SAP FICO Knowledge Database

Reconciliation Accounts and Special G/L Indicator

analyn1982@gmail.com (Author) — Tue, 07 Oct 2008 13:15:00 +0000

Most SAP people might be asking, what is a reconciliation account and special general ledger indicator in SAP Financial Accounting? Well, my dear readers surely you will be enlightened by this article.

First, you must understand the definition of general ledger. General ledger is the main accounting record of a business which uses double-entry bookkeeping. In SAP, the central task of G/L accounting is to provide a comprehensive picture for external accounting and accounts. Transactions that have a financial impact are captured by the general ledger. The transactions could be orinated from other modules. Example, posting of goods receipt (MIGO) performed by purchaing personnel (MM module) have already a financial impact. It increases the inventory balance and increases the GR/IR clearing account. The accounting journal entry the transactions MIGO create is debit (dr) Inventory account (G/L) and credit GR/IR clearing accounts (G/L).
The general ledgers summarize all financial transactions of a Company. It is the the basis of the preparation of the Company's Financial Statements.

Now, let's dig it further. Reconciliation Accounts are G/L accounts that receive postings from a subsidiary ledgers. Meaning, transactions data are not posted directly to recon accounts. Example of recon accounts are Accounts Receivable, Accounts Payable and Fixed Assets G/L. For accounts receivable G/L the subsidiary ledger is the customer account. All transactions with the customers are posted directly to the customer account and the recon account is automatically updated. How this thing happen? Well, when you create a customer account you specify under the Company Code data the reconciliation account.

So, all normal transactions to the customer e.g. sale of goods are posted to the recon account defined in the customer master data. Next question would be, what G/Laccount should be updated for postings of customer down payment (advance collection)? For proper accounting, downpayment should not be posted to Accounts Receivable - trade. It should be posted to different G/L account e.g. Advances from customer. Well, how would the said transaction be posted to Advances accounts.

This is one of the cases where the idea of special G/L indicator comes in. With the use of special G/L indicator you can specify in the set-up what G/L account advances transactions be posted. Standard posting key of customer transaction with special G/L indicator are 09 (dr) and 19 (cr). The system will always require you to indicate the special G/L indicator when you use the said posting keys.

Cheers, more tips to be posted!

"Understand and Configure Chart of Accounts"

analyn1982@gmail.com (Author) — Sat, 13 Sep 2008 01:25:00 +0000

Before configuring any part of the FI Enterprise Structure, it is vital to have already drawn out and agreed upon what the Company's structure will look like. Settling on a chart of accounts with the users in the client sites is one of the first big thing challenge to overcome in a project.

Before beginning design sessions on the chart, it is essential that both the consultant and the client personnel responsible for design decisions have a clear understanding of the differences between Financial Accounting (FI) and Controlling (CO) in SAP. The main purpose of FI is for external legal reporting purposes to outside authorities (SEC, Bureau of Internal Revenue, etc.). Whereas, the main reporting purpose of CO is for internal management reporting. This is often a very difficult nuance for usres to grasp and understand.

With SAP, you don't need thousands of accounts or any logic other than grouping logic (e.g. all Cash accounts are in the 100000 to 199999 range) built into the G/L account number. The easiest way to configure a chart of accounts is to copy an existing chart of accounts:

IMG > Financial Accounting (New) > General Ledger Accounting (New) > Master Data > G/L Accounts > G/L Account Creations and Processing > Alternative Methods > Copy G/L Accounts > Copy Chart of Accounts.

Transaction Code: OBY7

Alternatively, you can create your chart of accounts from scratch. First, you need to create your chart of accounts name and properties with the path below:

IMG > Financial Accounting (New) > General Ledger Accounting (New) > Master Data > G/L Accounts > Preparations > Edit Chart of Accounts List.

Transaction Code: OB13

Then create your G/L accounts manually:

Menu Path: Accounting > Financial Accounting > General Ledger > Master Records > G/L Accounts > Individual Processing > In Chart of Accounts.

Transaction Code: FSP0.

"Company Code vs Controlling Area"

analyn1982@gmail.com (Author) — Wed, 03 Sep 2008 05:01:00 +0000

What's the difference between Company Code and Controlling Area?

Company Code
It is the smallest organizational unit in FINANCIAL ACCOUNTING (FI) for which a complete set of accounts can be created. It is the central organizational unit of external accounting within the SAP system. Normally, a company code is created for each company (legal entity). It is a mandatory and pre-requisite that at least one company code must be defined before implementing the Financial Accounting component. All business transactions relevant for Financial Accounting are entered, saved and evaluated at company code level. Therefore, it is at company code level wherein a complete set of financial statements (Balance Sheet, Income Statement, Statement of Cash Flows) can be created.

Controlling Area
Controlling Area in SAP is an organization that represents a closed system used for cost accounting purposes. It is an organizational unit in the Controlling (Management Accounting) separate and has different functions with that of the Company Code. One ore more Company Codes can be assigned to a Controlling Area.

"Financial Accounting vs. Controlling (Mgt. Accounting)"

analyn1982@gmail.com (Author) — Wed, 03 Sep 2008 04:59:00 +0000

In accounting point of view, Financial Accounting (FI) and Management Accounting/Controlling (CO) are two branches of accounting. Each branch has different purpose, serves different type of information users and uses different types of data and information. The following clearly distinguish the two branches of accounting:

Financial Accounting output such as the financial statements generally used by external users (other than management). These users could be the stockholders, government, employees and banks. Whereas, Management Accounting (Controlling) purposely serves the management of the Company. Example of controlling reports are cost center report (cost per dep't), profit center report and profitability analysis report.

Financial Accounting uses general data and information. To relate to SAP FICO, the basis of the preparation of financial statements is the general ledger. And postings to GL are general in nature e.g. accounts receivable - trade account is not segregated into source. Whereas, Management Accounting uses specific type of data and information. In SAP, example of these reports are cost center report, profit center report and profitability analysis. The above reports contain specific information e.g. salaries expense is segregated per project and/or per department.

Both two branches of accounting are properly addressed and automated in SAP. Standard reports are available and readily available to use.

FICO - Posting Key and Field Status Group?

analyn1982@gmail.com (Author) — Wed, 03 Sep 2008 04:55:00 +0000

Debit? Credit?- are accounting terminologies and most often than not, only accounting people understand these terms. Every transaction of a Company that has financial impact are recorded through a journal entry. Each journal entry composes of at least one debit and one credit; and the balance should always the same e.g. debit = 100, credit = 100. In SAP (FICO), financial transactions are recorded through a journal entry.

Posting key has 3 roles:
1. It determines the account type to be entered; whether it's a customer account, vendor account, asset account or general ledger account.
2. It determines the type of posting; whether the account is a debit or credit.
3. Partly, it determines the entry screen layout of the line item.

Example: Posting key '01'.
1. Account type allowed is only customer account. If the account entered is other than customer account, an error appears and transaction can not be posted.
2. The line item is a debit (positive or negative sign for an amount is not necessary to be entered).
3. Fields that will be displayed depends on the configuration of the posting key(and the field status group of the general ledger account).

Field Status Group (FSG), also determines partly the entry screen layout of the line item.
Entry screen layout means either fields are:
a. Display only - no information can be entered for display only fields.
b. Required - information should be entered e.g. select through dropdown or entered manully. Transactions can not be posted in the system, unless required fields are filled up.
c. Optional - you can input information or just leave these blank.

How SAP Parallel Accounting Works?

analyn1982@gmail.com (Author) — Tue, 02 Sep 2008 02:04:00 +0000

The new GL functions include "Parallel Accounting", it's an SAP feature where you can maintain different sets of books to satisfy all different requirements of Financial Statement users accurately, efficiently and effectively. Standard reports are already available and readily available to use.

How does Parallel Accounting works in SAP (FICO)? Requirement is; a leading ledger is created in the system (0L - ledger = GAAP). Then another leger should be created and classified as non-leading ledger (1L - ledger = TAX).

All financial transactions in the system are posted to both ledgers if no ledger is specified in the transaction. If you generate a financial statement or gl account report, both ledgers contain the data of the transaction posted.

To post only to specific leger (e.g. 0L - ledger), the Ledger Group field in the header should be filled-up with 0L - ledger. The transaction won't affect the other ledger (1L - ledger).

More tips to follow!Cheers,

"Profit Center and a DUMMY Profit Center"

analyn1982@gmail.com (Author) — Tue, 02 Sep 2008 02:03:00 +0000

A profit center is a management‑oriented organizational unit used for internal controlling purposes. Dividing your company up into profit centers allows you to analyze areas of responsibility and to delegate responsibility to decentralized units, thus treating them as “companies within the company”. Profitability of each profit center can be monitored closely. Furthermore, a financial statement can be generated for each profit center.
Revenue and costs postings in Financial Accounting (FI) require an assignment to a cost object (e.g. overhead controlling, profitability). What transfer the FI posting data to Controlling are the primary revenue and cost elements. Revenue items generally require a profit center assignment. Cost items generally require cost center, work breakdown structure element, network and internal order assginments.

What is a Dummy Profit Center then? Remember, that an accurate financial statement can be generated for each profit center. It's therefore safe to assume that all transaction postings should have a profit center assignment; all balance sheet and income statement accounts. During posting of transaction there might be instances a user forget to indicate the profit center assignment. In this case, the transaction data will be automatically assign to a Dummy profit center. A Dummy profit center serves as a dumping account/temporary receiver of transactions with no profit center assignment. Data accumulated in the Dummy profit center can be reposted to the correct profit center.

Parallel Accounting in SAP new GL

analyn1982@gmail.com (Author) — Tue, 02 Sep 2008 00:31:00 +0000

With the use of the new GL, Companies can now maintain many sets of books to satisfy the requirements of different reporting agencies e.g. GAAP vs. Tax requirements. This is the new feature of parallel accounting in SAP that have found to be useful for every Company. Both books have standard drilldown reporting functionality embedded already in the system.