click on the checkmark ( ) again and the data will be
saved. Click on the back icon ( ) and confirm that your company code is now listed:

Confirm Company
Code. Your screen
should show: ##
University Cellular

Click back icon ( ), then click Cancel ( ) on the again on the Choose Activity window:

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and you are back in the SAP Reference IMG.

Chart of Accounts and Fiscal Year Variant

Each company has one chart of accounts and one fiscal year variant. We will assign the
University Cellular company code to fiscal year variant K1, which is a predefined fiscal year that
comes with the R/3 system. This fiscal year runs from Jan. 1 to Dec. 31 and has one special
period defined to facilitate year-end closing of the books.

1.2 Assign Fiscal Year Variant to Company Code

To assign fiscal year K1 to our company code, make sure you are in the SAP Reference IMG.
If you are not there, follow the menu path:

Tools Customizing IMG Edit Project

Click on SAP Reference IMG then follow the menu path:

Financial accounting Financial Accounting Global Settings  Fiscal Year  Assign

Company Code to a Fiscal Year Variant (click clock icon )

Which will bring up the following screen:

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Enter K1 next to your company code

Enter K1 as the Fiscal year variant next to your company code. To see what other default fiscal
years are provided, click on the cell with your fiscal year variant, then click on the icon that is
displayed on the right border of the cell. This icon appears whenever the SAP system has data
entry options or provides a search option for data entry.

Click on the cell, then

the option list icon.

The following screen appears, showing the list of fiscal year variants that are already defined in
the SAP system:

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You can select the entry K1 by double-clicking anywhere on the line K1 Calendar year, 1 spec.
period. Select K1 from this list, then click on the save ( ) icon. Click on the exit ( ) to
return to the main screen.

1.3 Assign Company Code to Chart of Accounts

Next, we need to assign our company code to a chart of accounts. From the IMG, follow the
menu path:

Financial Accounting General Ledger Accounting  G/L Accounts  Master records 

Preparations Assign Company Code to Chart of Accounts (click clock icon )

This will produce the following screen:

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Enter CHFS for chart of

accounts next to your
company code

Enter CHFS for the chart of accounts. Click on the save icon ( ).

CHFS was specially created for this class. In CHFS we have:

Account Group Number Range

BS – Balance Sheet 100000 – 399999
PL – Profit and Loss 400000 – 999999
RA – Reconciliation 110000 – 310000

Later, we will create specific accounts and account numbers for our company by copying from a
master list. Usually in SAP configuration it is better to copy from an existing data set or default
data supplied with the R/3 system and make changes rather than creating data from scratch.
Configuring the system by copying results in a higher probability that the program will work and
that some critical, but obscure, setting or piece of data is not overlooked. As a rule, you should
work with the default values and settings unless you know enough to clearly explain why a
different value or setting is better.

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1.4 Create Credit Control Area

The credit control area is an organizational unit created to manage customer credit. More than
one company code can be assigned to a credit control area. For example, GMAC, the financing
arm of the General Motors Corporation, provides credit to the Chevrolet, Pontiac, Buick, GMC
and Cadillac divisions. Each division would likely have its own company code (or perhaps
several), with all company codes assigned to one credit control area, GMAC.

To create the default credit control area, follow the menu path (from the SAP Reference IMG):

Enterprise Structure Definition  Financial Accounting  Define Credit Control Area

(click clock icon )

which will produce the following screen:

Click on New Entries

Click on the New entries icon ( ), which will produce the following screen:

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Enter Cred. Contr. area ##UC

and Currency USD

Enter ##UC for the new credit control area and USD for the currency, then click on the save icon
( ). Click on the back icon ( ) and then enter ## UC Credit Control Area for the
description:

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Enter ## UC Credit Control Area

for the description

Save the new credit control area by clicking on the save icon ( ), then exit out of the screen
( ).

1.5 Assign Company Code to Credit Control Area

Next, we have to assign our company code to the credit control area. From the SAP Reference
IMG), follow the menu path:

Enterprise Structure Assignment  Financial Accounting  Assign company code to

credit control area (click clock icon )

which will produce the following screen:

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Assign credit area ##UC

to company code ##UC

Assign your company code (##UC) to your newly created credit control area (##UC). Click on
the save icon ( ), then exit out of the screen ( ).

While we have defined the default credit control area, it is possible to define a number of credit
control areas to the company code and then control credit based differently based on the
customer or order. The SAP R/3 can automatically determine which credit control area is
applicable based on data in the customer master record, material master record, customer order,
etc.

1.6 Assign Permitted Credit Control Area to Company Code

We will again assign our company code ##UC to credit area ##UC as one of what could be
numerous permitted credit control areas. To do this, follow the menu path (from the SAP
Reference IMG):

Financial Accounting Accounts Receivable and Accounts Payable Credit Management

Credit Control Account Assign Permitted Credit Control Areas to Company Code
(click clock icon )

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Note: This time, we are making a configuration setting under the Financial Accounting
area, whereas before we were doing it under the Enterprise Structure area.
Click on the New Entries icon ( ) to get the following screen:

Enter Company Code ##UC

and Cred. contr. area ##UC
then click on the save icon

Enter Company Code ##UC, Credit Control Area ##UC, then click on the save icon ( ) and
exit out of the screen ( ).

1.7 Determine Tax Version

One of the major complications in configuring the SAP R/3 system is the number and diversity
of tax systems throughout the world. The following configuration step is required to make the
system work, but there is no good explanation as to why it must be done this way. With SAP,
some things just have to be accepted.

Using the Pull Down Menus from the SAP Easy Access Menu (see next page), follow the path:

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SystemServicesTable MaintenanceExtended Table Maintenance

Use pull-down menu to get to

Extended Table Maintenance

This menu path will produce the following screen:

Enter Table/view T169P

then click on Maintain

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This will produce another screen:

Click on the New Entries icon ( ) and to get the following screen:

Enter Company Code ##UC

and then select One tax
amount and tax code

Enter Company Code ##UC then select One tax amount and tax code from the pull down list
under Tax Version. Click on the save icon ( ), then click on the exit icon ( ) until you
are back at the SAP Easy Access screen.

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