As a SAP consultant many times we underestimate the importance of Master Data Here we will see how a consultant can provide support using his experience
Ticket raised with description: Need a G/L account 1234 – Cash pool PLN
The company presents in multiple countries Shares the same chart of accounts
1. Check whether G/L is created in the chart of account or not 2. To find the company code check users parameters in SU01 transaction 3. The G/L is a balance sheet account (can understand from the description) 4. The currency of G/L account is PLN 5. check company code currency, if different than PLN then 6. Need to add this G/L into foreign currency valuation 7. If G/L is not managed as an open item basis then find out the exchange rate difference keys available and assign in G/L master 8. If G/L is managed as open item basis then have to do configuration to include the account in foreign currency valuation (maintain configuration for account key KDF) 9. Generally, cash account is not managed as open items, if it is not a sub-account of any main bank 10. Check the preceding and succeeding Accounts to know is this G/L sub-ledger to the main bank account 11. If it is sub-account (like incoming and outgoing account) then should be open item managed 12. Field status of bank account (with mandatory value date) 13. Description maintenance language (check the maintenance language of the chart of accounts and the local language of user if different then maintain description in local language as well)
And the G/L is created by one sentence of description. Without any need of asking anything to user.
This blog will not take you through the customizing of foreign currency valuation; instead you will learn one or two things differently.
When a foreign currency valuation is done in SAP, all open items and balances in a foreign currency will be converted to local currency using the current exchange rate maintained in the system.
After taking FCV run SAP creates two postings. One for actual valuation at the month-end and the other for reversal on the next day i.e. first day of next month (depends on configuration), but sometimes next period is not open for the reversal postings, so SAP only creates one posting. Now if you have taken the valuation run via batch input then you can open the period and continue with the batch run.
If no batch run were selected then have to manually reverse the postings on the next day with the only transaction code FBB1. This transaction does not post balance in other currencies than the local one.
Scope of Foreign Currency Valuation Generally, currency valuations cover the following:-
Customer open items, Vendor open items, and General Ledger Open Line items, Managed in foreign currency. (Each document is evaluated separately and the valuation posted with gain/loss)
Other General Ledger Balance Sheet Accounts Managed in Foreign Currency, but not flagged as open item management accounts. (Only the balance of G/L account is valuated and gain/loss is posted)
Foreign currency valuation is only done for Balance sheet G/L accounts
We need to determine G/L accounts for open item managed G/Ls and for G/Ls which are not managed as open item basis
The above set up is must if you want to valuate any G/L account.
Exch. Rate Diff. using Exch. Rate Key – KDB :- Here we set G/L account for the G/L accounts which is not managed as open items
Exchange Rate Dif.: Open Items/GL Acct – KDF :- Here G/L account is set for open item managed G/Ls
Let’s see the account determination for KDB account key:
Now if we double click on the KDB account key, the system will ask you to enter the chart of account – so the account is determined on chart of account level, correct?
But in below screenshot you can see, we have option to choose valuation area (highlighted field)
So we can set G/L account on Valuation area + chart of account level (Note: Valuation area is optional and mostly G/Ls are not set per valuation area)
In above screenshot the G/L accounts for realize exchange rate gain and loss are maintained with exchange rate difference key.
As said earlier this setting is used for the G/L accounts which are not managed as open items, so now let’s link this customizing to the G/L account:
Here in the control data tab of G/L account, we can assign the exchange rate difference key. Based on this key; G/L accounts for loss/gain will be determined.
The above G/L account does not have an open item management tick. But even if this account has that tick, the system will not restrict you to assign this key in G/L and neither considers it in valuation.
Account determination for account key KDF
This setup is required for open item managed G/L accounts
From the above snapshot, it can be considered that each and every G/L account needs to be configured, when its managed as an open item basis; unlike the previous one, where we just create exchange rate keys and then assign it in G/L master data.
Account key KDF can also be maintained on valuation area level.
The highlighted area in the above figure explains how/on what basis G/L accounts can be determined.
We have below possibilities to set the G/L account:
For the G.L account
For G/L and currency combination
For G/L and currency type combination
There are two options for assigning Loss and Gain G/L accounts:
The G/L accounts which are managed on open item basis, needs a clearing.
For e.g. vendor invoice is booked on 01.01.2020 it is stored as open item and cleared when payments made against the invoice.
Let’s say the payment against the invoice is made after two months on 04.03.2020
Now when the valuation run is taken on the 31.03.2020 system calculates the difference between the exchange rate of Invoice booking date and the rate of clearing date
And the difference is posted to exchange rate difference realized account (Highlighted in above screenshot)
But what about the valuation runs comes between the invoice booking date and clearing date:
In the above example invoice was booked on 01.01.2020 and not cleared till 31.01.2020
But still we need to evaluate the balance of vendor in the month end, in order to have correct financial reporting to local tax authorities.
So this time system calculates the exchange rate difference of invoice date and the date on which valuation run is taken
And the difference is posted to valuation G/L accounts (highlighted above)
We have one more option to set Balance sheet adjustment account
In most of the cases, we know the valuation difference is calculated and reversed in the next month, so there might be a requirement to not book these differences on the same G/L account, instead, post to the separate G/L account.
In that case we will assign different Balance sheet adjustment account otherwise the same G/L Account should be maintained.
And now the last section: Translation –
This field is used to translate the balances into group currency. We will discuss this in separate blog.
If the create posting is not ticked then transaction will be executed in test mode
Executing the transaction with batch input session helps many times, several times error does not appear in a test run and comes at the time of direct posting
In those cases system stores the data in batch input which is not posted and you can rectify the error and run the session
Variant configured here impacts on the displayed output after executing the transaction. We can configure user-friendly variant, easily as per the requirement.
If the save log button is not ticked, then it’s almost impossible to track the valuation runs, so make sure the end-user is applying this check-in each evaluation.
Hope you like reading this blog, do mention your suggestions in comment
We will keep updating this blog from the received suggestion and keep simplifying critical parts of foreign currency valuation.
If you have any suggestions or questions do let us know in the comment section or you can also write us directly.
Sign up with us to get an update of a new blog post.
We have already discussed about G/L accounts and pre-requisites to create it in first blog
In this second part of the blog, we will discuss about types of chart of accounts and their uses, fields in G/L account, and the importance of each field.
Let’s start with the type of chart of accounts -> almost everyone knows there are three types of Chart of Accounts, but that’s not enough to use them wisely, that’s why we will have more deeper look into it.
Global Chart of Account
Group Chart of Account
Country specific Chart of Account
The interesting part is all of the Chart of Account is created in transaction code OB13, then how one becomes Global COA and other Country specific COA -> it is decided on their assignment.
Let’s check with example:
Suppose I have created two Chart of Account in OB13 -> 1. COAG 2. COAC
In the COAG chart of account I have assigned the COAC chart of account in the field group chart of account, then COAC will become group chart of account and COAG will be global chart of account.
Similarly, if the Chart of Account is assigned in the transaction code OB62 as a country chart of account then it will become a country-specific chart of account.
Global chart of account is considered as an operating chart of account, various reports can be only run on this Chart of Account or with the G/L accounts created under Global Chart of Accounts. So it makes other COA less valuable. But still, in the companies which are spread internationally, country-specific chart of account used widely.
We can group the G/L accounts in Country spec. G/L accounts by assigning same G/L account to many operating G/Ls.
What is the need of Country specific G/L account?
In some countries, there is a legal requirement to prepare financial statements using specific G/L codes. In order to map this requirement SAP has provided the functionality of Country spec. chart of account.
When the country chart of account is assigned to Company code, then it becomes mandatory to assign every G/L account to the alternative G/L account.
Fields in G/L accounts and their use:
G/L is divided into the two parts, Chart of accounts and company code. In hierarchy chart of account is above company code. It is because fields or tabs available in the chart of account level, impacts all the company codes to which chart of account is assigned. In contrast company code level changes only impacts for that specific company code.
We will start with the first tab of G/L account. (as the below information may be too much common, you can skip the below parts of the blog and directly jump to the part which you want to know)
The first tab Type/Description of G/L account is under chart of account, all the fields in this tab will be changed or modified for a chart of account.
Account Group: As we know, SAP only divides G/L account in the P&L account and Balance sheet account, but the G/L account should be grouped in deeper criteria.
P&L statement Account type: In order to explain the use of this field, we have to explore the concept of Retained earning Account in SAP
As we all know retained earnings of the current year are taken from the profit and loss statement and transferred to the balance sheet liability side. We can also call it net profit as an alternative.
How to set retain earing account?
Create a balance sheet G/L account and assign it in OB53 transaction with one representative symbol like X or Y
Now if you define two retain earning in customising for same chart of account then this option of P&L statement account type will be available for selection of retained earning account. (otherwise system will take retained earning account by default)
It is assigned to each and every P&L account. At the year-end balance of P&L accounts carried forward to the next year with retained earning account. Every account balance is cumulated in this account and then the net sum of debit and credit balance in retained earning account is transferred to the balance sheet.
Description: Name of the G/L account, the language of the description is considered as the language of chart of account maintenance.
Group chart of account: If the group chart of account is assigned to the Operational chart of account then this field becomes mandatory to fill. The G/L accounts created in the Group chart of accounts are available for selection in this field.
This tab comes under company code level, hence all the changes done in this tab will affect only the relevant company code
Account Currency: If a currency other than the company code currency is specified, users can only post items in that currency to this account. If the company code currency is specified, users can post items in any currency to this account.
Tax Category: With this you can restrict the G/L accounts to be posted with wrong tax, you can specify if only output tax or input tax should be posted on the G/L account or all types of tax is allowed, if kept blank, the system will now allow to post the G/L account with tax.
Recon. Account for account type: (SAP text is enough to understand this)
An entry in this field characterizes the G/L account as a reconciliation account. The reconciliation account ensures the integration of a sub-ledger account into the general ledger.
E.g. G/L account 140000 is defined as a reconciliation account. In the customer account 4711, the G/L account 140000 is determined as a reconciliation account. In this way, all postings to customer account 4711 are also posted automatically to the G/L account 140000. The G/L account itself is not designed for direct posting. In this way, reconciliation between sub-ledger and general ledger is always guaranteed.
Alternative Account Number: The alternative account number field in the company code area is freely definable. You could use it to enter:
The account number from your legacy system or
The account number from a country chart of accounts if your corporate group uses a standard chart of accounts.
Exchange rate difference key: to determine G/L accounts to post valuation gain or loss. Instead of maintaining each G/L account with gain/loss accounts in customizing, you can create keys and assign them to multiple G/L accounts in the master data level.
This tab also correspond to the company code
Field status group: this is for the transactional data, which field should be mandatory/optional/suppressed while posting to this G/L account is determined here.
Reconciliation account ready for input: indicator which determines that the reconciliation account is ready for input when posting a document. The indicator is used in Financial Assets Management like when you make an initial load of the asset balances the balances are being posted to Asset Sub-Ledger but not to the GL Account.
Hence, in such cases, you are required to Reset the Reconciliation Accounts in OAMK and post the same entries into GL Account that you have loaded to Asset Sub-Ledger and then again make them as Reconciliation Accounts.
Note: On the other hand Reconciliation Accounts are only mean for posting by the System, but when you select the “Recon. account ready for input”, it would become like a normal account, it will allow you to post directly, this would invalidate the integrity of the data. Therefore, you should never put the checkbox Reconciliation Account ready for input for RECONCILIATION accounts.
House Bank & account ID: to determine the bank master data or bank account
Keyword helps to search the G/L account in F4 help
Translation is make description of G/L available in multiple logon languages.
Chart of account information
This tab contains the information of created and changes made to the COA level
Company Code information
This tab contains the information of created and changes made to the company code level
Okay… And this brings us to the end of this blog.
If you have any suggestions or questions do let us know in the comment section or you can also write us directly.
Sign up with us to get an update of a new blog post. Till then you can have look at our ebooks.
I can sense, after reading the title of this blog, half of the reader starts assuming the contents and topics should be discussed here, and probably not read this. So I have decided to give an overview of the topics at the start of the blog.
This post will be helpful for fresher to intermediates in the SAP FICO module along with a consultant from other modules, who want to fully understand the concept of the General Ledger account.
Prerequisites to create G/L accounts
Concept of Chart of accounts and their uses
How G/L accounts created in the international environment (Logic of number range and Groups)
What is the use of an Alternative G/L account or country-specific G/L account?
Use and impact of each field of G/L accounts
Importance of master data and Mistakes people often do
Let’s start with the prerequisites for the G/L accounts:
G/L Account has two levels or let’s say G/L account is created on two levels:
Chart of account (COA)
Company code (CoCd)
Many will argue, G/L account is not created on company code level, it is just extended to company code from Chart of account, but then some will say, we don’t just extend, we expand the G/L account by adding extra views to it.
Chart of Account: A chart of accounts (COA) is an index of all the financial accounts in the general ledger of a company. In short, it is an organizational tool that provides a digestible breakdown of all the financial transactions that a company conducted during a specific accounting period, broken down into subcategories. – by Investopedia
In simple language COA is a list of G/L accounts of a company.
A company can have multiple company codes.
The above statement shows the need of separately extending G/L accounts on company code level.
In the international environment, it is recommended to use a single Chart of Account for all company codes from different countries. (This means we can also have separate Chart of Account for each CoCd)
We will discuss more about ‘Concept of Chart of accounts and their uses’ in upcoming pages, now let’s understand the prerequisite to create G/L account.
From above we can assume now G/L account is created in two phase or it can also be created in one go with transaction FS00.
To create G/L account in Chart of Account:
We will need one Chart of Account
Transaction code to do so -> OB13
Name: Four digit alphanumeric names can be given to the chart of account
Maintenance Language: The language maintained here will be considered as a default language for the description of G/L accounts
Controlling Integration: Automatic creation of cost element, does not mean it will create cost element automatically, there is one prerequisite for this, we have to save the default cost element category for the G/L we are creating. How this works: In most of the cases G/L accounts ranges are fixed for one type of G/L accounts, so we can predict in which range Primary cost elements will be created, hence we can store the category for those G/Ls beforehand in customizing.
Group COA: In the same transaction Group chart of account is defined. Group Chart of Account is assigned when there are multiple Chart of Account used for different CoCd
Blocked: Set this indicator when the Chart of Account is not in used or not completed yet
Create Account group
After creation of chart of account, account group needs to be created for the same Chart of Account
Transaction code for Account Group: OBD4
The account group determines the fields for the entry screens if you create or change a master record in the company code. The account group also determines in which number interval the account number must be.
Here we create different groups for G/L accounts (4 digit alphanumeric), Group controls the fields of G/L master record, because of this, you can notice some of the fields are not available while creating G/L accounts under some specific account group.
Mostly the account groups are created as below: G/L accounts are bifurcated in below groups:
Balance sheet accounts
Profit and loss accounts
Once the account groups are created we are ready to create G/L account in Chart of account
Create G/L account in Char of account:
Transaction code is FSP0
The tabs available in this transaction code can be called global views of G/L accounts
Whatever settings we make here will be applicable to all Company codes, who shares same chart of accounts.
That’s why the maintenance of master data becomes crucial because even if you think of changing the name of G/L account, you should keep in mind that it will be changed for all the users across the world provided their company code uses the same chart of account.
Below are the settings we make on Global/Chart of Account level
P&L OR Balance sheet A/C
Name of the G/L account
Group Account number
Description in different languages
Key word/ translation tab:
In this tab you can maintain keywords in different languages, so that the keyword in user logon language will be used for search.
In translation tab the transaction of short and long text is saved.
Extend G/L account to Company code
In order to create G/L account centrally or to extend already created G/L to company code, we have to do one more step along with above i.e. create field status group and assign it to Company code
Transaction code for field status group à OBC4
Field status group determines the screen layout for document entry.
Fields can have the following statuses:
Optional entry – you can enter data in the field
Mandatory entry – you must enter data in the field
Suppressed – the field does not appear on the screen
Use: To make the value date field mandatory for bank G/L
Assign the created field status variant to Company code in transaction OBC5
After this basic set up you are ready to extend G/L account to company code level
Execute transaction code FSS0
The G/L account cannot be directly created in company code (in this transaction code), the G/L account you are extending should be created in COA (FSP0)
In addition to the previous three views, here we will extend or add three more tabs to the G/L account, but the settings on these tabs will be valid to the specified company code only.
If you look at the above screenshot you will notice the ‘open item management’ is not available. This is because the group, which is selected for this G/L in COA level and that group’s field status has suppressed the field open item management.
The same G/L account can be extended to the multiple company codes with different parameters in transaction code FSS0.
G/L account also can be created centrally with transaction FS00
Here we can notice all the tabs available to create or change G/L account.
In the second part, we will be having a deeper look into the G/L accounts master data and answers the questions like what is the use of a Country chart of account, Valuation group, exchange rate difference key and etc.
The currency type definition for company code and controlling area directly impacts how the organization structures are defined. An incorrect definition in this step can make it impossible to consolidate company codes situated in different countries at the same controlling area level.
Currency type customization is subjective, which means that there is no customizing path where you can define all of the currencies at the same time. The currency types are determined during the customizing of other areas’ SAP ERP items. For example, when you are setting up the different SAP ERP clients (such as development, quality or test, and production) you must choose a currency for the client, which indirectly defines the currency type 30. This is one of the most common areas that can cause issues in SAP ERP, and it’s difficult or impossible to change or correct later. It’s crucial to analyse all of the requirements and consider them in the definition of the structures before beginning the customizing.
All of the currency types should be defined in the project blueprint with consideration of all active components and the company needs. Never change the currency type in an environment with data because it will cause a system inconsistency.
Currency type 10
Currency type 10 is defined at the company code level. Each company code in SAP ERP has its own currency, and when you set this currency, you are actually creating the currency type 10 for that company code.
To maintain the company code currency, use Transaction OX02, or follow the IMG menu path Enterprise Structure → Definition → Financial Accounting → Edit, Copy, Delete, Check Company Code, which brings you to the screen shown in Figure
By double-clicking on an entry in the Company Code column (e.g., company code FS00), you can view the basic information for each company code, as shown in Figure
The Currency field in Figure is defined as “INR”—currency type 10 for company code FS00.
Currency type 20
Currency type 20 (controlling area currency) is the currency type defined in the controlling area settings. We don’t recommend that you use this type in a multi-currency organization because there is a possibility that the currency assigned to currency type 20 may not be available at the company code level. If this is the case, the system cannot assign the company code to the controlling area.
Currency type 30
Each SAP Client has its own currency. Any company code that uses currency type 30 as one of the three available will share the same currency. Currency type 30 is usually used for consolidation. A company doing business in many countries, for example, can assign currency type 30 to all company codes, and it will be available to consolidate the balance sheet, profit and loss, and other financial statements in the same currency.
To maintain the SAP Client currency, use Transaction SCC4, or follow menu path Tools → Administration → Administration → Client Administration → Client Maintenance, which brings you to the screen shown in below figure
The currency (Crcy column shown in Figure) assigned to Client 001 is EUR. This means the client currency type or currency type 30 is EUR.
Currency type 40 and 50
Currency types 40 and 50 are defined in the country customizing. These can be used in countries where inflation is relevant, and accountants need a hard or indexed currency to be available for financial statements.
You maintain the currencies using Transaction OY01 or by following the IMG menu path NetWeaver → General Settings → Set Countries → Define Countries in mySAP Systems, which brings you to Figure
To see the information for the country, double-click in the Country column (e.g., US), and the corresponding country settings will open. There are two currency fields available in the settings: index-based curr. and hard currency, which are currency types 50 and 40, respectively. You can see in Figure that Country DE uses EUR as index-based currency or currency type 50, and EUR as hard currency or currency type 40.
Currency type 60
Currency type 60 is seldom used as a controlling area currency. It is normally defined in the trading partner customization. Company codes assigned to the same trading partner will share the same currency.
To maintain the trading partner currency, either use Transaction OX15, or follow the IMG menu path Enterprise Structure → Definition Financial Accounting → Define Company, which will open the screen shown in Figure. Double-clicking on an entry in the Company column, (e.g.,FS00) will open the screen as shown, Internal Trading Partner Details. (Note that the term “company” is synonymous with “trading partner” in SAP ERP.)
It is useless to have the currency type created if you don’t assign the currency type to the company code. Each company code can have three currency types assigned. This allows the accounting to be maintained in three different currencies.
To customize the currency at the company code level, use Transaction OB22, or follow the IMG menu path Financial Accounting (New) → Financial Accounting Global Settings (New) → Ledgers → Ledger → Define Currencies of Leading Ledger
Hope you enjoy and learn a few things in this blog,
If you have any suggestions or questions do let us know in the comment section or you can also write us directly.
Sign up with us to get an update of a new blog post.