Chapter 10: FINANCIALS CHART OF ACCOUNTS: ‘The GHaMAAGEOURIS is organized by drawers and levels The organization of the chart of accounts follows GAAP (Generally Accepted Accounting Principles) in which there is a separate “drawer” for accounts representing: Assets, Liabilities, Equity (Capital and Reserves), Revenues (Turnover), Cost of Sales, Expenses (Operation Costs), Financing (Non-Operating Income and Expenditure), ‘and Other Revenues and Expenses (Taxation and Extraordinary Items). These rowers which have been defined by SAP and cannot be changed, organize your accounts by level in a logical fashion appropriate to your financial accounting and’ reporting processes. In the General Ledger, we distinguish between Balance Sheet Accounts and Income Statement Accounts, also called Profit and Loss Accounts. BALANCE SHEET ACCOUNTS: @ The first 3 drawers: Assets, Liabilities, Equity (Capital and Reserves) hold the Balance Sheet Accounts, such as the Sales Tax account and the Accounts Payable Account. @% ~The bookkeeping balance of these accounts is kept from one fiscal year to the next. The Balance Sheet Accounts ~refiect the monitory value of he cortpany «stock, asses, et. PROFIT AND LOSS ACCOUNTS: @ ~The last 5 drawers: Revenues (Turnover), Cost of Sales, Expenses (Operation Costs), Financing (lor-Operating Income and Expenditure), and Other Revenues and Expenses (Taxation and xtraordinary Items) hold the Profit and Loss Accounts, such as the Income Accounts. Note that in some localization, ielloWer daWes/are notfallrofitandiloss account GraWers, |Z The bookkeeping balance of these accounts has to be cleared at the end of each fiscal year — this is the Period End Closing process (will be discussed in Unit 4: Financial Periods Process). @% The Profit and Loss Accounts - reflect the changes in the company value, such as: sell stock — cost of goods sold, increase revenues. REPORTS: 2 FinanclalteporingYequremenis cre most fhe inal setngs and configuration decisons. a \e different financial reports run on the account balances relevant to a selected date range and present them according to their drawer, level and type: ‘The BAIAREBESHESt - summarizes the value of the business assets liabilties, and owner's equity accounts. “The [a BAIANES - details for each account: beginning balance for a particular period, all of the debits and credits, and the ending balance. Profitand/Loss"Statement— after tne en of te isal year, the balances of the expense accounts wll "e subtracted from the balances of the revenue accounts to come up with the profit or the loss for the fiscal year.Level2Leveld.«—sLeveld. Levels Freeeld ne Land acute {= Tonge sings f aso - ed Pants aS | Rey [costa — - Capen bngiie ees Vere Paredm Assets boa A giaRORSeOUMES aranges 2 company's general ledger accounts in a hierarchical stucture ‘The top level in the structure (level 1) consists of sections or groups for different type of accounts (assets, lables capital and reserves, tumover, and so on). The umber of account groups, depends on the localization that was selected when the company was created and cannot be modified by the user. ‘The system displays the section as a cabinet drawer (see figure). Each drawer has a section ttle, which you cannot change, The and Levels 2 through 4 can contain either active accounts or titles that combine several active accounts. Level 5 only contains active accounts. Because only active accounts can be posted to in SAP Business One, itis a good practice to have all your active accounts at the same level In reports, atitle account summarizes all the balances of each active account below it.JOURNAL ENTRY : — ee In SAP Business One, a journal entry is automatically posted from many documents, such as A/R and AIP invoices. Additionally, you can manually post a journal entry directly to a GIL account or to a business partner sub-ledger account. All journal entries are posted to one file in SAP Business One — the JoummallEntriesiflg. You can set various defaults for journal entries. You can also change some document settings for an individual Journal entry. ‘+ In automatic journal entries created by the documents in SAP Business One, the fields are filed automatically fromthe document fields. In manual journal entries you set the values: ‘+The system automatically enters a number in the document header. This number is incremented with every transaction. You can define numbering series for journal entries on the Document Numbering screen, under the Administration™=> System initialization =Document Numbering.‘The three dates in the header default to the current system date but you can change them. ‘© PastingiDate. This date determines the posting period and therefore the fiscal period for financial reporting. You can post to an earlier or later date if the posting period is Unlocked for posting ° ‘The date the transaction is due. ° The date used for tax reporting purposes. You can use the REAMIaRIREM2MIBIGS to enter references to associated actual documents You can also classiy the document using a fafiSaelOn|eOWs, for example, as an accrualideferral document, depreciation document, or value adjustment document. Choose traneacton totes ‘The system copies the description of the transaction code to the Details fieldPOSTING TOOLS You can post a Journal Entry by: Entering a manual journal entry. Using a posting template As a recurring posting. From a journal voucher. POSTING TEMPLATE, Tempiate Type: Percantage a pti Code Gay >)-- ~~~ Deserition: Uti ts GtAecomt rc GLACenmiB> Dette cre 30 Utes 25 oxot Ey %5 sso Probie serve 100 You can create POStNGITERIpIAtES for journal entries that have a very similar structure. These templates can contain account numbers but you can also just specify an account description in a line itemif you do not yet Know which exact account will be used for this ine tem. Instead of fixed amounts, Ol//BErCENtaGESTATSIEHIETER|NEIE. These percentages indicate how the total amount is distrinuted among the line items. ‘The illustration shows an example of how you can allocate out a utlty expense, like the electric bill, to its component expenses at a specific percentage rate, The posting template is stored under a code and with a description. CHADSSIRIMAREIaIS — Enter an amount in one of the line items and the template will allocate the amounts to the other lines based on the percentage rate.RECURRING POSTINGS Code: Rent Description Rental Payment eee ara eae = a sc otros seo Frequency: Monthly = On Valid to Next ecu: woo oorate tt rete Titel Va a T te | Fortran! sternal Eien «Half Yoarty, ‘Template Type: Recurring won ‘ty = One Time == SAP Business One features a recurring postings function for similar, fed amount journal entries created on a regular basi RECUITINGYDOSIIAGs Use a template that is stored with a code and a description. In this template, you define (among other things) the frequency in which the journal entry is supposed to be created and Until when the recurring posting is valid = Daily, Weekly, Monthly, Quarterly, Half-Yeariy, Annually: You must also specify the next execution date for these entries. m= One time: Although a one-time recurring posting seems a bit odd, it serves a special purpose. With this you can schedule a journal entry for a specific date. = Template: Journal entries that you need repeatedly but not on a regular basis can be created as this type. You can access these templates from the manual journal entry. To do so, you must specify Recurring Posting in the Template Type field. i: If you do not need the recurring posting at present, you can turn it off with this In the WallGNTOMi8Id, you can enter a date until which the recurring posting is valid and will be executed by the system. ‘The system duplicates the original recurring posting (instance 0) every time the execution date arrives. Once you use this instance and add it to the system, it wil be deleted You can display a list of all the recurring postings in the system You can then adjust these postings and confirm them You can also configure the system so that the execution list is displayed automatically in the execution date as soon as you log on. Choose Administration’ =s System You can add recurring postings to the cash flow, which appear in green in the reportJOURNAL VOUCHER v Journal Voucher (Folder of Journal Entry Drafts) SAP Business One offers You can create the journal entries as, When the user is creating You can change journal voucher as long as they have not been posted yet. Then, you can access the journal voucher, make any necessary corrections, and post the entire journal voucher. each journal entry individually. If you do want to post the journal entries individually, however, you must create a separate journal voucher for each journal entry draft =k Correct and Update To create, change and post journal vouchers, choose Fimameials'=3Youmal Vouchers. ‘You can remove a journal voucher or delete an entry from a journal voucher, as long as they have not been posted yet. Choose the Data menu or, right-click the journal voucher row.POSTING PERIOD When you create a new company database, you create the posting periods for the first fiscal year. PaStingiperiods split the fiscal year into sub-periods. SUBEPEHiOds are created automatically by SAP Business One in the fiscal year. The available sub-periods are: Year (ane sub-petiod) Quarters (four sub-periods) Months (twelve sub-periods) Days (any number of sub-periods) Using this information, the system automatically creates the corresponding number of posting periods. You can change these periods, if necessary. ‘The first posting period must be defined at the time the company database is created. Afterwards, to set up new posting periods, go to From here you can update the generated periods (such as date ranges) and create new ones (by choosing New Period). You can also set or change the start of the fiscal year.PERIOD-END CLOSING Wator Exponso ‘Account Balance Accept and Post Proposal o s ‘Automatic Journal Entries: S Posting Date: December 31% BB Posting Dat: January 1% With the Period-End Closing function, you can choose P&L accounts and periods, and specify a retained earnings and period-end closing accounts. When you execute the perioc-end closing, the system generates a list of proposals for closing entries. You can accept each proposal individually. After you accept the proposals, the system transfers the account balances from the Expense and the Revenue accounts to the Period-End Closing account on the same day (the last day of the period). This sets the accounts balances to zero. At the same time but with the first day of the following posting period as posting date, the system transfers the balances form the Period-End Closing account to the Retained Eamings account (the Period-End Closing is a clearing account), ‘Two transactions are created for each account and two journal entries are automatically created to reflect those transactions. Now, the Retained Earnings account, which is a Balance Sheet account, contains the total brought forward cumulated profit Journal Entries posted by the Period-End Closing Utility have the origin "BC” Note that you can store the results initially as a report and then post them at a later stage. If you make postings after entering the balances carried forward, you need to repeat the period-end closing routine to include these subsequent postings.