Interview Questions and Answers for SAP Accounts payable

1.      Explain the ‘Account Payables’ Sub module?

2.      What Documents Result from ‘Procurement Processes’?

3.      Describe a Purchase Cycle?

4.      What is a ‘Purchase Requisition’ (PR)?

5.      What is a ‘Request for Quotation’ (RFQ)?

6.      What is an ‘Outline Agreement’?

7.      What is a ‘Contract’?

8.      What is a ‘Release Order’?

9.      What is a ‘Scheduling Agreement’?

10.  What is a ‘Quotation?

11.  What is a ‘Purchase Order’ (PO)?

12.  What is a ‘PO History’?

13.  Will the FI Document be created with the Purchase Order (PO)?

14.  Explain FI-MM Integration?

15.  What Happens, in SAP, when You Post a ‘Goods Receipt’?

16.  Explain ‘Invoice Verification’ (IV) in SAP?

17.  How do You Deal with ‘Tax’ when you Post an Invoice?

18.  What ‘Variances’ do you come Across in Invoice Verification?

19.  Outline ‘Vendor Payments’ in the SAP System?

20.  Explain ‘Automatic Payment Program?

21.  Explain ‘Automatic Payment Program’ Configuration?

22.  How do You Execute an ‘Automatic Payment Program’?

23.  Can You Pay a Vendor in a Currency Other than the Invoice Currency?

24.  What is a ‘Payment Block’?

25.  How do You Release ‘Blocked Invoices for Payments’?

26.  What is the ‘Account Assignment Category’?

27.  What is a ‘Credit Memo’?

28.  What are ‘Special GL Transactions’?

29.  Differentiate ‘Free Offsetting Entry’ from a ‘Statistical Posting?

30.  What is a ‘Noted Item’?

1. Explain the ‘Account Payables’ Sub module?

Accounts Payables a sub module under Financial Accounting (FI), takes care of vendor-related transactions as the module is tightly integrated with the purchasing transactions arising from the ‘Procurement Cycle.’ The module helps in processing outgoing payments either manually or automatically through the ‘Automatic Payment Program.’ It also helps in ‘Vendor Evaluations.’

2. What Documents Result from ‘Procurement Processes’?

In Materials Management (MM):

1. PR: Purchase Requisition (manual or automatic using MRP)

2. PO: Purchase Order

In Financial Accounting (FI):

1. Invoice Verification

2. Vendor Payment (manual or automatic)

Both MM and FI areas:

      1.    Goods Receipt

You may also group these documents into

(1) Order documents

(2) GR (Goods Receipt) documents

(3) IR (Invoice Receipt) documents.

While GR/IR documents can be displayed both in MM and FI views, the order documents can only be viewed in MM view.

3. Describe a ‘Purchase Cycle?

A ‘Purchase Cycle or Procurement Cycle’ encompasses all activities including purchase

requisition, purchase order, goods movement, goods receipt, invoicing, invoice verification, payment to vendors, and ends with the updating of vendor account balances.

4. What is a ‘Purchase Requisition’ (PR)?

A ‘Purchase Requisition,’ PR, is the document that outlines a company’s purchasing needs of a material/service from vendor(s). A PR, typically an internal document that can be created automatically or manually, identifies the demand for a product and authorizes the purchasing department to procure it. In the automatic creation of a PR, this is done as a result of MRP (Material Requirements Planning). The PR, after identifying the vendor, is processed further to result in a RFQ (Request for Quotation) or directly to a Purchase Order (PO).

5. What is a ‘Request for Quotation’ (RFQ)?

A ‘RFQ (Request for Quotation),’ which can be created directly or with reference to another RFQ or a PR or an Outline Agreement, is actually an invitation to vendor(s) to submit a ‘quotation’ for supplying a material or service. The RFQ will contain the terms and conditions for supply. You may send the RFQ to single or multiple vendors, and you can monitor it by sending reminders to those who have not responded to the RFQ.

7. What is an ‘Outline Agreement’?

An ‘Outline Agreement,’ a declaration binding both the buyer and seller, is the buyer’s intention to purchase a material/service with certain terms and conditions agreed to by both parties. The essential difference between the ‘outline agreement’ and ‘quotation’ is that the outline agreement does not contain details such as delivery schedule or quantities. Outline agreements can be contracts or scheduling agreements.

8. What is a ‘Contract’?

A ‘Contract,’ also referred to as a ‘Blanket Order,’ is a long-term legal agreement between the buyer and the seller for procurement of materials or services over a period of time. The contract, created directly or with reference to a PR/RFQ or another contract, is valid for a certain period of time with start and end dates clearly mentioned. There are two types of contracts:

Quantity Contracts and Value Contracts.

9. What is a ‘Release Order’?

A ‘Release Order’ is a ‘purchase order’ created against a Contract. The release orders usually do not contain information on quantities or delivery dates and are also called ‘Blanket Releases,’ Contract Releases,’ or ‘Call-Offs.’

10. What is a ‘Scheduling Agreement’?

A ‘Scheduling Agreement’ is also a long-term agreement with the buyer and seller for

procurement of certain materials or services subject to certain terms and conditions. These agreements can be created directly or with reference to other documents such as another scheduling agreement, or an RFQ or PR. These agreements help in promoting Just-In-Time (JIT) deliveries, less paperwork, they reduce supply lead times, and ensure low inventory for the buyer.

11. What is a ‘Quotation?

A ‘Quotation’ contains information relating to the price and other conditions for supply of a material or a service by a vendor, and is the vendor’s willingness to supply the same based on those conditions. You will be able to compare the data from quotations using a Price Comparison List and will help in identifying the most reasonable vendor for supply of that item(s). After you receive the quotations, you will typically enter the quotation data (pricing/delivery) in RFQ. The SAP system can easily be configured to automatically print ‘Rejections’ for vendors whose quotation are not selected.

12. What is a ‘Purchase Order’ (PO)?

A ‘Purchase Order’ (PO) is a legal contract between a vendor and a buyer concerning the material/service to be purchased/procured on certain terms and conditions. The order mentions, among other things, the quantity to be purchased, price per unit, delivery related conditions, payment/pricing information, etc.

A PO can be created:

1. Directly or

2. With reference to a PR/RFQ/contract or another PO. Remember, all items on a PO

should relate to the same Company Code.

13. What is a ‘PO History’?

The ‘Purchase Order History’ (PO History) lists all the transactions for all the items in a PO such as the GR/IR document numbers.

14. Will the FI Document be created with the Purchase Order (PO)?

No. There will not be any document created on the FI side during creation of a PO. However, there can be a document for posting a ‘commitment’ to a Cost Center in CO. (The offsetting entry is posted at the time of GR.)

15. Explain FI-MM Integration?

FI-MM Integration is based on the following:

     1.    Movement Types

     2.    Valuation Class

     3.    Transaction Keys

     4.    Material Type

The Movement Type is the ‘classification key’ indicating the type of material movement (for example, goods receipt, goods issue, physical stock transfer). The movement type enables the system to find pre-defined posting rules determining how the accounts in FI (stock and consumption accounts) are to be posted and how the stock fields in the material master record are to be updated.

The Valuation Class refers to the assignment of a material to a group of GL accounts. Along with other factors, the valuation class determines the GL accounts that are updated as a result of a valuation-relevant transaction or event, such as a goods movement.

The valuation class makes it possible to:

     1.    Post the stock values of materials of the same material type to different GL accounts.

     2.    Post the stock values of materials of different material types to the same GL account.

The Transaction Key (also known as the ‘Event Key or Process Key’) allows users to

differentiate between various transactions and events (such as physical inventory transactions and goods movements) that occur within the area of inventory management. The transaction/event type controls the filing/storage of documents and the assignment of document numbers. The Material Type groups together materials with the same basic attributes, for example, raw materials, semi-finished products, or finished products. When creating a material master record, you must assign the material to a material type.

The material type determines:

Whether the material is intended for a specific purpose, for example, as a Configurable

Material or Process Material.

     1.    Whether the material number can be assigned internally or externally.

     2.    The Number Range from which the material number is drawn.

     3.    Which screens appear and in what sequence.

     4.    Which user department data you may enter.

     5.    What Procurement Type the material has that is, whether it is manufactured in-house or procured externally, or both Together with the plant, the material type determines the material’s inventory management requirement, that is:

     6.    Whether changes in quantity are updated in the material master record.

     7.    Whether changes in value are also updated in the stock accounts in financial accounting.

16. What Happens, in SAP, when You Post a ‘Goods Receipt’?

When you post a ‘Goods Receipt’ (GR), the stock account is debited (stock quantity increases) and the credit goes to the GR/IR Clearing Account, which is the intermediate processing account, before you actually process the vendor invoice or payments to the vendor:

Debit: Inventory Account

Credit: GR/IR Clearing Account

During this (1) a material document is created, (2) an accounting document to update the relevant GL account is created, (3) PO order history is updated, and finally (4) the system enables you to print the GR slip.

17. Explain ‘Invoice Verification’ (IV) in SAP?

Invoice Verification involves:

1. Validating the accuracy of the invoices (quantity, value, etc.).

2. Checking for ‘blocked’ invoices (which vary to a great extent from that of the PO).

3. Matching of invoices received from vendors with that of the Purchase Order/ Goods

Receipt. At this point in time, the PO History is updated for the corresponding PO Line

Item(s) of the matched invoice.

4. Passing of matched invoices to the FI module. The system posts the following entries:

Debit: GR/IR Clearing Account

Credit: Vendor a/c (Accounts Payable open line item)

Credit: GL Reconciliation Account

The different scenarios in invoice verification include:

4. GR-based Invoice Verification indicator is not set in the PO detail screen:

Although this setting enables you to post the invoice referenced to a PO prior to

making a GR, the system will block the invoice for payment (this kind of posting

results in a Quantity Variance as there has not been a GR).

5. GR-based Invoice Verification indicator is set in the PO detail screen: When the

PO number is referenced the system brings up all the unmatched items of GR in

the selection screen. You will not be able to post the invoice for its full value, unless

the PO has been fully received.

18. How do You Deal with ‘Tax’ when you Post an Invoice?

When you enter an invoice, based on the configuration settings, the system checks the Tax Code and calculates the applicable tax or validates the Tax Amount entered by you:

1. Manual Entry: Input the Tax Code and the Tax Amount. The system will validate and

issue a message in case it does not find the tax code or if the amount is different.

2. Automatic Entry: Leave the Tax Code and Tax Amount fields blank. Check the

Calculate Tax indicator. The system picks up the corresponding tax code and calculates the tax amount automatically.

19. What ‘Variances’ do you come Across in Invoice Verification?

The system needs to be configured properly with ‘Tolerances’ so that you are not hampered with variances when you try Invoice Verification. You need to define the lower and upper limits for each combination of the Company Code and the tolerance key defined for the various variances. The system then checks these tolerance limits and issues warnings or prevents you from proceeding further when you process an invoice. ‘Variances’ arise because of mismatch or discrepancies between the invoice and the PO against which the invoice has been issued. Normally you will encounter:

1. Price variances: If there is a discrepancy in invoice price and PO item prices.

2. Schedule variances: If the planned delivery date is later than the invoice postings.

3. Quantity variances: If the delivered quantity (or delivered quantity less the previously invoiced quantity) is not the same as that of the invoiced quantity. When the invoiced quantity is more than the GR, the system requires more GRs to square off the situation.

20. Outline ‘Vendor Payments’ in the SAP System?

The payments to single or multiple vendors can either be handled in a manual process or through an ‘Automatic Payment Program.’ The open liability item created for the vendor during the invoice verification will be squared off when you make the vendor payment or when you run the automatic payment program. The payment program in SAP is designed to allow you to enjoy the maximum discount allowed by that vendor.

21. Explain Automatic Payment Program?

The ‘Automatic Payment Program’ in SAP helps to process payment transactions both with customers and vendors. AR/AP/TR/Bank Accounting uses the payment program.

The ‘automatic payment program’ helps in determining:

What is to be paid?

To do this, you specify rules according to which the open items to be paid are selected and grouped for payment.

When is payment to be carried out?

The due date of the open items determines when payment is carried out. However, you can specify the payment deadline in more detail via configuration.

To whom the payment is made?

You specify the payee (the vendor or the alternate payee as the case may be).

How the payment is made?

You determine rules that are used to select a payment Method.

From where the payment is made?

You determine rules that are used to select a bank and a bank account for the payment.

22. Explain Automatic Payment Program Configuration?

Before you are ready to run the ‘Automatic Payment Program,’ the following should have been defined/configured in the system:

House Bank and the corresponding bank accounts.

Payment Methods to be used for the Company Code.

SAP comes with predefined payment methods, both for AR and AP. The following payment methods are available for you to select from depending on the requirements:

a. Accounts Payable

    Check (S)/Transfer/Postal Giro transfer/Bill of exchange

b. Accounts Receivable

    Bank collection/Bank direct debit/Refund by check/Refund by bank transfer/BE payment request Bank Chain defined, if necessary. Bank chains are used to make payment via more than one bank, for example, via the correspondence banks of the house bank, the recipient bank, or the intermediary banks. You can define up to three banks. Payment Forms defined. SAP delivers standard forms, which can be modified, or new forms can be created for use. You may do most of the configurations by using the Transaction Code FBZP and branching to individual sections thereon. Or you may use the following Transaction Codes for individually doing it:

1. (Sending) Company Code specifications

a. Sending the Company Code—if Company Code ‘A’ is making payments on

behalf of ‘B,’ then ‘B’ is the Sending Company Code. Otherwise, the sending

Company Code is considered the paying Company Code (both are one and the same).

b. Tolerance days

c. Paying Company Code specifications

Minimum amounts for incoming and outgoing payments.

Forms for payment advice and EDI.

Bill of Exchange parameters

2. Payment Methods/Country and Bank determination

a. Payment Methods/Country

Payment Method for outgoing/incoming?

Payment Method classification

Master data requirements

Posting details—document types

Payment medium details—Print programs

Permitted currencies (leave blank to allow all currencies)

b. Bank Determination

Ranking Order

Per Payment Method:

Which bank should be used first, second, etc.

Currency

Bill of Exchange

Bank accounts

Available amounts

Per House Bank and Payment Method combination:

Offset a/c for subledger posting

Available funds in each bank

Clearing accounts for Bill of Exchange

Value date

Charge

3. Payment methods per Company Code

a. For each Payment Method and Company Code you need to define:

Minimum/maximum payment amounts

Whether payment abroad or in foreign currency is allowed

Payment Media

Bank optimization

4. House Bank

23. How do You Execute an ‘Automatic Payment Program’?

The following are the series of events happening in the system when you try to execute an ‘Automatic Payment Program’:

1. Maintain Payment Parameters

To start with, you need to maintain the parameters required such as date of execution of

‘payment run,’ ‘payment run identifier,’ etc. Once this is done, you need to specify the

‘posting date’ of these payments, the ‘document date’ up to which the program should

consider the items, the paying Company Code, payment methods to be considered, the

‘next posting date,’ is there certain accounts which need to be excluded from the run, etc. The payment run then needs to be scheduled either immediately or at a specified

time/date.

2. Payment Proposal

The system creates a ‘payment proposal’ based on the payment parameters maintained in

(1) above. The system selects the eligible Open Items based on the following sequence:

a. Due date is determined via the Base Line Date and the Terms of Payment for each of the line items.

b. Program calculates the Cash Discount Period and due date for the Net Payment.

c. Grace Periods are then added to this due date.

d. Which Special GL accounts are to be included, based on what you have already

maintained as the parameters in (1) above.

e. The system will determine whether to include an item during the current run or for

the future one based on the specifications you made in (1).

f. Blocking an item.

The payment proposal can be displayed for further processing; the ‘log’ can be

checked to see the system messages, and the exception list can be generated for

further evaluation.

3. Payment Proposal

With the payment proposal available, you can now edit the proposal to:

a. Change House Bank, from what was maintained earlier

b. Change Payment Method, if necessary

c. Change Payment Due Date to relax or restrict certain open items

d. Block/Unblock line items

4. Payment Run

After the payment proposal has been edited, you can run the Payment Program that

creates the payment documents and prepares the data for printing the forms or creating

the tape or disk. Before printing the forms, check the logs to determine that the payment

program run was successful.

5. Print Run

Payment Medium Programs use the data prepared by the payment program to create

forms (payment advice, EDI accompanying sheet, etc.) or files for the data media. The

data created by the payment program is stored in the following tables:

REGUH Payee or Payment Method data

REGUP Individual Open Items data

REGUD Bank Data and Payment Amounts data

You need to define Variants for print programs, which need to be defined:

a. Per Payment Method per country->assign a Print Program

b. To run the Print Program->at least one Variant per Print Program per Payment

Method

24. Can You Pay a Vendor in a Currency Other than the Invoice Currency?

With release 4.5A, you can pay a vendor in a currency that is different from that of the

transaction/invoice currency. This is achieved by entering the required currency code directly in the open item. Prior to this release, to pay in a different currency, you had to manually process the payment.

25. What is a ‘Payment Block’?

A ‘Payment Block’ prevents you from paying an open item of a vendor. The payment block is entered in the ‘Payment Block’ field in a vendor master record or directly in the open line item. Use the payment ‘Block Indicators’ to define the ‘Payment Block Reasons.’ You may use the SAP delivered payment block indicators (A, B, I, R, etc.) or create your own. An indicator such as is used when you want to skip the particular account, and a blank indicator indicates that the account/item is free for payment. However, for each of these ‘block indicators,’ you need to configure whether changes would be allowed while processing the payment proposal. Then, it is also possible to block a payment or release a blocked one while processing the ‘Payment Proposal.’

You may also propose a ‘payment block indicator’ while defining Terms of Payment.

26. How do You Release Blocked Invoices for Payments?

The system will block an invoice if it comes across with an item with a ‘Blocking Reason.’ The blocking reason may be due to variances or inspection-related issues. When the system blocks an invoice for payment, the ‘payment block’ field is checked by the system. You will use an ‘Invoice Release Transaction’ to select the blocked invoices for processing further. The ‘release’ of blocked invoices for payments can be handled either manually or automatically.

27. What is the Account Assignment Category?

The ‘Automatic Account Assignment’ logic takes care of posting to the correct GL accounts for ‘Stock Material’ with the ‘Material Type’ permitting inventory management, and the material master contains information as to which GL account needs to be updated. But there are material line items (‘Non-Stock’ materials) created manually in the Purchase Requisition/Purchase Order/Outline Agreement for which someone needs to decide the account assignment data and manually enter it in the Purchase Requisition. Here, the Account Assignment Category determines where to allocate the costs relating to such materials. The account assignment category helps you to define the type of account assignment (Sales Order-C, Project-P, Cost Center-K, etc.) and which accounts are to be posted to when GR/IR is posted to.

28. What is a ‘Credit Memo’?

A ‘Credit Memo’ is issued by a vendor who has earlier supplied you some services or materials. The occasion is necessitated when the delivered goods are damaged or you have returned some of the goods back to the vendor. The system treats both the invoices and the credit memo in the same way, except that the postings are done with the opposite sign. If the credit memo is for the entire invoiced quantity, the system generates the credit memo automatically. However, if the credit memo relates to a portion of the invoiced quantity, you need to process it manually in the system.

29. What are ‘Special GL Transactions’?

Special GL Transactions are not directly posted to the GL (Reconciliation Accounts) though these are related to sub ledger accounts such as AR/AP. The transactions to these accounts are shown separately in the balance sheet. There are specific posting keys/indicators defined in the system to regulate the postings to these items. You need to specify a Special GL Indicator (such as a F-Down Payment Request, A-Down Payment) for processing such a transaction. And the system will make use of the specially defined posting keys (09-customer debit, 19-customer credit, 29-vendor debit, and 39-vendor credit) for posting these special GL transactions.

There are three types of Special GL transactions:

         1.    Free Offsetting Entries (Down Payment)

         2.    Statistical Postings (Guarantee)

         3.    Noted Items (Down Payment Request)

30. Differentiate ‘Free Offsetting Entry’ from a Statistical Posting?

Free Offsetting Entry postings are part of the regular postings but with a freely definable offsetting entry, and relate to the On-Balance Sheet Items. On the other hand, in a Statistical Posting, you will always be posting to the same offsetting entry, and these are all the Off Balance Sheet Items.

31. What is a ‘Noted Item’?

Noted Items are never displayed on Financial Statements as they serve only as reminders of a financial obligation such as outstanding payments to be made or due to us, such as a ‘Down Payment Request.’ This kind of posting does not update any GL account in the system but helps to keep track of such obligations for easy follow-up. This is also sometimes referred to as a Memo Entry.’ It is interesting to note that while the Special GL Indicator for a Down Payment Request is ‘F,’ you need to enter the indicator ‘A’ as the target Special GL indicator while you are in the Down Payment Request Entry Screen. When you post this entry, the system creates a one-sided memo entry for the customer or vendor but does not update the GL


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