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Accounts Receivable – [FI-AR]

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Accounts Receivable – [FI-AR]

Declaration

This document is drawn, based upon certain assumption and based upon
certain circumstances. This merely reveals the concepts of internal order
customization, planning, budgeting, actual posting and settlement. This
document gives only an overview may or may not coincide with other’s
requirement

All rights are reserved. No part of this publication may be reproduced or


stored in any retrieval system, or transmitted in any form or by any means
electronic or mechanical including photo copying, recording without
permission in writing from me

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Accounts Receivable – [FI-AR]

Before going ahead the customization of


Accounts receivable, ensure that we
have properly customized the enterprise
structure. FI-ES is the prerequisites for
this customization. To learn how to
customize, FI Enterprise structure, refer
my eBook on “A COMPLETE GUIDE
TO ENTERISE STRUCTURE”. This
eBook is a free downloadable from my
website www.surya-padhi.net

This eBook is dedicated to my beloved wife


Mrs. Sharmistha Padhi

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Accounts Receivable – [FI-AR]

INDEX
1 Glossary: ............................................................................................................................... 6
1.1 Customer Account Groups:........................................................................................... 6
1.2 Dunning: ....................................................................................................................... 6
1.3 Dunning Procedures...................................................................................................... 6
1.4 Dunning level................................................................................................................ 6
1.5 Dunning areas: .............................................................................................................. 7
1.6 Open Item Management:............................................................................................... 7
1.7 Grace Days:................................................................................................................... 7
1.8 Reason Codes:............................................................................................................... 7
1.9 Noted Items:.................................................................................................................. 7
1.10 Statistical Posting:......................................................................................................... 7
2 Customization Steps.............................................................................................................. 8
2.1 Customer Master........................................................................................................... 8
2.1.1 Define Account Groups with Screen Layout (Customers) – OBD2..................... 8
2.1.2 Create Number Ranges for Customer Accounts – XDN1 .................................. 11
2.1.3 Assign Number Ranges to Customer Account Groups - OBXR ........................ 12
2.2 Business Transaction- Outgoing Invoices: ................................................................. 13
2.2.1 Maintain Terms of Payment – OBB8 ................................................................. 13
2.2.2 Define Terms of Payment for Installment Payments – OBB9............................ 17
2.2.3 Define Cash Discount Base for Outgoing Invoices – OB70............................... 17
2.3 Business Transaction – Incoming Payments Global Setting ...................................... 18
2.3.1 Define Accounts for Cash Discount Granted – OBX1 ....................................... 18
2.3.2 Define Accounts for Overpayments/Underpayments - OBXL........................... 19
2.3.3 Define Reason Codes for Overpayments/Underpayments - OBBE ................... 21
2.3.4 Define Accounts for Payment Differences OBXL ............................................. 23
2.4 Business Transaction – Manual Incoming Payments ................................................. 24
2.4.1 Define Tolerance Groups for Employees – OBA4 ............................................. 24
2.4.2 Define Tolerances (Customers) – OBA3............................................................ 24
2.5 Business Transaction – Automatic Incoming Payments - FBZP................................ 28
2.5.1 Set Up All Company Codes for Payment Transactions:..................................... 28
2.5.2 Set Up Paying Company Codes for Payment Transactions:............................... 30
2.5.3 Set Up Payment Methods per Country for Payment Transactions ..................... 31
2.5.4 Set Up Payment Methods per Company Code for Payment Transactions ......... 31
2.5.5 Set Up Bank Determination for Payment Transactions:..................................... 32
2.6 Business Transaction – Dunning ................................................................................ 32
2.6.1 Define Dunning Areas – OB61........................................................................... 32
2.6.2 Define Dunning Keys – OB17............................................................................ 33
2.6.3 Define Dunning Block Reasons – OB18 ............................................................ 34
2.6.4 Define Dunning Procedures - FBMP.................................................................. 34
2.7 Business Transaction – Down Payment Received...................................................... 42
2.7.1 Define Reconciliation Accounts for Customer Down Payments:....................... 42
2.8 Business Transaction – Bills of Exchange.................................................................. 45
2.8.1 Define Alternative Reconcil. Acct for Bills/Exch.Receivable............................ 45

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2.8.2 Define Accounts for Bill of Exchange Transactions .......................................... 45


2.8.3 Prepare Bill of Exchange Charges Statement ..................................................... 47
2.8.4 Define Bank Sub accounts .................................................................................. 48
2.9 Business Transaction – Interest Calculation:.............................................................. 49
2.9.1 Define Interest Calculation Types: ..................................................................... 49
2.9.2 Define Number Ranges for Interest Forms:........................................................ 50
2.9.3 Prepare Interest on Arrears Calculation:............................................................. 51
2.9.4 Prepare Account Balance Interest Calculation: .................................................. 56
2.9.5 Prepare Special G/L Transaction Interest Calculation:....................................... 58
2.9.6 Maintain Withholding Tax Code for Interest Document.................................... 58
2.9.7 Define Reference Interest Rates: ........................................................................ 58
2.9.8 Define Time-Based Terms:................................................................................. 59
2.9.9 Enter Interest Values:.......................................................................................... 60
2.9.10 A/R: Calculation of Interest on Arrears:............................................................. 61
2.9.11 A/R: Balance Interest Calculation: ..................................................................... 63
2.9.12 Assign Forms for Interest Indicators: ................................................................. 65
2.10 Closing Procedures – Foreign Currency Valuation .................................................... 66
2.10.1 Define Depreciation Areas:................................................................................. 66
2.10.2 Define Valuation Methods:................................................................................. 67
2.10.3 Prepare Automatic Posting for Foreign Currency Valuation.............................. 70
2.11 Closing Procedures – Reserve for Bad Debts ............................................................. 74
2.11.1 Define Methods................................................................................................... 74
2.11.2 Define Accounts for Reserve for Bad Debt ........................................................ 75

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1 Glossary:

1.1 Customer Account Groups:

Customer Account group represents a group of customers. The account group ensures that only
the relevant screens and fields are displayed and ready for input for each of the customer’s
different partner functions. For example, the address, communication, and bank data fields are
omitted for the account group for one-time accounts. The account group controls:
• Method of Numbering: The type of number assignment used for the account number
• No. Range Interval: A number interval from which the account number is chosen. The
system uses the account number to identify the customer.
• Field Status: Which fields are displayed when we enter or change customer master data
and whether or not an entry must be made in these fields (field status)
• Type of Customer: Whether the account is a one-time account

1.2 Dunning:
Dunning represents the process of sending payment reminder or a dunning notice to remind
customer for their outstanding debts. The SAP System allows us to dun business partners
automatically. The system duns the open items from business partner accounts in which the
overdue items create a debit balance. The dunning program selects the overdue open items,
determines the dunning level of the account in question, and creates a dunning notice. It then
saves the dunning data determined for the items and accounts affected. We can use the dunning
program to dun both customers and vendors. It may be necessary to dun a vendor if he or she
has a debit balance as a result of a credit memo. If a customer is also a vendor, we can offset
the account balances against one another.

1.3 Dunning Procedures

The dunning procedure controls various parameters that control how the open items of the
business partners will be dunned. How dunning is carried out by the system. We can define as
many dunning procedures as we like.

1.4 Dunning level

The dunning levels are calculated based on the number of days open items are in arrears. We
can also have the system calculate the dunning levels based on the dunning amount or a
percentage paid (sales-related dunning level determination).

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1.5 Dunning areas:

A dunning area is an organizational unit within a company code used for the dunning process.
A dunning area can be a division or a sales organization. We can assign a dunning area to an
open item when we are posting. We can dun items separately by dunning area.

1.6 Open Item Management:


Specification that items in an account has to be cleared by other items in the account. The total
of the items involved in the clearing transaction must be zero. The account balance is therefore
always the total of the open items.
Customer and vendor accounts are always managed in this way. This allows us to monitor our
outstanding receivables and payables at any time. We have to define open item management for
G/L accounts in the master record.

1.7 Grace Days:


Number of days by which the payment deadlines may be exceeded when manual payments are
made.
In the payment entry facilities, the grace days are added to the payment deadlines. This means
that the system will accept cash discount deductions and net payments even after the original
deadline. If the days in arrears are displayed during open item processing, the system reduces
them by the number of grace days.

1.8 Reason Codes:


Reason codes are used to segregate different reasons for under payment and over payment on
account receivable line items. With reason code, we can define whether the difference should
be charged off to G/L account or if a residual posting should be made.

1.9 Noted Items:


Special item that does not affect any account balance. When we post a noted item, a document
is generated. The item can be displayed via the line item display. Certain noted items are
processed by the payment program or dunning program. For example: Down payment request.

1.10 Statistical Posting:


The posting of a special G/L transaction where the offsetting entry is made automatically to a
specified clearing account (received guarantees of payment for example). Statistical postings
create statistical line items only.

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1.11 Reversal Document:

Reversal document is an accounting document, which nullify the document, which was posted
earlier. We are reversing an accounting document, if we have posted a document with
incorrect value or on wrong date or to a wrong account. A document can only be reversed if:
It contains no cleared items
It contains only customer, vendor, and G/L account items
It was posted with Financial Accounting
All entered values (such as business area, cost center, and tax code) are still valid
If an accounting document is already cleared by another accounting document, then reversal
can only be carried out after the clearing is reset.

2 Customization Steps

2.1 Customer Master

2.1.1 Define Account Groups with Screen Layout (Customers) – OBD2

T Code OBD2
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Customer Account → Master Data → Preparations for Creating Customer
Master Data → Define Account Groups with Screen Layout (Customers)

Purpose: In this step, we will create the account groups for customers. We can also define
reference account groups for one-time accounts. We can use these to control the fields of the
one-time account screen so that, for example, certain fields are displayed as required fields or
are hidden.
When creating a customer account, we must specify an account group. We can specify a
reference account group under "Control" in the "General data" part of a one-time account's
master data. If we do not specify a reference account group, then, as previously, all fields of the
one-time account screen are ready for input during document entry.

Customization: To carry out the activity, choose one of the above navigation options

• Select New Entries

• Update the screen as follows

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- General data field statuses are valid for customer master records created in this
customer account group regardless of company code or sales organization.
- Company code data field statuses are valid for company code level only. This
means that as customer are extended across several company codes, the fields in
this section can have different value based on the company code using the
customer master.
- The fields stored in the sales data field status are valid for combinations of sales
organizations, distributions channels, and divisions. These fields have an impact
on the functionality of the SD module.

• Double Click on Company code data, we will be taken to following screen, where we
have to select fields which are required, optional and will be suppressed

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• Double click on “Account management”

• Select required entry radio button for reconciliation account, as shown below

• Press F3, to go the previous screen

• Double click on “Payment transaction”

• Select required entry radio button for terms of payment, as shown below

• Click on to save.

• Similarly, we will create another customer group for one time customer and check the
check box for one time customer as shown below.

• Maintain the field status as maintained for our 1st customer group.

• Click on to save.

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Customization result:
In this customization steps, we have created two-account group for customers. Customer group
9991 for regular customer and 9992 for one time customer. We have also maintained field
status of customer account groups by making payment terms and reconciliation field status as
required entry.

2.1.2 Create Number Ranges for Customer Accounts – XDN1


T Code XDN1
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Customer Account → Master Data → Preparations for Creating Customer
Master Data → Create Number Ranges for Customer Accounts

Purpose: In this activity we will create the number ranges for the customer accounts. To do
this, specify the following under a two-character key:
A number interval from which the account number for the customer accounts is to be selected
• The type of number assignment (internal or external number assignment)
• Allocate the number ranges to the account groups for customers.

Customization: To carry out the activity, choose one of the above navigation options

• Click on change interval icon. We will be taken to a screen, where we will maintain
number range for customers

• Click on to insert new number range interval.

• Update the screen as follows

• Click on to insert the above number range.

• Similarly follow the above three steps to create another number range. The second
number will be as follow

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• Click on to save.

Customization result:
In this customization steps, we have created two-account group number range for customers
account group’s i.e. number range 98 and 99.

2.1.3 Assign Number Ranges to Customer Account Groups - OBXR


T Code OBXR
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Customer Account → Master Data → Preparations for Creating Customer
Master Data → Assign Number Ranges to Customer Account Groups

Purpose: In this step we will assign the number ranges that we have created in the preceding
step to the account groups for customers. We can use one number range for several account
groups.

Customization: To carry out the activity, choose one of the above navigation options

• Click on button

• Key 9991 customer account group ID for 9991 regular debtors as shown below.

• Press enter, we will be taken to customer account group 9991

• Key number range ID 98 against customer account group 9991, as shown below

• Similarly follow the above steps, to assign the number range 99 to 9992 one-time
debtors groups.

• Click on to save.

Customization result:
In this customization steps, we have assigned the number range 98 and 99 created in our
previous steps to customer account group 9991 and 9992 respectively. Customer created under
this group will be assigned one sequential number out of these number ranges.

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2.2 Business Transaction- Outgoing Invoices:

2.2.1 Maintain Terms of Payment – OBB8


T Code OBB8
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Outgoing Invoices/Credit Memos → Maintain
Terms of Payment

Purpose: In this step, we will define rules with which the system can determine the required
terms of payment automatically. The rules are stored under a four-character key. We assign the
terms of payment specified to the customers in the master record via the key. The key and the
terms determined with it are proposed when entering a document to the customer account. We
can override the proposed payment terms, by entering another payment terms at the time of line
item entry.

Customization: To carry out the activity, choose one of the above navigation options

• Click on new entries.

• Maintain the screen as follows

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The descriptions of the fields in the above screen are:

Payment Terms: This is payment terms identifier of our payment terms

Sales Text: This represents a short text expiation of our payment terms

Day Limit: This field is only valid if our terms of payment depend on the day of the
month. For Example, an invoice billed on or before the 10th of the month is due on the
25th of the same month, and an invoice billed after the 10th is due on the 5th of the next
month. Given example, 10 will be entered in this field because the terms are good until
the 10th day of the month.

Own Explanation: This field is used to give a details explanation of the payment terms.
This field should be used if we want to override the explanation that is automatically
generated by the system. The system expiations are shown in the bottom fields.

Account Type: These controls represent, to which type of account this payment term is
applicable. A single payment term may be used for both customer as well as vendor. In
this control we have to select whether the particular payment term will applicable for
customer or vendor or both.

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Base line date calculation: This is applicable, where the payment terms are depended
upon the fixed day of a month.

Fixed Day: Calendar day with which the system overwrites the day of the baseline date
for payment of the line item.
Additional Month: Number of months, which the system adds to the calendar month of
the baseline date for payment.

Payment block/Payment Method Default:


Block Key: If the terms of payment should propose a block key. The block key takes
effect only if the terms of payment key are entered in the customer or vendor master
record. If the payment term is inserted in the line item of the document, the block key if
not defaulted.

Payment Method: The payment method determines how payments are to be made, e.g.
by check, bank transfer or bill of exchange. This key will override the payment method
entered in business partner’s master

Default Base line date: In this control box we will set what will be our default base line
date. There are four options
No Defaults: If this indicator set, we have key the base line date at our line item entry
level
Document Date: If this indicator is set, then the document date will be taken as base line
date
Posting Date: If this indicator is set, posting date will be the default base line date.
Entry Date: If this indicator is set, the entry date is to be proposed in the field "Base
date" during document entry.

Payment Terms: In this control box we have three options


1. Installment Payment: We have check the radio button for installment payment or
2. Recurring Entries: This indicator controls whether the terms of payment in a recurring
entry are to be taken from the customer or vendor master record, if no terms of
payment key has been entered in the recurring entry original document
3. Make the setting for due date and cash discount. In this case we can make up to three
levels for cash discount and payment due date.

Percentage: Enter the percentage rate, which is to be used for the discount.

No. of Days: Enter the number of days out from the baseline date for which the
percentage discount is valid.

Fixed Date: Enter the day of the month the discount ends if we do not want to use the
baseline date.

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Additional Months: If we want to add month(s) to the baseline date month to determine
the length of time the discount is valid, enter the number of additional month(s) in this
field.

Explanation: The system defaults explanations of the payment terms in this field based
of the percentage discount and length of time the discount is valid. An entry in the own
expiations field overwrites the system-derived explanation.

• Click on to save.

• Create another new payment terms as shown below for installment payment. In this
payment terms we will not define any cash discount % or due date. Check that radio
button for installment is checked

• Click on to save.

Customization result:
In this customization steps, we have defined a payment terms 9991. This payment terms will be
applicable for customers only. The default baseline date for this payment terms is document
date that means, due date will be counted from the date of document. We have also customized
the cash discount policy as follows 1. If payment made with in 2 days of the document date,
cash discount will be 5% of the bill value, 2. If payment made with in 5 days of the document
date the cash discount will be 2% 3. How ever the bill is due for payment after 10 days.

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2.2.2 Define Terms of Payment for Installment Payments – OBB9

T Code OBB9
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Outgoing Invoices/Credit Memos → Define Terms
of Payment for Installment Payments

Purpose: In this step we will determine whether an invoice amount is to be divided into partial
amounts with different due dates. For these terms of holdback/retain age payment, we must
determine the amount of the holdback/retain age in percent and the terms of payment for each
holdback/retain age payment. If we then post an invoice with terms of holdback/retain age
payment, the system generates the corresponding number of line items due to our specifications
for the holdback/retains age.

Customization: To carry out the activity, choose one of the above navigation options

• Click on New Entries

• Maintain the screen as follows

• Click on to save.

Payment Terms: Payment terms ID for installment payment


Installment: This is installment sequential, this control what will be 1st installment. 2nd
installment etc….
Percent: This determines how the invoice will be divided into.
Pmnt Term: Determines what will be payment term of these installments

Customization result:
In this customization steps, we have defined a payment terms 9992 for installment payment.
According this payment term payment can be made in 4 equal installment and the payment
terms for installment is 9991.

2.2.3 Define Cash Discount Base for Outgoing Invoices – OB70


T Code OB70

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Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable


→ Business Transactions→ Outgoing Invoices/Credit Memos → Define Cash
Discount Base for Outgoing Invoices

Purpose: In this step we will determine whether the tax amount is to be taken into
consideration in the base amount for calculating the cash discount amount. We will make our
specifications per company code.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on Position Button

• Enter company code 9999

• Press Enter

• Check the check box as follows

• Click on to save.

Customization result:
In this customization steps, we have defined cash discount will be granted on gross amount of
the invoice / bill.

2.3 Business Transaction – Incoming Payments Global Setting

2.3.1 Define Accounts for Cash Discount Granted – OBX1


T Code OBX1
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Define Accounts for Cash
Discount Granted

Purpose: In this step, we will define to which account numbers for our cash discount expense
amount will be posted. The system posts the cash discount amount to these accounts when
clearing open items.

Customization: To carry out the activity, choose one of the above navigation options.

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• GIVE chart of account ID …….. 9999

• Press Enter, we will be taken to following screen

• Click on to save.

• Click on Accounts

• Select GL Account no 3000000151 from the dropdown box as shown below

• Click on to save.

Customization result:
In this customization steps, we have defined account determination for cash discount granted to
customer. GL Account 3000000151 will be updated when there is a cash discount.

2.3.2 Define Accounts for Overpayments/Underpayments - OBXL


T Code OBXL
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable

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→ Business Transactions→ Incoming Payments → Define Accounts for


Overpayments/Underpayments

Purpose: In this activity we will define the numbers of revenue and expense accounts to which
the system posts if the following requirements are fulfilled:
• There is a difference in payment. The difference can result from an underpayment or an
overpayment.
• The difference is within the
• Tolerance limits for an automatic adjustment posting.
• The difference cannot be posted via cash discount adjustments.

Customization: To carry out the activity, choose one of the above navigation options.

• Give the chart of account ID …….. 9999

• Enter, we will be taken to following screen

• Click on to save.

• Click on Accounts

• Select GL Account no 3000000152 from the dropdown box as shown below

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• Click on to save.

Customization result:
In this customization steps, we have defined account determination for over payment and under
payments. GL Account 3000000152 will be updated when there is a cash discount.

2.3.3 Define Reason Codes for Overpayments/Underpayments - OBBE


T Code OBBE
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Incoming Payments
Global Settings → Overpayment/Underpayment → Define Reason Codes

Purpose: In this step, we will define reason codes, per company code, for handling payment
differences in the form of (1) Residual items , (2) Partial payments, (3) Postings on account
Reason codes come about, for example, if the cash discount period was exceeded, if cash
discount was taken when net payment was due or simply if there is a computer error at the
customer's. Per reason code, we determine:
In which company code it is valid. Which correspondence type (payment notice to the
customer) is connected to it Short text and long text of the reason code

Customization: To carry out the activity, choose one of the above navigation options.

• Key Company Code ……… 9999

• Press Enter

• Click on New Entries, update the screen as follows

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Reason Code: Key which represents a reason for payment differences. The keys can be freely
defined in the system.

Short Text: Reason Code short description

Long Text: Reason code long description

Curt: Correspondence Type for Reason Code: Type of correspondence, which is to be created
with the specified reason code in the case of payment differences. The requirement is that only
this reason code occurs in the clearing procedure and that it was agreed that a payment notice is
to be created for payment differences (residual item, partial payment, payment on account) for
the customer/vendor tolerance group.

C: Charge off difference via separate account: Indicator that payment differences with this
reason code are charged off via a separate G/L account. The accompanying account is specified
in the configuration menu depending on the reason code.

D: Disputed item: Indicator which should cause a disputed item from payment differences with
this reason code during residual item formation. Disputed items do not raise the total
receivables for a customer in the framework of the credit management program. Disputed items
can be displayed separately in the line item display and in credit management.
In credit reviews, disputed items are not considered against the oldest open items or against that
percentage of open items with a specific number of days in arrears.

Do not ….: Do not Copy Text: If we set this indicator, the text for the reason code is not copied
into the segment text of the residual item or the partial payment. Set the indicator if we want to
enter the segment text manually.

• Click on to save.

Customization result:

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In this customization steps, we have defined two reason code 01 for short payment and 02 for
excess payment. We have also defined these two reason code will be charged off to Profit and
loss account.

2.3.4 Define Accounts for Payment Differences OBXL


T Code OBXL
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Incoming Payments
Global Settings → Overpayment/Underpayment → Define Reason Codes

Purpose: In this step, we will set the account determination for the reason codes for which
payment differences are charged off via a separate G/L account.

Customization: To carry out the activity, choose one of the above navigation options.

• Key Company Code ……… 9999

• Press Enter, we will be taken to following screen

• Click on to save.

• Click on Accounts

• Select GL Account no 3000000152 from the dropdown box as shown below

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• Click on to save.

Customization result:
In this customization steps, we have defined account determination for over payment and under
payments. GL Account 3000000152 will be updated when there is an over payment / under
payment with this reason code.

2.4 Business Transaction – Manual Incoming Payments

2.4.1 Define Tolerance Groups for Employees – OBA4


T Code OBA4
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Manual Incoming
Payments → Define tolerance groups for employees

Purpose: In this activity, we will define various amount limits for our employees with which
we determine:
• The maximum document amount the employee is authorized to post
• The maximum amount the employee can enter as a line item in a customer or vendor
account
• The maximum cash discount percentage the employee can grant in a line item
• The maximum acceptable tolerance for payment differences for the employee.
Payment differences are posted automatically within certain tolerance groups. This way the
system can post the difference by correcting the cash discount or by posting to a separate
expense or revenue account

Customization: To carry out the activity, choose one of the above navigation options.

This step has been customized in my free downloadable eBook “A complete guide to
Enterprises Structure from my website www.surya-padhi.net.

2.4.2 Define Tolerances (Customers) – OBA3


T Code OBA3
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable

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→ Business Transactions→ Incoming Payments → Manual Incoming


Payments → Define Tolerances (Customers)

Purpose: In this step, we will specify the tolerances for customers. These tolerances are used
for dealing with differences in payment and residual items, which can occur during payment
settlement. Specify the tolerances under one or more tolerance groups. Allocate a tolerance
group to each customer via the master record. For each tolerance group, specify the following:
• Tolerances up to which differences in payment are posted automatically to expense or
revenue accounts when clearing open items
• The handling of the terms of payment for residual items, if they are to be posted during
clearing

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Up date the screen as shown

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• Click on to save.

The descriptions of the fields of the above screen are

Grace Days Due Date: Number of days by which the payment deadlines may be exceeded
when manual payments are made.

Cash discount Terms displayed: During payment settlement, the items are displayed with the
cash discount terms specified here.

Permitted Payment Differences:


Gain/Amount: Payment differences to our advantage are allowed up to the amount entered
here. The amount always refers to the local currency. Payment differences up to the amount
entered here are posted automatically by the system as increasing the profit. The system creates
line items to show this
Gain/Percentage: Differences when settling payments are accepted and posted automatically
by the system up to the percentage rate entered here. The percentage rate is only valid if the
difference is posted as a gain. The percentage rate is used for the maximum of the debit and
credit totals of the items to be cleared.

Gain/Adjust Discount By: When clearing payments, any payment differences up to the
amount specified here are corrected with the cash discount posting as long as the cash discount
amount is large enough for the adjustment. The value we specify here is used for differences
that represent a gain.

Permitted Payment Differences for Automatic Write Off:


Rev. / Amount: Payment differences to our advantage are permitted up to the amount specified
here. The amount always refers to the local currency. The system always automatically posts
payment differences up to the amount specified here as increasing the profit. The system also
creates line items.

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Rev. /Percentage: The function 'Automatically write-off payment difference with function
code AD is an enhancement of the function 'Differences from payment clearing'. As specified
in the example, we can define different limits for payment differences in clearing processes.

Expenses / Amount: Payment differences to our disadvantage are permitted up to the amount
specified here. The amount always refers to the local currency. The system always
automatically posts payment differences up to the amount specified here as reducing the profit

Expenses / Percentage: The system accepts and posts differences that arise during payment
clearing up to the percentage rate specified here. The percentage rate only applies if the
difference is to be posted as an expense.

Specification for posting residual items for payment difference:

Payment Terms from Invoice: Indicator that the terms of payment are to be transferred from
the original item for residual items. In this case, the amount qualifying for cash discount is set
in such a way that the relationship between the amount qualifying for cash discount and the line
item amount of the original item is also given in the residual item.

Only Grant Partial Cash Discount: Indicator that only partial cash discount is granted when
clearing an invoice if an outstanding receivable is posted due to an insufficient payment.

Fixed Payment Terms: Terms of payment key which is to be transferred to the line item when
posting residual items.

Dunning Key: The dunning key entered here is put into an automatically generated residual
item line. In this way, the maximum dunning level can be specified for residual items, for
example.

Tolerances for payment advice:


Outst. Reciv. Form/ Amount: If the net amount stated in the payment advice note exceeds the
net amount of the open item by at least the value given here, then an outstanding receivable for
the difference amount is automatically generated.
Outst. Reciv. Form/ Percentage: If the net amount stated in the payment advice exceeds the
net amount of the open item by at least the percentage rate given here, then an outstanding
receivable is generated automatically to the amount of the difference.

Outst Payable Form / Amount : If the net amount stated in the payment advice exceeds the
net amount of the open item by at least the value given here, then a payable is posted
automatically to the amount of the difference from the overpayment.

Outst Payable Form / Percentage: If the net amount stated in the payment advice exceeds the
net amount of the open item by at least the percentage rate given here, then a payable is posted
automatically to the amount of the difference from the overpayment

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Customization result:
In our above customization step, we have defined up to 6 % of the invoice amount or
Rs.10000.00 which ever less is; payment difference will be accepted from customer. Out of
above payment difference up to maximum Rs.5000.00 will be adjusted towards cash discount.
Out of the residual amount of over payment and under payment up to Rs.2000.00 or 2% of the
invoice amount will be adjusted towards expenses or income as amount written off.

2.5 Business Transaction – Automatic Incoming Payments - FBZP

2.5.1 Set Up All Company Codes for Payment Transactions:


T Code OBVU
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Automatic Incoming
Payments → Payment Method/Bank Selection for Payment Program → Set Up
All Company Codes for Payment Transactions

Purpose: In this activity, we will make specifications for all company codes involved in
payment transactions.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries.

• Maintain the screen as follows

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• Click on to save.

The explanations of the fields are

Sending company code: The sending company code is the company code that is known to the
business partner. When making cross-company code payments, we can specify the sending
company code as well as the paying company code for each company code. If the sending
company code is different from the paying company code, the system notes the sending
company code in the payment transfer medium or payment advice. This note is information for
the business partner.

Paying company code: In this field we find the company code which processes the payment
transactions. Postings to the bank accounts or the bank sub-accounts are made in the company
code specified here during automatic payment transactions.

Separate payment per business area: If this indicator is set, line items from different
business areas are paid separately.

Pay meth suppl: Usage of Payment Method Supplements. Means that payments are to be
separated in the document according to a preset characteristic.

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Tolerance days for payable: Specifies the number of days by which the cash discount periods
and period for the due date for net payment may be exceeded.

Outgoing Pymt with cash disc form: Minimum Percentage Rate for Payments with Cash
Discount. Specifies the lower limit for payments with cash discount deduction. Only items that
have a cash discount percentage rate greater than or equal to the one specified here are paid
with the cash discount deducted. If the percentage rate is less than the one specified here,
payment is made at the due date for net payment.

Max cash discount: Vendor Payments Always with Maximum Cash Discount. Means that the
maximum cash discount is always to be deducted when automatically paying vendor invoices.
Cash discount is also deducted if the payment is made after the predefined period.

Vendor: Spl G/L Transaction to be Paid: All open vendor items that have been entered with
one of the specified special G/L indicators are included in the payment.

Vendor: SP G/L Trans. For exception list: All open vendor items that have been entered with
one of the special G/L indicators are output in the exception list.

Customer: Spl G/L Transaction to be Paid: All open customer items that have been entered
with one of the specified special G/L indicators are included in the payment run.

Vendor: SP G/L Trans. For exception list: All open customer items that have been entered
with one of the special G/L indicators are output in the exception list.

2.5.2 Set Up Paying Company Codes for Payment Transactions:


T Code OBVU
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Automatic Incoming
Payments → Payment Method/Bank Selection for Payment Program → Set Up
Paying Company Codes for Payment Transactions

Purpose: In this activity, we make the following specifications for the paying company codes:
• Data for controlling the payment program
• Specifications for paying with bills of exchange
• Forms and sender details for advice notes and EDI accompanying sheets

Customization: To carry out the activity, choose one of the above navigation options.

We are not configuring any thing here. This has been dealt in “A Complete Guide to
Accounts payable”. For details refer to my website: www.surya-padhi.net

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2.5.3 Set Up Payment Methods per Country for Payment Transactions


T Code OBVCU
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Automatic Incoming
Payments → Payment Method/Bank Selection for Payment Program → Set Up
Payment Methods per Country for Payment Transactions

Purpose: In this activity, we specify which payment methods are to be used in each country.

Customization: To carry out the activity, choose one of the above navigation options.

We are not configuring any thing here. This has been dealt in “A Complete Guide to
Accounts payable”. For details refer to my website: www.surya-padhi.net

2.5.4 Set Up Payment Methods per Company Code for Payment Transactions
T Code OBVU
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Automatic Incoming
Payments → Payment Method/Bank Selection for Payment Program → Set Up
Payment Methods per Company Code for Payment Transactions

Purpose: In this activity, we specify which payment methods can be used per company code
and determine the conditions under which a payment method should be used.

• Amount limits for payments within which the payment program can select the payment
method
• Specifications for grouping items for payment (such as single payment for marked
items)
• Specifications for foreign/foreign currency payments
• Specifications for optimizing bank selection
• Specifications for the form to be used for the payment medium
• Specifications for issuing payment advice notes

Customization: To carry out the activity, choose one of the above navigation options.

We are not configuring any thing here. This has been dealt in “A Complete Guide to
Accounts payable”. For details refer to my website: www.surya-padhi.net

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2.5.5 Set Up Bank Determination for Payment Transactions:


T Code OBVCU
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Incoming Payments → Automatic Incoming
Payments → Payment Method/Bank Selection for Payment Program → Set Up
Bank Determination for Payment Transactions

Purpose: In this activity, we make settings that the payment program uses to select the banks
or bank accounts from which payment is to be made. We define the following:
Ranking order of banks
We specify which house banks are permitted and rank them in a list.

• Bank accounts
For each house bank and payment method (and currency, if required), we specify which
bank account is to be used for payments.

• Available amounts
For each account at a house bank, we enter the amounts that are available for the
payment run. We enter separate amounts for incoming and outgoing payments.
Specifying available amounts enables us to control which bank account is to be used for
payments. We can specify the amounts depending on the value date at the bank.

• Value date
We specify how many days elapse between the posting date of the payment run and the
value date at the bank, dependent on the payment method, bank account, payment
amount, and currency.
We can have the system determine the value date, taking into account the bank calendar
and any individual arrangements made with the bank. To do so, choose the activity
Define Value Date Rules

• Fees/Charges
We define the charges that are printed on the bill of exchange forms (standard practice
in Spain).

Customization: To carry out the activity, choose one of the above navigation options.

We are not configuring any thing here. This has been dealt in “A Complete Guide to
Accounts payable”. For details refer to my website: www.surya-padhi.net

2.6 Business Transaction – Dunning

2.6.1 Define Dunning Areas – OB61


T Code OB61
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable

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→ Business Transactions→ Dunning → Basic Settings for Dunning → Define


Dunning Areas

Purpose: In this step, we will define our dunning areas. Dunning areas are used if several
organizational units are responsible for carrying out dunning within one company code. These
organizational units are referred to as dunning areas. The dunning area can correspond, for
example, to a profit center, a distribution channel, a sales organization or a business area.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Update the screen as shown

• Click on to save.

Customization result:
In this customization steps, we have created two dunning areas 01 for customer group 9991
and dunning area 02 for customer group 9992. .

2.6.2 Define Dunning Keys – OB17


T Code OB17
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Dunning → Basic Settings for Dunning → Define
Dunning Keys

Purpose: We will define our dunning keys in this step. With the dunning keys, we can limit the
dunning level of an item. Define either instead of or in addition to the dunning key whether the
items with a dunning key are to be displayed separately in the dunning letter.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Update the screen as shown below

• Click on to save.

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Customization result:
In this customization steps, we have created one dunning key to limit the dunning at dunning
level 2 for certain customer.

2.6.3 Define Dunning Block Reasons – OB18


T Code OB18
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Dunning → Basic Settings for Dunning → Define
Dunning block reasons

Purpose: In this step, we will define the reasons for a dunning block under a key. The key can
be entered in an item or in the account of a business partner. Blocked items or accounts are not
considered for the dunning run.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Update the screen as shown below

• Click on to save.

Customization result:
In this customization steps, we have created one dunning block reason for blocking the
disputed items from being dunned.

2.6.4 Define Dunning Procedures - FBMP


T Code FBMP
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Dunning → Dunning Procedure → Define
Dunning Procedures

Purpose: In this activity we will enter the settings that control the dunning program by:
• Specifying the company codes to include in dunning. We will specify these company
codes when configuring the dunning program.
• Setting up the dunning procedure we want to use. Dunning procedures are company
code independent. They determine the dunning interval, the grace periods for the due
date determination, and the number of dunning levels. We can also set the dunning level
at which we want to list all due items from an account in the dunning notice.

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• Setting the dunning charges. We can either specify a fixed charge or have the system
calculate the charge on the basis of a percentage rate we specify.
• Specifying the net payment due date at which a particular dunning level is reached.
• Specifying the dunning notice we want to send to our customers. We have to define one
or more forms for the notice.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Procedure

• Maintain the Screen as follows

• Click on to save.

The field’s descriptions of the above screen are:

Dunning Interval in days: These fields determine at what intervals the allocated accounts are
to be dunned for every dunning procedure. During every dunning run, the system then checks
whether the run date is at least this number of days since the date of the last dunning run. If this
is not the case, then a new dunning notice cannot be created even if new items have become
overdue on the account or individual items have changed their dunning level.

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No of dunning levels: These fields determine how many times an account will be dunned
besides legal dunning an account may be dunned up to 9 times.

Total due items from dunning level: Dunning level from which all the due items in an
account are totaled.

Mondays in arrears (acct): Days in arrears after which a dunning notice will be sent. Days in
arrears which at least one item in this account must have for a dunning notice to be created.
These minimum days in arrears have no influence on calculating the days overdue

Line item grace periods: Grace periods per line item. Grace periods per line item which are
taken into consideration during determination of the due date for the dunning run?
An item whose days in arrears are smaller or identical to the grace periods, is taken as not due
for that dunning notice.

Interest Indicator: Interest calculation indicator for calc. of dunning interest. We enter an
interest calculation indicator here if we want dunning interest to be calculated for this account.

Standard Transaction Dunning: If this indicator is set, standard transactions - as opposed to


special G/L transactions - are included when using this dunning procedure. This should be the
default setting.

Dun Special GL Transaction: An entry in this field means that special G/L transactions as
well as standard transactions are included in the dunning procedure.

Ref Dunning Procedure for Text: Dunning procedure, which is used to determine the form
names when printing dunning notices. This field simplifies the maintenance of the form names
for procedures which have the same number of dunning levels and the same form layout. If this
field is left blank, the selected dunning procedure is set automatically. The form names can
only be maintained for procedures in which the reference dunning procedure is the same as the
dunning procedure.

Besides main screen there are other 5 button is there. Screen behind these buttons needs to be
configured.

• Click on Dunning Levels.

• Maintain the screen as follows

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The above screen is having following fields and meaning thereof.

Days in arrears: Minimum number of days in arrears, referring


To the due date for net payment, that an item must show in order to reach a certain dunning
level. No grace periods are taken into consideration for calculating the days in arrears.

Calculate Interest: This indicator determines that interest is to be calculated for documents
with the dunning level.

Always Dun? Indicates that a dunning notice is still printed even if no change has been
made to the dunning proposal since the last dunning run.

Print All Items: This indicator determines that all open items are to be printed in the
dunning notices that have this dunning level. The dunning level of the dunning notice is the
same as the highest dunning level of the items in the notice

Payment Deadline: If we wish to enter a payment deadline for payment of the overdue
items in the dunning notice, we can enter the number of days here. This number is added to
the date of issue of the dunning run and creates the payment deadline.

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Always dun in legal dunning Proc.: If a legal dunning procedure has been entered in the
customer/vendor master record, a further dunning notice is usually only sent when further
account movements have occurred. If we wish to send a dunning notice although no further
account movements have occurred, select this indicator.

• Click on Charges.

• Enter Currency ……… INR and Enter

• Maintain the screen as follows

In this configuration steps, we will define what will be dunning charges at each dunning
level. The above screen is having the following fields and meaning there off

Dunning Level: Dunning level of the customer/vendor which was reached by the last
dunning run.

From Dunn.Amt: Total of all overdue items which are printed in a dunning notice. If all
open items of an account have been posted in the same currency, then the total is
determined in this currency. Otherwise, the local currency is used.

Dunn.Charges: The fixed dunning charge in dunning currency can be printed on the
dunning notice. If a customer receives several dunning notices (as a result of the dunning
notice per dunning area or dunning notice per dunning level setting, or a dunning grouping),
the dunning charge is printed on every dunning notice.

Dunn. Charge %: Dunning charge in percent. The percentage is multiplied by the total of
all overdue items in a dunning notice. The result is the dunning charge in dunning currency.

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If the dunning notice only contains items in one currency, this is the dunning currency. If
the dunning notice contains items in different currencies, the dunning currency is the local
currency.
If we have defined a dunning charge as a percentage, a fixed dunning charge cannot be
defined at the same time.

• Click on Minimum Amounts

• Enter Currency ……… INR and Enter

• Maintain the screen as follows

Dunn. Level: Dunning level of the customer/vendor which was reached by the last
dunning run.

Minimum Amount: Minimum amount to be dunned. Minimum amount of the overdue


items which is necessary to set a dunning level. If this amount is not reached in a
dunning level, then the items in this dunning level are assigned to the next lowest, and
the system checks whether a dunning notice can then be created in this dunning level.

Min.Percentage: Minimum percentage rate used in editing. Percentage below which


the allocated dunning level is not triggered by the system. The minimum percentage is
multiplied by the total of all open items on a particular account. A dunning notice is
only created at this level if all the items due at this dunning level have reached at least
the level determined by the multiplication.

Min.amt. for interest: Minimum amount to be reached by interest in order to be


identified at this level in dunning notices.

• Click on Dunning Texts.

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• Enter Company code ……… 9999 and Enter

• Maintain the screen as follows

• Click on to save.

• Press F3 come back to main screen of Dunning Procedure

Dunning by dunning area: Indicator that determines that dunning notices are to be
created separately by dunning area rather than per account for a company code.
The updating of dunning data in the master record of the business partner, for example,
dunning level and date of the last dunning notice, takes place separately according to
dunning areas.

Separate dunning notice for each dunning level? : An entry in this field means that a
separate dunning notice is created within an account for every dunning level
determined.

• Click on Dunning Texts

• Enter Company code ……… 9999 and Enter

• Maintain the screen as follows

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Dunning level: Dunning level of the customer/vendor which was reached by the last
dunning run.

Dunning Area: The dunning area represents an organizational entity that is responsible
for dunning. The dunning areas represent a sub-structure of the company codes.

Form: Key of the form which is to be displayed for the dunning level. The layout of the
form is defined in the SAP script word processing tool using the key specified here.

Adv: Indicator for generation of payment advice.

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• Press F3 to come to main screen

• Click on to save.

Customization result:
In this customization steps, we have maintained various parameter for our dunning procedure
as follows:
We have defined dunning letter will be send at 10 days interval to every customer. A business
partner will be dunned maximum 4 times

2.7 Business Transaction – Down Payment Received


Advances received from the customers will be tracked by using the Special General Ledger
Transactions. When Special General Ledger Transactions are used system will be posting to an
alternative Reconciliation account instead of normal reconciliation account, which is assigned
in the customer master. In this active Alternative Reconciliation Accounts will be assigned in
relation to the Customer Master Reconciliation account.

2.7.1 Define Reconciliation Accounts for Customer Down Payments - OBXR


T Code OBXR
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Down Payment Received → Define Reconciliation
Accounts for Customer Down Payments

Purpose: In this step, we will define an account in which the customer down payments or
down payment requests are managed in the general ledger. In the case of down payments or
down payment requests, the posting is automatically made to this account instead of to the
normal receivables account (reconciliation account)

Create one GL Account 2000000011 in Current Liabilities Grouping through T Code FS00 for
SPL GL Reconciliation account for Down Payment with field status group G031
Create one GL Account 1000000051 in Current Assets Grouping through T Code FS00 for
Debtors control Account with field status group G019
Create one GL Account 2000000012 in Current Liabilities Grouping through T Code FS00 for
Customers Security Deposit Account with field status group G019

Customization: To carry out the activity, choose one of the above navigation options.

We will taken to below screen

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• Double click on Sp GL Indicator A

• Enter Company Code …….. 9999 and enter

• Maintain the screen as follows

The Field descriptions of the above screen are

Recon. Acct: The reconciliation account in G/L accounting is the account which is
updated parallel to the sub ledger account for normal postings (for example, invoice or
payment

Special G/L Account: The G/L account number to which spl gl transaction will be updated

• Click on to save.

Similarly maintain relation GL account for down Payment Request


Double Click on

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Give Chart of account ID ……9999

Maintain the screen as follows

Similarly maintain relation GL account for security Deposit from customer

• Double click on Sp GL Indicator C

• Enter Company Code …….. 9999 and enter

• Maintain the screen as follows

• Click on to save.

Customization result:
In this customization steps, we have assigned GL Account no 2000000011 (reconciliation
account for down payment) assigned to customer reconciliation GL account 1000000051.
Similarly GL Account no 2000000012 (reconciliation account for down payment) assigned to
customer reconciliation GL account 1000000051.

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2.8 Business Transaction – Bills of Exchange - OBYN

2.8.1 Define Alternative Reconcile. Acct for Bills/Exch.Receivable


T Code OBYN
Path IMG → Financial Accounting → Bank Accounting → Business
Transactions→ Bill of Exchange Transactions → Bills of Exchange
Receivable → Post Bill of Exchange Receivable→Define Alternative
Reconcil.Acct for Bills/Exch. Receivable

Purpose: In this activity we will define the accounts in which bill of exchange payments are
recorded in the general ledger. When we post bills of exchange, the system will post the entries
to these accounts instead of to the normal receivables account (reconciliation account). This
way it is possible to keep bills of exchange separate from the normal receivables. A transfer
posting for balance sheet purposes is no longer necessary.

Customization: To carry out the activity, choose one of the above navigation options.

• Double Click on

• Key Chart of Account …… 9999, Enter

• Maintain the screen as follows

• Click on to save.

Customization result:
In this customization steps, we have assigned GL Account no 1000000054 (reconciliation
account for Bills of exchange receivable) assigned to customer reconciliation GL account
1000000051.

2.8.2 Define Accounts for bill of exchange Transactions - OBYH


T Code OBYH
Path IMG → Financial Accounting → Bank Accounting → Business
Transactions→ Bill of Exchange Transactions → Bills of Exchange

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Receivable → Post Bill of Exchange Receivable→Define Accounts for Bill of


Exchange Transactions

Purpose: In this step, we will define the account numbers and the posting keys for automatic
postings, which the system makes when posting the payment by bill of exchange and bill of
exchange usage. For some transactions (posting a bill of exchange payment request, for
example) we only need posting keys.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on

• Key Chart of Account ID …9999

• Maintain the screen as follows

• Click on to save.

• Click on

• Key Chart of Account ID …9999

• Save

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Click on

Customization result:
In this customization steps, we have assigned GL Account no 3000000054 assigned to bank
discounting charges.

2.8.3 Prepare Bill of Exchange Charges Statement - SPRO


T Code SPRO
Path IMG → Financial Accounting → Bank Accounting → Business
Transactions→ Bill of Exchange Transactions → Bills of Exchange
Receivable → Post Bill of Exchange Receivable→Define Accounts for Bill of
Exchange Transactions

Purpose: In this step, we will define the default values for the bill of exchange charges
dependent on company code. These values are proposed when entering a bill of exchange
receivable. These include:
• Discount percentage rate
• Collection charges in local currency
• Tax code for taxes on sales/purchases
• Bill of exchange tax code

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Maintain the screen as follows

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• Click on to save.

The above screen consists of following fields

Company Code: The company code is an organizational unit within financial accounting.

Des. Rate: Percentage Rate for Bill of Exch. Disc. with Passed-On Chrgs. When accepting bills
of exchange receivable, bank charges can be invoiced to the customer. This includes the
discount charges, which are calculated from the percentage rate specified here and the term of
the bill of exchange.

LC Collection Charges: Charge for bill of exchange collection in local currency. Charges for
bill of exchange collection in local currency. This is not necessarily the amount which is
actually to be paid, but the amount which is debited to the customer who has paid with a bill of
exchange.

Tax Code: Tax code for bill of exchange charges. This field contains the corresponding tax
code providing that the debit posting of the customer with bill of exchange charges is subject to
taxes on sales/purchases.

B/e tax code: Bill of exchange tax code. Indicator by which the bill of exchange tax rate is
determined.

Curr: Currency. Currency key for amounts in the system.

2.8.4 Define Bank Sub accounts - OBYK


T Code OBYK
Path IMG → Financial Accounting → Bank Accounting → Business
Transactions→ Bill of Exchange Transactions → Bills of Exchange
Receivable → Present Bill of Exchange Receivable at Bank→Define Bank Sub
accounts

Purpose: We will specify the bank sub accounts that display the bill of exchange liability from
the point of view of the bank. The bill of exchange liability results from the bill of exchange
usage.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

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• Maintain the screen as follows

• Click on to save.

2.9 Business Transaction – Interest Calculation:

2.9.1 Define Interest Calculation Types – OB46


T Code OB46
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation → Interest Calculation
Global Settings → Define Interest Calculation Types

Purpose: In this step, we will create our interest indicators and determine whether they are to
be used for the line item interest calculation or account balance interest calculation.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Update the screen as follows

• Click on to save.

The above screen has following fields:

Int. ID: Enter an interest calculation indicator. This interest indicator will be keyed at
business partner’s master for whom we will determine interest.

Name: Enter here name of the Interest Calculation indicator.

Acct. as intClcInd: Indicator, which determines that the account number is used as an
extended interest indicator in the interest terms.

Int. Calc. Type: Decides whether the interest indicator participates in the calculation of
interest on arrears (per line item) or in the account balance interest calculation (interest
scale).

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Name: This text appears when fixed values are displayed in the F4 help. It explains the
possible input values.

Similarly create another Interest ID AB for interest calculation on security deposit. Ensure
that interest calculation type should be S (Balance Interest Calculation).

In the above step, we have created two interest calculations ID as follows:

Customization result:
The interest indicator AA and AB was configured for our company code 9999. AA will be
used for overdue account receivable interest calculation. While AB will be used for interest
calculation other GL account like bank interest, security deposits

2.9.2 Define Number Ranges for Interest Forms – FBN1


T Code FBN1
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation → Interest Calculation
Global Settings → Define Number Ranges for Interest Forms

Purpose: In this activity we will create number ranges for interest forms by:
• Specifying an interval of numbers to assign to the interest forms.
• Selecting the type of number assignment (internal). The system assigns a unique
number from the number range interval. Once we post an interest document, the number
of the form is stored in the "Reference" field.

Customization: To carry out the activity, choose one of the above navigation options.

• Key Company code ……… 9999

• Click on

• Click on

• Maintain the values of the table as follows

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• Click on to insert the number range

• Click on to save.

Customization result
In this step we have created the internal number range for interest form IN for year 2005

2.9.3 Prepare Interest on Arrears Calculation – OB82


T Code OB82
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation → Interest Calculation
Global Settings → Prepare Interest on Arrears Calculation

Purpose: In this step we will make general specifications for each interest indicator for the
calculation of interest on arrears. To do this, we will make specifications for the selection of
items as well as for calculating interest. We can make further specifications as to the
subsequent processing of interest, output control and for posting.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Maintain the screen as follows

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Similarly create another interest indicator for GL balance interest calculation

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• Click on to save.

The above screen is having the following fields and the meaning thereof

Int. Calc. Indicator: Key for the allocation of the interest terms to the respective accounts.

Selection of Items: The radio buttons in this section determines the line on which interest
is calculated. The program will try to select all available line items that have become past
due since the data of the last interest run based on the parameters selected here, the
available entries are as follows:

Open and All Cleared Items: The program includes those open items that are posted up to
the upper limit of the period. Items that are posted after the upper limit of the period are not
included. If the clearing date (posting date of the clearing) is after the upper limit of the
period, the program selects the item as an open item.

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In addition, the program selects clearing transactions that contain a payment. These are
transactions in which open items are cleared by an incoming payment to the bank account.
It also includes clearing transactions in which open items are cleared by credit memos,
offsetting entries or payments on account.

Open Items and Items Cleared with Payment: The program includes those open items
that are posted up to the upper limit of the period. Items that are posted after the upper limit
of the period are not included. If the clearing date (posting date of the clearing) is after the
upper limit of the period, the program selects the item as an open item.
In addition to the open items, the program includes only those clearing transactions that
contain a payment. This enables us to exclude the credit memos, offsetting entries and
payments on account that was not immediately cleared with a receivable during posting.
Because the accounts are maintained later, we can prevent an unnecessary increase in the
number of items listed in the letter by excluding those transactions.

No Open Items – All Cleared Items: This option prevents open items from being selected.
The program then only includes cleared items. The clearing date (posting date of the
clearing) must be within the period of interest calculation.

No Open Items - Only Items cleared with a Payment: This option prevents open items
from being selected. The program includes only those cleared items that contain a payment.
The clearing date (posting date of the clearing) must be within the period of interest
calculation.

Calendar type: The calendar type determines how many interest days per month and year
are used as a basis for calculating interest on financial investments. The number of days in
the year is used as the divisor for the interest rate to calculate the daily interest rate from the
annual interest rate. The available options are as follows:
- B (Bank Calendar): The Bank calendar uses 360 days as the basis for a year
and 30 days as the basis for a month.
- F (French Calendar): The French calendar uses 360 days as the basis for a year
and the exact number of days in the month as the basis for a month.
- G (Gregorian calendar): The Gregorian Calendar uses 365 days as the basis
for a year and the exact number of days in the month as the basis for a month.
- J (Japanese Calendar) The Japanese Calendar uses either 365 or 366 days
(depending on leap years) as the basis for year and 30 days as the basis for a
month.

Transfer days: Transfer days for interest for days overdue. Transfer days are the days
required for a payment to go from the payer to the payee (bank run times for payment
transfers, for example). We can also include late account maintenance with transfer days.

Tolerance days: Tolerance days for calculating interest on arrears. A customer can clear
payables which are already due without any interest being calculated. This can occur due to
grace days.

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Examples (Assume that the grace period= 2 days):


1.) An item is 20 days overdue. If we subtract the two-day grace period, the item is still 18
days overdue. This means that interest will be charged on the item. However, 20 days of
interest are calculated

Factory Calendar: A factory calendar distinguishes between working days and non-
working days.

Calculate interest on items paid before due date: Indicator which means that credit
interest is calculated for items paid prior to their due date, provided that the item paid was
not subject to a cash discount. Interest is calculated using credit interest rates.

Only calculate interest on debit items: Indicator, which means that, in principle, interest
is only calculated on debit entries. Otherwise, interest would also be charged to credit
items. The credit item would be treated as a debit item; in particular, the same interest rate
is applied to both. Reason: If the credit memo is not cleared right away by the invoice, but
cleared later, both the invoice and credit memo are "overdue" and consequently balance out
in terms of interest.

Calculate using interest calculation numerators: Option to determine first the interest
calculation numerators resulting from the amount and the days the system calculates. In the
next step, the system then calculates the interest from the interest calculation numerators.

Round-off interest calculation numerators (if used): Indicator that means that the
interest calculation numerators determined are always rounded off immediately. This is
only useful if interest calculation numerators are to be calculated.

Function module for other interest calculation: If the interest rate determination is not to
be carried out in the standard way (via transaction and business types), we should enter the
name of the function module which provides the interest rate determination here. The
interface, among other things, is the table structure T_ZSTAB. For further information on
the interface, see the sub-routine 'INTEREST_RATES_EX'.
Make sure that we do not make any other entries here.

Amount Limit: Minimum/maximum amount of interest .If the interest amount calculated
per account and currency is larger than the minimum/maximum amount, an interest
settlement is created. If the calculated interest amount is smaller than the
minimum/maximum amount, no interest settlement is generated. We can thus avoid interest
settlements being created for small amounts (if the interest amount is smaller than delivery
charges, for example).

No interest payment: Select this option if we do not want an interest settlement created
when an interest payment is produced. An interest payment is produced if the credit interest

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(because of interest calculated on items paid before the due date) is greater than the debit
interest.

Number range for customizing interest calc. The number range we enter here is used for
numbering interest forms.

Print posting key text: Indicator which means that the posting key text is output in the line
item during interest form output (in field RFDUZI01-ZTEXT).

Terms of payment key: Key for defining payment terms composed of cash discount
percentages and payment periods.

Tax Code: Tax on sales/purchases code the tax code represents a tax category which must
be taken into consideration when making a tax return to the tax authorities. Tax codes are
unique per country. The tax rate calculation rules and further features are stored in a table
for each tax code.

2.9.4 Prepare Account Balance Interest Calculation - SPRO


T Code SPRO
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation → Interest Calculation
Global Settings → Prepare Account Balance Interest Calculation

Purpose: In this step we will make general specifications for each interest indicator for the
account balance interest calculation. These include determination of the period, the interest
determination, the subsequent processing of interest, the output control for printing forms as
well as the terms of payment.

Customization: To carry out the activity, choose one of the above navigation options.
• Click on New Entries

• Maintain the screen as follows

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• Click on to save.

There are certain new fields in the above screen, these are

Interest Calc. Freq: Interest calculation frequency in months


An entry in this field determines the intervals (in months) at which interest is to be calculated
automatically for this account (account balance interest calculation). The interest calculation
frequency is added to the date of the last interest calculation.

Settlement Day: Settlement day for interest calculation of account balance


Along with the interest frequency and the key date of the last interest calculation, this
determines the upper limit of the interest calculation period to be included in a program run.
We can specify a value between 01 and 31.

Month end Indicator: Month-end indicator. We use this indicator to stipulate whether, in the
"bank calendar" or "Japanese calendar", February 28 is treated as the 28th or the 30th.

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2.9.5 Prepare Special G/L Transaction Interest Calculation - SPRO

T Code SPRO
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation → Interest Calculation
Global Settings → Prepare Special G/L Transaction Interest Calculation

Purpose: In this step, we will define an alternative interest indicator for special G/L
transactions. The specifications only apply to the account balance interest calculation.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Maintain the screen as follows

• Click on to save.

2.9.6 Maintain Withholding Tax Code for Interest Document - SPRO


T Code SPRO
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation → Interest Calculation
Global Settings → Maintain Withholding Tax Code for Interest Document

Purpose: In this activity we will define withholding tax codes for creating interest documents.

Customization: To carry out the activity, choose one of the above navigation options.
We are not customizing any thing here

2.9.7 Define Reference Interest Rates - OBAC


T Code OBAC
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation →Interest Calculation →
Define Reference Interest Rates

Purpose: In this step, we will define our reference interest rates by entering a key and a
mnemonic name. All other fields are purely informative.

Customization: To carry out the activity, choose one of the above navigation options.

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We are not customizing any thing here

2.9.8 Define Time-Based Terms – OB81


T Code OB81
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation →Interest Calculation →
Define Time-Based Terms

Purpose: In this activity we will specify how the system determines an interest rate for each
interest indicator. We can make these settings based on the currency and a validity date.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Maintain the screen as follows

• Click on to save.

Int. Cal. Indicator: Enter the Interest Indicator identifier to which you wish to assign a
reference interest rate.

Currency Key: Enter currency key identifier that is to be used in the interest calculation.

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Eff. From: Enter the first date this relationship is valid. If in the future we want to assign
the interest indicator to a different reference interest rate, we can create a new record with a
valid from date that is later than the valid from date in the first record.

Sequential number: If we are calculating interest bases upon account balances instead of
line items, we can enter the sequence number that is to be used. This field in combination of
with the amount from field, allows we to use more than one interest rate based upon the
amount of the account balance and the sequence in which reference interest rates are
assigned. If we are using line item interest calculation, always enter 1 in this field.

Term: Use the pull-down box on this field o selects the appropriate entry. This field
determines what the interest indicator / reference interest rate relationship is used for (credit
interest for day’s overdue, Credit interest for account balances, Debit interest for days
overdue, or debit interest for account balances)

Ref. Interest Rate: Key under which a reference interest rate is defined.

Premium: Percentage rate added to the reference interest rate.

Amount from: Amount from which an interest rate is valid. By specifying the amount, an
interest rate specification staggered according to amounts is possible. This is currently only
implemented for the balance interest calculation.

Similarly maintain the interest rate for interest indicator AB

2.9.9 Enter Interest Values – OB83


T Code OB83
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation →Interest Calculation →
Enter Interest Values

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Purpose: In this step, we will specify the required interest rates dependent on the date for the
reference interest rates.

Customization: To carry out the activity, choose one of the above navigation options.

We are not customizing any thing here

2.9.10 A/R: Calculation of Interest on Arrears – OBV1


T Code OBV1
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation →Interest Posting → A/R:
Calculation of Interest on Arrears

Purpose: In this step, we will define the specifications for posting the interest calculated as
interest on arrears.
The account determination is carried out via the posting interface of application 1000 (interest
on arrears). The following specifications are necessary:

• Account determination keys and posting details


• G/L accounts
• Document type

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Maintain the screen as follow

• Press Enter to continue

• Maintain the screen as follows

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• Click on to save.

• Click on Accounts,

• Key Company Code …9999

• Maintain the screen as follows

• Click on to save.

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Customization results:
In this customization steps, we have used standard account symbols 0003 and 1000 for
automatic account assignment procedure for interest posting. Account symbol 1000 always
represents the customer master record updating, hence it is masked with +. In company
code 9999 we have configured account symbol 0003 to map to G/L account 4000000151
(Interest income). The standard customer debit posting 01 is used to debit customer account
and the credit posting key 50 is used to credit the interest income.

2.9.11 A/R: Balance Interest Calculation - OBV3


T Code OBV3
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation →Interest Posting → A/R:
Balance Interest Calculation

Purpose: In this step, we will define the specifications for posting the interest calculated on the
customer account balance.
The account determination is carried out via the posting interface of application 0005 (customer
interest scale). The following specifications are necessary:

• Account determination keys and posting details


• G/L accounts
• Document type

Customization: To carry out the activity, choose one of the above navigation options.
• Click on New Entries
• Maintain the screen as follows

• Press Enter

• Maintain the screen as follows

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• Click on to save.

• Click on accounts

• Key Company Code…………. 99999

• Press Enter

• Update the screen as follows

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• Click on to save.

Customization results:
In this customization steps, we have used standard account symbols 0002 and 1000 for
automatic account assignment procedure for interest posting. Account symbol 1000 always
represents the customer master record updating, hence it is masked with +. In company
code 9999 we have configured account symbol 0002 to map to G/L account 4000000151
(Interest Expenses). The standard customer debit posting 40 is used to debit interest
expenses account and the credit posting key 11 is used to credit customer account.

2.9.12 Assign Forms for Interest Indicators - SPRO

T Code SPRO
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Interest Calculation →Interest Print → Assign
Forms for Interest Indicators

Purpose: In this step, we will specify which form is to be used for the letter on interest on
arrears or account balance interest for each interest indicator. The forms defined here are used
if no other form is specified when calculating interest.
The form we define with SAP script (see "layout set") consists of a letter and further
information for the items or account balances on which interest is calculated. This includes an
overview of line items, an interest rate overview and an interest amount overview.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Maintain the screen as follows

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• Click on to save.

Customization results:
In this customization steps, we have used SAP standard form F_DUZI_01 for both interest
indicator AA and AB.

2.10 Closing Procedures – Foreign Currency Valuation

2.10.1 Define Depreciation Areas – SPRO


T Code SPRO
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Closing →Valuate → Define Depreciation Areas

Purpose: Closing can be carried out according to various legal regulations by which different
valuation principles apply. To be able to take these different valuation approaches into
consideration for calculation and posting, we must create valuation areas.

These valuation areas are used for:

• Foreign currency valuation (SAPF100, RFSBEW00) and

• Sorted list of receivables/payables (SAPF101)

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

• Maintain the screen s given below……

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The above screen is having the following fields and the meaning there off

Valuation: Valuation Area for FI Year-End Closing. Valuation area in FI (for example, HGB
or US GAAP) for use in year-end closing operations. Using an alternative valuation area, we
can display different valuation approaches and post to different accounts. The valuation result
can be stored per document item and the sorted list can be used, for example, for additional
closing operations. Note that in the case of the foreign currency valuation, these stored
valuation differences cannot be used for calculating the realized exchange rate differences.

Crcy. Type: Currency Type and Valuation View. The currency type is a key describing a
currency with regard to:
Its role within the R/3 System
The valuation method with which the amount arose, if we use functions for parallel valuation.

Long txt: It is the description of valuation area, which narrates the purpose of this valuation
approach

• Click on to save.

2.10.2 Define Valuation Methods - OB59


T Code OB59
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Closing →Valuate → Foreign Currency
Valuation → Define Valuation Methods

Purpose: In this activity we define our valuation methods. A valuation method represents a
group of specifications that we require for balance and item valuation. We specify the valuation
method we require before each valuation run.

Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries

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• Maintain the screen as given below

• Click on to save.

The above screen is consists of various parameters, which are described below

Valuation Method: Cross-chart of accounts unique key for determining a foreign currency
valuation method.

Description: Name of the valuation method.

Valuation Procedures:
Lowest value principle: Indicator that the items are valued according to the lowest value
principle. The valuation is only displayed if the valuation difference between the local
currency amount and the valued amount is negative, that is an exchange rate loss has taken

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place. The valuation is calculated per item total. Items with invoice reference are viewed
together.
Strict lowest value principle: If this field is selected, the item is valued according to the
strict lowest value principle. The valuation is only displayed if, as a consequence, the new
valuation has a greater devaluation and/or a greater revaluation for credit entries than the
previous valuation. The valuation is calculated per item total. Items with the same invoice
reference are viewed together.

Always evaluate: If we select this procedure, revaluations are also taken into consideration.

Revalue Only: Valuation Method: Revalue Only - Do Not Devalue


If we select this method, the system carries out evaluations only.
Example: Foreign curr. Local cur.
100 USD 150 DEM
Valuation exch.rate 1.6 +10 DEM Revenue 10 DEM

-100 USD -150 DEM


Valuation exch. rate 1.6 (-10 DEM) No valuation due
to expense
Valuation exch. rate 1.45 5 DEM Revenue 5 DEM

Reset Valuation Run: If we select this parameter then the open items are valuated at the
acquisition price. This way the valuation difference is set to zero. The old valuation method
is reset. The account determination is reversed: The revenue that arises is posted to the
expense account.

Post per line item: Normally the valuation results are posted in a summarized form. If we
select this parameter, a line item is generated for each valuated item in the valuation posting
as well as in the adjustment account, such as the expense or revenue account.

Document type: These controls, what type of document will be utilized for posting of
valuation difference

Crop. Group vendor: Evaluate Accounts According to Group Definition. This has the
effect that balances are created for several accounts. Customer and vendor accounts are
balanced and grouped according to the group to which they belong. G/L accounts are
balanced according to the valuation group. During further processing, the group is then
viewed as a whole, for example during foreign currency valuation the group balance is used
to determine the exchange rate type.

Crop. Group Cust: Evaluate Accounts According to Group Definition. This has the effect
that balances are created for several accounts. Customer and vendor accounts are balanced
and grouped according to the group to which they belong. G/L accounts are balanced
according to the valuation group. During further processing, the group is then viewed as a

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whole, for example during foreign currency valuation the group balance is used to
determine the exchange rate type.

G/L valuation Grp: Evaluate Accounts According to Group Definition. This has the effect
that balances are created for several accounts. Customer and vendor accounts are balanced
and grouped according to the group to which they belong. G/L accounts are balanced
according to the valuation group. During further processing, the group is then viewed as a
whole, for example during foreign currency valuation the group balance is used to
determine the exchange rate type.

Write Extract: Write Sequential File with the Document Changes. If we select this
parameter, then the SAPF100 valuation run must be given a file name. A series of
information is stored in this file for every valuated line item. The format is determined by
the F100FILE structure. This extract is used for separate, non-SAP applications.

Exchange Rate Type for Debit Balances: This exchange rate type is used for the
valuation of an item if the balance determined is positive.

Exchange Rate Type for Credit Balances: This exchange rate type is used for the
valuation of an item if the balance determined is negative.

Determine exchange rate type from account balance: If we select this field, the account
balance/group balance in the relevant foreign currency is used to determine the exchange
rate type.

Exchange rate type from invoice reference balance: If we select this field, the balance
per invoice reference number and currency is considered for the exchange rate type
determination.

Use exchange hedging: If we select this field, the items are valued at the hedged exchange
rate.

Minimum Difference for Display in Foreign Currency Valuation: Rounding differences


can also arise for hedged or fixed exchange rates. By specifying an absolute amount, we
can suppress currency differences up to the selected amount. The specification always
refers to the smallest currency unit.

2.10.3 Prepare Automatic Posting for Foreign Currency Valuation- OBV1


T Code OBA1
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Closing →Valuate → Foreign Currency
Valuation → Prepare Automatic Posting for Foreign Currency Valuation

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Purpose: In this activity we define the numbers of the accounts to which we want the system to
automatically post exchange rate differences when open items and foreign currency balances
are valuated.

We can also define the expense and revenue accounts to which realized exchange rate
differences (that arise when open items are cleared) are posted.

The accounts that are posted to when open items are valuated and exchange rate differences are
posted can be defined per currency type. Gains from exchange rate fluctuations are then posted
to different accounts, depending on whether the gains are in local currency or group currency.

When valuating open items the system posts to a balance sheet adjustment account and to an
account for exchange rate differences determined during the valuation (these are either revenue
or expense items). We define the account numbers accordingly.

For the valuation of foreign currency balances we define revenue and expense accounts to
which exchange rate differences (determined during the valuation of foreign currency balances)
are posted. We define these accounts under a key. We then enter this key in the accounts to be
valuated. If the exchange rate differences determined for a group of G/L accounts are posted to
the same expense and revenue accounts, enter the same key in the accounts to be valuated. This
key is user-defined.

We can differentiate the accounts by currency. Exchange gains and losses are then posted to the
accounts designated for the currency involved. We must not change our accounts for the
valuation posting after the first valuation run has taken place, since the postings can otherwise
not be reversed.

If we do not want to differentiate the accounts by currency, we require an entry with the
currency "blank" (this is the default value). The "exchange rate differences" key in the
company code-dependent part of the G/L accounts must also be empty.

Customization: To carry out the activity, choose one of the above navigation options.

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• Double Click on

• Click on New Entries

• Maintain the screen as shown below

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• Click on to save.

The field descriptions of the above screen are

Chart of Accounts: We have key here the COA ID for which we are making account
determination.

G/L Account: This field contains the number of the G/L account to which the transaction
figures are updated

Currency: Currency key for amounts in the system.

Currency Type: The currency type is required to be able to transfer amounts between
different components of the R/3 System such as Financial Accounting and Controlling
(using interfaces). These are the currency types allowed for valuation, sorted lists and other
closing operations.

Exchange rate difference realized – Loss: Local Account for Realized Exchange Rate
Losses. Losses resulting from exchange rate fluctuation are posted when clearing open
items in foreign currency.

Exchange rate difference realized – Gain: Account for losses from realized exchange rate
fluctuations. Losses resulting from exchange rate fluctuation are posted when clearing open
items in foreign currency.

Valuation – Val. Loss 1 Account for losses from the foreign currency valuation of open
items.

Valuation – Val. Gain 1 Account for gains from the foreign currency valuation of open
items.

Bal. Sheet Adj. 1 Account to which the receivables and/or payables adjustment is posted
during the foreign currency valuation of open items.

Translation Loss: Account for posting the translation when clearing open items which are
posted in foreign currency. A posting is made to this account if a loss was to be posted
previously during a foreign currency valuation in the first valuation area. The amount which
was posted as a loss is now posted to this account. The offsetting entry is made to a
translation clearing account. Via the translation account, the valuation differences which
apply to open items cleared within one period can be seen.

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Bal.Shett Adj. Loss: Account for clearing the translation when clearing open items which
are posted in foreign currency. The account is used as a clearing account if a translation
which is based on a gain in the first valuation area is posted.

Translation Gain: Account for posting the translation when clearing open items which are
posted in foreign currency. A posting is made to this account if a gain was to be posted
previously during a foreign currency valuation in the first valuation area. The amount which
was posted as a gain is now posted to this account. The offsetting entry is made to a
translation clearing account. Via the translation account, the valuation differences which
apply to open items cleared within one period can be seen.

Bal. Sheet Adj. Gain: Account for clearing the translation when clearing open items which
are posted in foreign currency. The account is used as a clearing account if a translation
which is based on a loss in the first valuation area is posted.

2.11 Closing Procedures – Reserve for Bad Debts

2.11.1 Define Methods – OBA4


T Code OB04
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Closing →Valuate → Reserve for Bad Debt →
Prepare Define Methods

Purpose: In this activity, we define a method for the following postings:

• Transfer posting of doubtful receivables

The report that carries out the transfer posting automatically determines the receivables
to be transferred and transfers them to a special G/L account. The report determines the
receivables to be transferred by means of the first period we specify for the method. The
special G/L account for doubtful receivables is determined by means of the special G/L
method.

• Posting the provision for doubtful receivables

For each method, enter four further periods in months and a percentage rate. The report
that posts the provision for doubtful receivables determines, by means of the period,
how high the posted provision amounts are. The report posts the amount to an account
for the allocation of funds.

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Customization: To carry out the activity, choose one of the above navigation options.

• Click on New Entries


• Maintain the screen as given below

• Click on to save.

The above screen contain the following fields

Prov: Using the provision method, we determine the time span by which customer open
items are posted to a special G/L account. The method allows the entry of a maximum of
four intervals. The percentage rate of the provision to be posted can be determined for each
interval.

Per: Transfer Posting Period in Months. If a receivable is due longer than the transfer
posting period, then the due item is transferred to a special G/L account. We specify the
transfer posting period in months.

Mo: Here we enter the number of months after the due date of the receivable. If the due
date according to the entry is reached or exceeded, a provision is set up with the selected
percentage rate.

Perc 1, 2, 3, 4: After the deadline has expired, a provision is set up according to the
percentage rate specified here.

2.11.2 Define Accounts for Reserve for Bad Debt - OBXD


T Code OBXD
Path IMG → Financial Accounting → Accounts Receivable and Accounts Payable
→ Business Transactions→ Closing →Valuate → Reserve for Bad Debt →
Prepare Define Methods

Purpose: In this activity, we specify the accounts for posting the reserve for bad debt. The
report which posts these reserves automatically determines the accounts to be posted to on the
basis of our entries in this table. For each reserve method, specify the account for allocation of
funds and the reserve account.

Customization: To carry out the activity, choose one of the above navigation options.

• Key Chart of Account ID …. 9999

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• Maintain the screen as follows

• Click on to save.

• Click on Account
• Maintain the screen as shown below

Click on to save.

With the above steps, we end our configuration of Accounts Receivable. In our next part we
will study, rest of the things

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