1. Explain Groupings and Levels?
Answer: Groupings determine how to summarize the data, with various groups and levels defined. A Group adds up various bank accounts and contains a number of levels. A-Level, thus, denotes the sources of data or account transactions. Below the levels are the line items, which are displayed using a list display.
2. What is a Document Type?
Answer: SAP comes delivered with a number of Document Types, which are used in various postings. The document type helps to classify an accounting transaction within the system and is used to control the entire transaction and determine the account types a particular document type can post to.
For example, the document type AB allows you to post to all the accounts, whereas type DZ allows you to post only the customer payments. Every document type is assigned a number range.
The common document types include:
• AA — Asset posting
• KG — Vendor credit memo
• AB —Accounting document
• KN — Net vendors
• AF — Depreciation postings
• KR — Vendor invoice
• DG — Customer credit memo
• KZ — Vendor payment
• DR — Customer invoice
• KG — Vendor credit memo
• DZ — Customer payment
• SA — GL account document
• X1 — Recurring entry doc.
• X2 —Sample document
3. Explain the role of the Transaction Manager?
Answer: The Transaction Manager is responsible for coordinating the transactions in databases and maintains a record of running as well as closed transactions. When the transaction committed or rolled back, the Transaction Manager informs the concerned storage engines regarding the event. Hence, they can run the required actions.
4. What is Modeling Studio?
Answer: In SAP Simple Finance, a modeling studio performs several tasks.
Some of them are included in the following:
Handle Data Services in order to enter the data from the SAP Business Warehouse
States, which tables are placed in HANA, the initial thing is to receive metadata and then program data replication tasks.
Utilize Data services for modeling
Handle ERP requests connection
5. How does S relate to Simple Finance driven by SAP?
Answer: The solution of SAP Simple Finance marked the initial step in the customer’s road map of. The solution has verified the assets of instant vision in Finance and simplification like no indexes, no redundancies, and no aggregates. SAP HANA On-Premise edition influences the entire scope of the SAP Accounting driven by SAP HANA comprised in SAP Simple Finance. In addition, the cloud edition of the S/4HANA is also intended to provide a similar scope.
6. Narrate the useful details of SAP Simple Finance?
Answer: SAP Financial and Controlling module (which is one among the core modules of SAP) is a mature submission with attractive depth and width. However, there is a tremendous change in the world with technology. Hence, there is a need to change for the new financial regulation. In addition, there is also a requirement for instant financial reports lighting. Since the world of data is rapidly changing, the financial operations are in need to deal with a large volume of data that is processed at higher speeds.
With this strategy and having the benefit of a high-performance feature of the HANA, the SAP software company made its finances as well as next range control module by releasing “Simple Finance” (Finco – in short) with the SAP S/4 HANA. By launching this platform, SAP eliminates some of the inconveniences with the traditional FICO module. It also comprises some influential new features. (Interview Questions and Answers)
7. Explain what is meant by Reverse Logistics?
Answer: Reverse Logistics is the collection of all processes that come into play for goods that move in the reverse directions which means transportation of goods customer to the business.
8. What are the main supply chain challenges companies face today?
The five big challenges that companies face today is,
Ignoring the continued growth of e-commerce as a channel in the industrial sector
No attention to the potential risk like volatile transportation costs
Over expectation that supply chain management technologies will fix everything
Over-reliance on past performance to predict future sales
Increase complexity added to supply chain operations with the implementation of unnecessary technologies
Lack of understanding of the full capacities of suppliers and service
9. Accounting, Is It Mandatory To Have A New Asset Accounting?
Answer: In Asset Accounting, in case there is no data that refers to both customizing and transactional data that have to be shifted, in such a situation there is no mandatory for doing the migration steps in the Asset Accounting.
If the customer decided to use the Asset Accounting in their new asset accounting later, then they can set up the personalizing in the IMG.
10. What Is The Basic Difference Between The New S/4hana Product Code Line And The Sap Business Unit Code Line?
Answer: The development process of the S/4HANA is to remove entire artifacts, which have been announced as workarounds of performance for traditional row-based RDBMS. Further, these are groups and programmed indexes, which included no value and offered rapid access to data and sums.
When it comes to the downside, these make compilation in the applications as well as difficulty in how to prevent the system to avoid incompatible updates in the groups. In addition, there is a need to develop significant code for the lengthy “Extract Transform Load” (ETL) setups including data preparation as well as exception handling routines initiated by latency.
With S/4HANA, these various kinds of workaround on limitation depends on the technical restriction are no longer needed, as the current details, as well as the time it takes to travel from the store, can be read immediately across entire inserts and updates. Hence, it removes the requirement for any kind of issues of the aggregates and index.
11. Tell me about financial transformation with SAP Simple Finance?
Answer: Transforming financial management with the ultimate sophistication: simplicity. As part of SAP S /
4HANA, a suite of new businesses, the next generation, SAP Finance Simple Powered by SAP HANA solution is designed to provide strategic value with Live Preview in finance – all via a customized user experience simple.
Use a common view of all the information in finance to ensure consistency across the enterprise
Combine prediction, simulation, and analysis to identify the best strategic options for the company
Giving users instant, personalized insight to encourage more timely and relevant financial decisions
Driving massive simplification of the computer with an architecture which suppresses replication and aggregates
Get a choice of deployment – cloud, on-site hybrid – to reduce IT costs. (SAP HANA Online Training)
12. What is working capital?
Answer: By definition, working capital is current assets minus current liabilities. The working capital figure shows a financial manager how much of an organization’s cash is tied up in items such as accounts receivables and inventory. It also indicates how much cash is going to be required to pay off short term debt and obligations over the next year.
13. Is it possible for a company to show positive net income and still go bankrupt?
Answer: Absolutely. A company that’s experiencing a deterioration of working capital (i.e. decrease in accounts payable, increase in accounts receivable) can show positive net income but be in financial trouble in the future. It’s also possible to show positive net income while in financial trouble by manipulating financial statements (e.g. revenue recognition, expense recognition, etc.)
14. Do you still have the number of characteristics limitation to 50 in COPA?
Answer: Some of the interfaces in CO-PA still check that you are not sending more than 50 characteristics, so SAP still recommends that you limit your operating concern to 50 characteristics. Nevertheless since each of the characteristics becomes a field in the universal journal when you come to build reports you can use attribute views to determine additional fields, for example, the material.
15. Can you explain a little more how the secondary cost element is merged with GL? How are the GL accounts segregated for activity types, OH, etc?
Answer: During migration, a G/L account will be created automatically for every secondary cost element and fields such as cost element category transferred from the cost element. The segregation of the secondary cost elements takes place via the cost element category (assessment, settlement, activity allocation, overhead calculation, etc).
16. which statement would I use and why?
Answer: Cash is king. The cash flow statement gives a true picture of how much cash the company is generating. Ironically, it often gets the least attention. You can probably pick a different answer for this question, but you have to have a good justification (i.e. the balance sheet because assets are the true driver of cash flow etc etc.).
17. If it were up to you, what would the budgeting process look like?
Answer: This is somewhat subjective. In my opinion, a good budget is one that has buy-in from all departments in the company, is realistic yet strives for achievement, has been risk-adjusted to allow for a margin of error, and is tied to the company’s overall strategic plan. In order to achieve this, the budget needs to be an iterative process that includes all departments. It can be zero-based (starting from scratch each time) or building off the previous year, but it depends what type of business you’re running as to which is better. It’s important to have a good budgeting/planning calendar that everyone can follow. This is an important part of how to be a world-class financial analyst.
18. FI Organizational structure?
Controlling area1 Controlling Area 2
Co. Code 1 Co. Code 2
Bus area 1 Bus area2 Bus Area3 Bus Area 4
19. What is the impact on Net Income?
Answer: Net Income increases, the amount depends on depreciation and tax treatment;
20. What is your opinion makes a good financial model?
Answer: It’s important to have strong financial modeling fundamentals. Wherever possible model assumptions (inputs) should be in one place and distinctly colored (typically bank models use blue font for model inputs). Good Excel models also make it easy for users to understand how inputs are translated into outputs. Good Excel models also include error checks to ensure the model is working correctly (e.g. the balance sheet balances, the cash flow calculations are correct, etc.). They contain enough detail, but not too much, and they have a dashboard that clearly displays the key outputs with charts and graphs. For more, check out our complete guide to financial modeling.
21. What does negative working capital mean?
Answer: Negative working capital is common in some industries such as grocery retail and the restaurant business. For a grocery store, customers pay upfront, inventory moves relatively quickly but suppliers often give 30 days (or more) credit. This means that the company receives cash from customers before it needs cash to pay suppliers. Negative working capital is a sign of efficiency in businesses with low inventory and accounts receivable. In other industries, negative working capital may signal a company is facing financial trouble.
In this answer to this interview question, it’s important to consider the company’s normal working capital cycle.
22. How do you record PP&E and why is this important?
Answer: There are essentially 4 areas to consider when accounting for Property, Plant & Equipment (PP&E) on the balance sheet: initial purchase, depreciation, additions (capital expenditures), and dispositions. In addition to these four, you may also have to consider revaluation. For many businesses, PP&E is the main capital asset that generates revenue, profitability and cash flow.
23. How does an inventory write-down affect the three statements?
Answer: This is a classic finance interview question. On the balance sheet, the asset account of Inventory is reduced by the amount of the write-down, and so is shareholders’ equity. The income statement is hit with an expense in either COGS or a separate line item for the amount of the write-down, reducing net income. On the cash flow statement, the write-down is added back to Cash From Operations (CFO) as it’s a non-cash expense (but must not be double-counted in the changes of non-cash working capital). Read more about an inventory write-down.
24. Why would two companies merge? What major factors drive mergers and acquisitions?
Answer: There are many reasons: to achieve synergies (cost savings), enter new markets, gain new technology, eliminate a competitor, and because it’s “accretive” to financial metrics. Learn more about accretion in M&A.
[Note: Social reasons are important too, but you have to be careful about mentioning them depending on who you’re interviewing with. These include ego, empire-building, and to justify higher executive compensation.]
25. If you were CFO of our company, what would keep you up at night?
Answer: This is one of the great finance interview questions. Step back and give a high-level overview of the company’s current financial position, or companies in that industry in general. Highlight something on each of the three statements. Income statement: growth, margins, profitability. Balance sheet: liquidity, capital assets, credit metrics, liquidity ratios. Cash flow statement: short-term and long-term cash flow profile, any need to raise money or return capital to shareholders.
26. Why do capital expenditures increase assets (PP&E), while other cash outflows, like paying salary, taxes, etc., do not create any asset, and instead instantly create an expense on the income statement that reduces equity via retained earnings?
Answer: Capital expenditures are capitalized because of the timing of their estimated benefits – the lemonade stand will benefit the firm for many years. The employees’ work, on the other hand, benefits the period in which the wages are generated only and should be expensed then. This is what differentiates an asset from an expense.
27. Walk me through a cash flow statement?
Answer: Start with net income, go line by line through major adjustments (depreciation, changes in working capital and deferred taxes) to arrive at cash flows from operating activities.
Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities to arrive at cash flow from investing activities.
Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash flow from financing activities.
Adding cash flows from operations, cash flows from investments, and cash flows from financing get you to a total change of cash.
Beginning-of-period cash balance plus the change in cash allows you to arrive at end-of-period cash balance.
28. Is it possible for a company to show positive cash flows but be in grave trouble?
A: Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves the lack of revenues going forward in the pipeline.
29. How is the income statement linked to the balance sheet?
Net income flows into retained earnings.
30. What is a deferred tax asset and why might one be created?
Answer: Deferred tax asset arises when a company actually pays more in taxes to the IRS than they show as an expense on their income statement in a reporting period.
Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.
31. What is the Document Change Rule?
Answer: The functionality Document Change Rules configured in the system maintains the information relating to what fields can be changed? and under what circumstances?. As you are already aware, SAPs document principle does not allow changing the relevant fields once a document is posted; any changes can only be achieved through Reversal or additional postings. Fields such as company code, business area, account number, posting key, amount, currency, etc., can never be changed once the document is posted. However, SAP allows changing some of the fields in the line items such as payment method, payment block, house bank, dunning level, dunning block, etc. These can be changed document by document or by using mass change for a number of documents in a single step. The changes to master data are tracked and stored per user for an audit trail.
32. How is it possible for a company to show positive net income but go bankrupt?
Answer: Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.
33. What is a Bill of Exchange?
Answer: Bills of exchange primarily act as promissory notes in international trade; the seller, or exporter, in the transaction addresses the bill of exchange to the buyer or importer. A third entity, typically a bank, is a party to many bills of exchange to help guarantee payment or receipt of funds.
34. In simple finance even If the customer never utilizes the asset accounting, Is new Asset Accounting mandatory?
Answer: Incase in the Asset Accounting then there is no data, which refers to the both transactional as well as the customizing data, which have to be migrated, in such a scenario there is no compulsion for performing the migration step in Asset Accounting.
If you later decide to use Asset Accounting in new asset accounting, then you can set up the customizing in the IMG.
35. What is the Transport Request?
Answer: Transport Requests (TRS) – is a kind of ‘Container / Collection’ of changes that are made in the development system. It also records the information regarding the type of change, the purpose of transport, request category and the target system. It is also known as Change Requests.
36. Why do capital expenditures increase an organization’s assets (PP&E), while other expenditures, like paying taxes, employee salaries, utility bills, etc. do not increase an organization’s asset base, but instead show up as expenses on the income statement that reduce equity via retained earnings?
Answer: Unlike general expenses that provide benefit over a short period time (i.e., employee’s work, taxes, etc.), capital expenditures provide benefit over a longer period of time. Due to the duration of their estimated benefit–usually, several years–capital expenditures are capitalized on the balance sheet, where shorter-term expenditures are expensed on the income statement. This is the difference between an asset and an expense.
Explain to me what a cash flow statement is and how it works.
You’ll want to start with net income and then proceed line by line through the major adjustments (depreciation, deferred taxes, and working capital changes) required to arrive at cash flow from operations. In your explanation you’ll also want to mention the following:
Capital expenditures, purchase of intangible assets, sale of real assets, and purchase/sale of investment securities to find cash flow generated from investing activies.
Issuance/repurchase of debt, sale of equity, and payment of dividends to find cash flow from financing activities.
Adding the cash flows from operating, investing and financing activities your ability to come up with the total change in cash.
By taking the cash balance at the beginning of the period and adjusting it for the total change in cash you arrive at the cash balance at the end of the period.
37. What is goodwill and how is it accounted for?
Answer: Goodwill is an intangible asset that is defined as the excess value of the purchase price over the fair market value (book value) of an acquired business. For example, if Walmart is sold for $100 billion with PP&E book value of $50 billion, equity of $30 billion, and debt of $10 billion, then the goodwill paid for Walmart would be $30 billion–the total sales price ($100 billion) minus the book value (Assets-Liabilities) of $70 billion.
The organization acquiring Walmart would show a decrease in cash of $100 billion to finance the acquisition, an increase of $50 billion to PP&E, an increase of debt of $10 billion, and goodwill of $30 billion.
38. Why are increases in accounts receivable a cash reduction on the cash flow statement?
Answer: Net income has to be adjusted to reflect an increase in accounts receivable since the company never actually received the funds. As the cash flow statement begins with net income, it shows a cash reduction what accounts received increases.
39. What is a deferred tax asset and what is its purpose?
Answer: A deferred tax asset (as its name suggests) is when a company pays more in taxes to the IRS than they actually owe (as shown as an expense on their income statement). This is an asset because it can be used to offset future tax expense in the future. Deferred tax assets can result from differences in revenue recognition, expense recognition, and net operating losses.
40. What is a deferred tax liability and what is its purpose?
Answer: Deferred tax liability is just the opposite of a deferred tax asset. The deferred tax liability occurs when a tax expense reported on the income statement is not paid to the IRS during the same period it is recognized–it’s paid at a future date. Deferred tax liabilities can result when there are differences in depreciation expense between book reporting (GAAP) and IRS reporting which lead to differences income as reflected on a companies income statement versus what’s reported to the IRS–and which results in lower taxes payable to the IRS (in the short run).
41. Educate me concerning budgetary change with SAP Simple Finance?
Answer: Changing money related administration with a definitive refinement: straightforwardness. As a major aspect of SAP S/
4HANA, a suite of new organizations, the people to come, SAP Finance Simple Powered by SAP HANA arrangement is intended to give key esteem Live Preview in the fund – all by means of a tweaked client encounter straightforward.
Utilize a typical perspective of all the data in back to guarantee consistency over the endeavor
Consolidate expectation, reproduction, and investigation to distinguish the best vital alternatives for the organization
Giving clients moment, customized knowledge to empower all the more auspicious and significant budgetary choices
Driving huge disentanglement of the PC with a design which stifles replication and totals
Get a decision of arrangement – cloud, nearby crossover – to diminish IT costs
42. Brief helpful information about SAP Simple Finance?
Answer: SAP Financial and Controlling module (one of the center modules of SAP from its R/2 days) is a genuinely develop offering with amazing width and profundity.
SAP Simple Finance gives intense in-memory-reporting that takes out the limit between(B/W) controlling and money related reporting, incorporating arranging capacities and improving liquidity examination. PWC can bolster the execution of SAP Simple Finance to Finance work turn into a genuine business accomplice.
.Outline of SAP Simple Finance 2.0
.Design of Simple Finance
43. Do regardless you have the quantity of attributes restriction to 50 in COPA?
Answer: A portion of the interfaces in CO-PA still watch that you are not sending more than 50 qualities, so SAP still suggests that you constrain your working worry to 50 attributes. All things considered since each of the qualities turns into a field in the all-inclusive diary when you come to assemble reports you can utilize ascribe perspectives to decide extra fields, for instance, the material.
44. The movement to SAP Simple Finance controlled by SAP HANA?
Answer: SAP Accounting fueled by HANA contains New General Ledger Accounting, Controlling and New Asset Accounting. On the off chance that you need to actualize and utilize SAP Accounting fueled by SAP HANA, you need to relocate the current client information from the G/L Accounting (FI-GL), Asset Accounting (FI-AA), Controlling and Material Ledger zones. The thorough information table “ACDOCA” contains the greater part of the detail records from FI, FI-AA, and CO. All postings of these applications are composed to the new table after the establishment and movement are finished. 2015-04-02_181732 The above screenshot demonstrates the different bookkeeping applications converge in the new structure of SAP Simple fund controlled by SAP HANA. The accompanying tables were supplanted by SAP HANA sees with similar names:
The detail, sums tables and application list tables of General Ledger Accounting (GLT0, BSIS, BSAS and FAGLFLEXA, FAGLFLEXT, FAGLBSIS, FAGLBSAS)
The aggregates tables and application record tables of Accounts Receivable and Accounts Payable (KNC1, KNC3, LFC1, LFC3, BSID, BSIK, BSAD, BSAK)
The detail and aggregates tables of Controlling (COEP for certain esteem sorts, COSP and COSS)
The material record tables for parallel valuations (MLIT, MLPP, MLPPF, MLCR, MLCD, CKMI1, BSIM)
The Asset Accounting tables (ANEK, ANEP, ANEA, ANLP, ANLC)
45. What is the difference between company and company code?
Answer: A company is an organizational unit used in the legal consolidation
module to roll up financial statements of several company codes.
The Company Code is the smallest organizational ! unit for which a
completely self-contained set of accounts can be drawn up for purposes of
46. How Does S/4hana Relate To Simple Finance Driven By Sap Hana?
Answer: The solution of SAP Simple Finance marked the initial step in the customer’s road map of SAP S/4HANA. The solution has verified the assets of instant vision in Finance and simplification like no indexes, no redundancies, and no aggregates. SAP HANA On-Premise edition influences the entire scope of the SAP Accounting driven by SAP HANA comprised in SAP Simple Finance. In addition, the cloud edition of the S/4HANA is also intended to provide a similar scope.
47. Explain what is activity-based costing?
Answer: It is a method which helps in the breakdown of the costs into specific activities in order to the maintenance of accuracy in the distribution of costs in product costing.
48. How many charts of accounts can be attached to a company code?
Answer: One or more Operative Chart of Accounts can be assigned to a company code.
COA must be assigned to a company code. This COA is the operative COA
and is used in both FI and CO. One Chart of Account can bee assigned to
many Company codes i.e., Multiple company codes can either share the
same or have separate COA. But a company code (Country specific Company
code or International Company code) can have a country-specific COA
also along with Operative COA. The link between the regular COA and the
country COA appears in the alternate number field of the G/L master
Eg: If a company’s subsidiaries are located in both US
& Mexico. We need to configure 2 Company codes – one for the US and
another for Mexico, for eg U100 and M100. The same way we create 2 COA’s
one for US & one for Mexico, USCA, and MXCA. Mexico has different
govt reporting requirements than the US so we will need to define a
company code specific to Country Mexico and also create a country-specific COA to be used, in addition to normal COA. In tcode OBY6(Comp
Code Global Parameters) of CC M100 we define normal COA i.e., USCA in
Chart of Accounts field and MXCA in Country Chart/Accts field.
49. What are substitutions and validations? What is the precedent?
Answer: Validations are used to check settings and return a message if the prerequisite check condition is met.
Substitutions are similar to validations; they actually replace and
fill in field values behind the scenes without the user’s knowledge, unlike validations that create on-screen msgs to the user.
50. State the ways of Migration from SAP to Simple Finance?
Answer: Here are some of the ways that state how the companies can migrate from SAP conventional FICO module to Simple Finance (that is SFINE 2.0).
Those who are on New GL are capable of migrating directly to Simple Finance.
Those who are on typical GL need to migrate to New GL first and then migrate to Simple Finance.
This kind of migration occurs only with SPRO and doesn’t require technical assistance. This migration is different from the central component of Finance that supports with moving data distributed Enterprise Resource Planning landscape and non–SAP Enterprise Resource Planning, utilizing SLT.
51. Explain the Various Reference Methods?
Answer: GRN is nothing but Goods Received Note.
At the time of delivery from the supplier to the person who orders the goods, the person will check the quantity and in terms of quality.
He will ensure the ordered quantities are received without any damage.
The storekeeper will put the GRN only those goods which were received at his counter.
Then the store’s ledger will be debited with GRN with concerned material code and credit when it is given for consumption.
52. What are the Configurations for Bank Statement Processing?
Answer: Before you make use of the Bank Statement Processing functionality in SAP, you need to have the following defined or configured in your system:
• Start Variant
• Search ID
• Processing Type
• Internal Bank Determination
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