Manish Patel SAP’ Account Determination > Learn account determination techniques for integration touch-points to SAP Financials > Increase productivity by automating commonly used "7 business processes > Reduce implementation time while debugging account determination related problems om Ey PRESS Galileo ees‘SAP PRESS Essentials isa series of technical guides, each providing complete “A-to-Z” instruction. to execute a specific SAP project, or serving as a definitive reference source on a highly-targeted subset of SAP functionality. (Our editors carefully sift through the universe of technical experts at SAP and top consulting firms, and select the premier thought-leader in each narrow area to author the book. 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Sincerely yours, the SAP PRESS team With more than ten years experience as an SAP Financial Consultant, ‘Manish Patel has conducted training at SAP America training centers <1 for topics like Fixed Assets, Special Ledger and Legal Consolidation.SAP Account Determination ‘Manish Patel Contents 1 Overview 44 Chart of Accounts o Operating Chart of Accounts Country Chart of Accounts Group Chart of Accounts 1.2 General Ledger Account Master Account Group P&L Statement Account or Balance Sheet Account Group Account Number Reconciliation Account for Account. Type Alternative Account Number Open iter Management Sort Key Field Status Group Post Automatically Only 1.3 Account Determination Techniques Transaction Key Technique Symbolic Account Technique Condition Technique 1.4 Summary 15 Reference Configuration Transactions Tables and Structures 2 General Ledger Transactions 24 Foreign Currency Transactions Open Item General Ledger Accounts Ending Balance General Ledger Accounts Other Accounts Relevant to Foreign Currency 2.2. Other General Ledger Transactions Retained Earnings Inter-Company Transactions Account Receivable/Accounts Payable Reclassification Bad Debt Reserve 23° Accrual Transactions Accrual Engine 7 General Ledger Accounts for the Accrual Engine wn. 24 Summary 25 Reference Configuration Transactions Tables and Structures... Enhancements Accounts Receivable/Accounts Payable Transactions 3:1 Reconciliation Accounts Alternative Reconciliation Accounts Special Reconciliation Accounts 3.2 Basic Accounts Receivable/Accounts Payable Transactions Incoming tnvoice Cash Discount Taken . Overpayments/Underpayments Rounding Differences Alternative Payment Currency Bank Charges Down Payements 3.3 Payment Card Accounts Clearing House Account Cash Clearing Account Bank Account 16 16 16 ” 8 18 18 20 sont wt 22 2 wr sap-press.com 4contents 3.4 Summary 3.5 Reference . Configuration Transactions Tables and Structures Enhancements ‘Tax Transactions 4:1 Account Determination Objects 4.2 General Ledger Account Determination ‘Tax Jurisdiction Code External Tax Systems Non-Taxable Transactions. ‘Tax Calculation in Sales .. ‘Tax Calculation in Purchasing 4.3. Other Relevant Information ‘Tax Account Maintenance GAL Account Attributes Withholding Tax 44 Summary 45 Reference a Configuration Transactions. Tables and Structures ... Bank Transactions ... 5A Account Determination Objects 5.2 General Ledger Account Determination . Electronic Bank Statement ‘Manual Bank Statement .. Deposited Check Transactions Cash Journal 5.3 il of Exchange Transactions Bill of Exchange Receivable ‘Transactions ail of Exchange Payable Transactions 5.4 Summary 55 Reference .. Configuration Transactions Tables and Structures Asset Transactions 61 Account Determination Objects Asset Class. Depreciation Area ©Galileo Press 2007 Altrights reserved. 2 27 27 28 28 29 29 3 3 32 32 32 33 34 34 35 35 35 36 36 36 37 37 38 39 39 40 40 a 42 42 a2 A a2 45; 45 45. 46 Chart of Depreciation ‘Account Determination 6.2. General Ledger Account Determination Basie Transactions . Asset Under Construction Transactions Other Depreciation Postings ‘Asset Revaluation Postings .. Imputed Interest Calculation Investment Support Transactions 63 Summary 6.4 Reference Configuration Transactions Tables and Structures Enhancements ‘Travel Expense Transactions 7A Account Determination Objects 7.2. General Ledger Account Determination Reimbursement from Accounts Payable .. . Reimbursement from Travel Management .. Reimbursement from Payal Reimbursement for Corporate Credit Card Handling of Private Expenses Tip Advances to Employees 73 Sammary 74 Reference Configuration Transactions Tables and Structures Sales and Purchasing 841 Sales petount Determination Objects Sales-Relevant Accounts .. Revenue Recognition Accounts Accrual Accounts Reconciliation Accounts 82 Purchasing ‘Account Determination Objects General Ledger Account Determination 46 a a7 a7 0 50 50 50 3 51 152 52 52 52 53 53 5 56 56 37 57 58 58 58 58 58 6 6 6 6a 63 64. 64 64 64 6683 a4 Inventory Transa sa 92 93 94 Summary Reference o Configuration Transactions Tables and Structures ions... ‘Materials Are Valuated How Materials Are Valuated . Controlling Account Assignment ‘Account Determination Objects Stock Type Geographical/tanufacturing Unit... Transaction Type For Valuation Areas For Material Types For Movement Types General Ledger Account Determination— Procurement... Inventory Accounts... GRR Clearing Account Purchasing Tax so Planned and Unplanned Delivery Costs Price Variance Accounts Other Differences in Logistics invoice Verification (LIV) Foreign Currency Procurement .. Differences in Stock Transfer Consignment Process Subcontracting Process Volume Rebate Arrangements General Ledger Account Determination — Revaluation and Other Accounts 66 66 66 67 6 6 6 70 70 70 n 2 we P2 72 a 3 a 2 3 m4 74 ” 75 75 6 76 76 10 Change in Standard Price ‘Work in Process Revaluation Revaluation for Inflation Cost Object Hierarchy Settlement Inventory Offsetting Accounts 95 Summary 9.6 Reference Configuration Transactions Tables and Structures Enhancements Account Modifier Matrix Payroll Transactions 4041 Account Determination Objects Employee Grouping Account Assignment Type 102 General Ledger Account Determination . General Ledger Accounts Customer/Vendor Accounts .. Technical Accounts Symbolic Account Derivation 10.3 Other Transactions Month-End Accruals Bank Account Determination .. 10.4 Summary 105. Reference Configuration Transactions Tables and Structures 10.6 Conclusion Index wornsap-presscom 3 76 76 76 76 7 7 77 7 78 78 78 81 82 83 a4 84 a4 85 85 86 86 86 87 37 87 88. 28 2a 89 ContentsThis guide is dedicated éo my toving mother, the late Smt. Jasumati Patel | would like to thank SAP PRESS editor, Jawahara Saidul- lah, for giving me the opportunity to publish this work and would like to recognize her trust, efforts and patience daring the entire process.41 Overview One of the major goals of any SAP installation Is to Improve efficiency by automating as many manual, cr0s5- departmental activities as possible, General Ledger (G/L) account determination in Finan- clals assists n reaching this goal by providing a structured framework and methodology. Using G/l. account dater- ‘mination, business transactions originating in different SAP components automatically determine the appropri- ate G/L account for posting—therefore eliminating man- Lal intervention for the most part. By design, SAP uses different techniques for G/L account determination in different SAP components. This guide provides you with an overview of the G/t account determination techniques used in some of the major SAP components. This Essentials guide Is relevant up to ECC 5.0. Chapter 1 begins by explaining the G/L account setup In the SAP system. This is primarily for the benefit of readers who are familiar with the setup of G/L accounts In SAP but are not necessarily experts in Financials. Even If Financials 's your primary area of expertise, the section con different types of account determination techniques Used in SAP will be useful to you. You do not have to read this guide in any particular sequence, although It helps if you read the chapters that form the basis of the discussion first. You should deft- nitely read this fist chapter before proceeding through the remainder of this guide in the order you choose, Section 1.3 Is particularly important, as It explains the three techniques discussed In this guide, on a concep- tual level, 41° Chart of Accounts GAL accounts master data Is maintained in SAP at two levels: the chart of accounts level and the company code level. This type of master data maintenance enables the same chart of accounts to be shared by multiple com- pany codes. Operating Chart of Accounts Every operative company code in SAP Is assigned an oper- ating chart of accounts. This chart of accounts contains GAL accounts to which postings are made to the com- pany code, Financial statements and most of the opera tonal reports of the company code are generated using G/L accounts from the operating chart of accounts, The operating chart of accounts (see Figure 141) Is assigned to the company code as part of the global parameters for the company code via the menu path: Financial Accounting IMG « Financial Accounting Basic Settings + Global Parameters for Company Code Enter Global Parameters. Company Code [USBI] County Ternpate US| Countykey __[US i Figure 1» Operating Char of Accounts However, consider SAP installations for a large company, ‘with multiple company codes in multiple countries. In such an implementation, business, management, or stat tory requirements make It difficult to use a single, com- mon wor'dwide chart of accounts. Each company must be able to generate financial statements that meet local statutory requirements. At the same time, if companies start using different charts of accounts, it becomes diff- cult to obtaln a consolidated financial picture at the head office, Such requirements can be broadly classified into the following two groups: wrvewsapspress.com 54 Overview > Requirements to generate consolidated financial statements across all companies at the head office > Requirements of individual companies to generate financial statements that meet their local manage- ‘ment and statutory requirements ‘To handle these requirements, SAP provides the following two charts of accounts that can optionally be set up for a company in addition to the operating chart of accounts: » Country chart of accounts > Group chart of accounts Let's take a look at these two now. Country Chart of Accounts This chart of accounts contains country-specific G/L accounts to enable preparation of financial statements as per local statutory requirements. you choose to use the country chart of accounts for your implementation, you can also include G/L accounts that meet your unique local management requirements. The country chart of cour any codes in @ group are set up with the same operat: ing chart of accounts. In this type of setup, consolid te tive ease, because all Company codes ube te bare chart cf accounts. At the same time, local statutory financial statement requirements are met by the.country-specific chart of accounts County Template US Figure 12 Country Chart of Accounts Assignment ‘The country chart of accounts is assigned to the company code along with other global parameters maintained for the company code (see Figure 1.2) via the menu path’ Financial Accounting IMG - Financial Accounting Basic Settings « Global Parameters for Company Code « Enter Global Parameters. 6 Cableo Press 2007, Al rights reserved In the G/L account master data, the G/L account cor- responding to the country chart of accounts is main- tained in te Alternative account no. fed if the country Shart of accounts i aSiigned to a company code, then {hig alternative account _the operating chart of 8 nber provides a link between is and the country chart of “ecounts. The alternative account number field is avail- “ble on the Control data tab of the int master data (see Figure 1.3). impany code G/L ans on aezount no J comnbesk compary Cade County Template US Figure 13 Country Chart of Accounts—Aecount Number Group Chart of Accounts ‘The group chart of accounts consists of G/L accounts rel evant for consolidation purposes. This chart of accounts | is useful, e.g. if each company code in a group is set up with its own localized operating chart of accounts. tn this type of setup, it is relatively easy to prepare local statu- tory financial statements. However, it becomes difficult to generate consoli- dated financial statements, as the same information can be in different accounts in different company codes. You ‘ean use the group chart of accounts in such a scenario to meet the requirements of group consolidation. chant oraccts [INT ‘ Deserintion [Sample char of accounts Figure 44. Group Chart of Accounts Assignment‘The group chart of accounts is assigned to the operat- ing chart of accounts in the configuration activity for the chart of accounts (see Figure 1.4) via the menu path Financial Accounting IMG + General Ledger Accounting + Master Data » G/L Accounts « Preparations - Edit Chart of Accounts List. In the G/L account master data, the G/L account cor- responding to the group chart of accounts is maintained In the Group account number field (see Figure 1.5). This field forms a link between the operating chart of accounts and the group char: of accounts, and itis maintained on the Type/description tab of the G/L master data at the chart of accounts level. @Lacoutna. [FFTO00—] cashoesk [UO] Coun Template US | “Group account number Figure 15. Group Chart of Accounts—Account Number The country chart of accounts and the group chart of accounts were introduced in this section so that you are aware of thelr existence and, ifrequired, you can trace an automatic posting while carrying out top-down or bot tom-up analysis from a report, These charts of accounts will not be mentioned any further, and all references to GAL accounts from this point on will refer to the operat- ing chart of accounts, unless explicitely noted. 12. General Ledger Account Master ‘We will now look at some of the important fields in the G/L account master that are relevant for automatic G/L account determination. This list also includes fields that are not directly used in automatic G/L account determi nation but which have an indirect influence on which G/L account can or cannot be used in automatic G/L account determination 12 General Ledger Account Master Account Group Even though Its not directly linked to G/L account deter- mination, the account group (SKAT-KTOKS) controls which fields (e.g., whether itis a reconciliation account) are available for maintenance in the G/L account master data. ‘Account groups are set up via this menu path: Finan- cial Accounting IMG General Ledger Accounting» Mas- ter Data G/L Accounts « Preparations « Define Account Group. (144.0004) P&L Statement Account or Balance Sheet Account Now let's see how the P&L Statement Account (SKA1~ GVTYP) or Balance Sheet Account (SKAT-XBILK) work. ‘Many configuration transactions for G/L account deter- ‘mination have built-in validations to expect only one of these types of accounts. Group Account Number As already discussed, if the group chart of accounts (SKA1-BILTK) is used in an implementation, this field contains the G/L account number from the group chart of accounts, Reconeiliation Account for Account Type The reconciliation account for account type (SKB1- MITKZ) field determines ifthe G/L account isa reconcill- ation account. You can indicate an account as a reconcill- ation account for customers, vendors, assets, etc. Alternative Account Number As already discussed, if the country chart of accounts is being used, this feld (SKB1-ALTKT) contains the G/L account number from the country chart of accounts. Open Item Management If automatic G/L account determination posts to an account where subsequent clearing is required, then this fig (SKB1-XOPWW)should be selected. For example, consider a goods receipt/invoice receipt account in a pur- chase-to-pay business process. In this type of account, just knowing the ending balance is not sufficient. You must be able to match individual credits (goods receipt) with debits (invoice receipt) wwwsap presscom 7Sort Key This field (SKB1-ZUAWA determines how, and with what value, the allocation field in the document posted to this account is filled, The sort key for a G/L account should be selected judiciously so as to assist in account clear- ing for open item managed accounts, or to assist in easy grouping and reporting of documents posted in other accounts, Field Status Group This field (SKB1-FSTAG) also indirectly impacts G/L account determination postings. it controls fields that are available while posting transactions to a G/L account. Fost Automatically Only ‘Most ofthe G/L accounts set up in automatic G/L account determination have this field (SKB1-XINTB) selected, though some G/L account determination configuration ‘fansactions explicitly check for this fi ‘bus nes requirement to. make manual adjustments, rather than deselecting this fag, you should creat G/L account with the same ost m ments. 13 Account Determination Techniques This section describes, in conceptual terms, the G/L. account determination techniques, discussed next, used in different SAP components. It, and by extension, this ‘whole gulde—concentrates on the three techniques, dis- cussed next, that are most commonly used for automatic G/Laccount determination. breton 8 Gallen Press 2007. Al ights reserved, ‘Transaction Key Technique Figure 1.6 illustrates the account determination objects that are directly or indirectly Involved In G/L account determination. The transaction key technique is used in several areas, such as General Ledger Accounting, ‘Accounts Receivable, Accounts Payable, and Inventory ‘Management. In transaction key techniques, a business transaction {s associated with a three-character Transaction Kéy tat ut by asi action Key. ‘Transaction Group Transaction Key Account/Rule Modifiers G/L Accounts Figure 46. Transaction Key echalque Some transaction keys (particularly for Inventory Man- agement transactions) have one or more account modi- fiers (Rules) associated with them. These modifiers allow assignment of G/L accounts based on multiple criteria For example, if you only have the transaction key, you can assign only one G/L accourt for the corresponding business transaction. However, if transaction key has an associated debit/ credit account modifier, you can assign two G/L accounts: one if the business transaction generates debit posting, and another if the business transaction generates credit postingSimiarly, fa transaction key has a tax code as an account modifier, then you can assign multiple G/L accounts to the same transaction key—one for each tax code. If a transaction key has both (debit/credit and tax code) as account modifiers, you can assign two G/L accounts (for debit posting and for credit posting) for ‘each tax code, This will become more clear as you read through this guide, It Is Important to note that account modifiers are assigned to a specific transaction key, and whether or not they can be modified Is set by SAP. Therefore, there are two possible scenarios with respect to their influence on the configuration of G/L account determination: > The account modifier is enabled by default for a transition key, and it cannot be modified. If you cannot modify configuration, then there isn't much flexibility. f you do not want to assign different accounts for debit and for credit transactions, then. Just assign the same account for both values. » The account modifer is available, and can be modi- fied. In this case, it depends on the business require- ment as to whether or not you want to enable the modifier and maintain different G/L accounts for each combination value, There is a third and less common scenario that combines both of the above, in which one transaction key has more than one account modifier—some that cannot be modi- fied, and others that can be modified. In this case, you will use a combination of the methods described above for G/L account determination. The transaction keys for (conceptually) related busi ress transactions are grouped into a Transaction Group. As far as G/l. account determination is concerned, this transaction group is only used for informational pur- poses. Usually you only need to know the transaction key In order to Identify and decide on G/L account determi- nation It Is relatively easy to identify the G/L account deter- mined using this technique. However, it is important to know the transaction key associated with the corre- sponding business transactions that generate the posting, ‘Transaction FBKP provides a single area for configuring G/L accounts for transactions that use the transaction key technique. Symbolic Account Technique The symbolic account technique (see Figure 1.7) consists of two parts: > The derivation of a symbolic account > The substitution of a symbolic account with an actual GA account Symbolic account | derivation ‘Symbolic account G/L Accounts ae Figure 47. Symbol Account Technique This G/L account determination technique Is used in bank transactions, vavel expense transactions, and pay- roll transactions. ‘The derwvation of a symbolic account can be as simple as assigning a symbolic account directly in place of an actual G/L account, or It can be a complex combination ‘of multiple techniques discussed in this gulde. We will cover this complexity in later chapters. it should be noted that symbolic account derivation logic in SAP is nat always configurable; you cannot always ‘configure the criteria by which you want to derive asym- bolic accourt. Also, in some components, the structure and format ofa symbolic account is set by SAP and can- rot be modifed—for instance, symbolic accounts in banking transactions. Condition Technique The condition technique provides considerable flexibil- ity in terms of configuring G/L account determination. ‘Most, if not all, objects used in this technique are con- figurable, although some require greater technical skills than others. Figure 1.8 shows the different objects involved in this G/L account determination technique. At the high- est level, the Field Catalog provides the fields that can wwnwsap-press.com 9 ton recnniques1 Overview be used as parameters for G/L account determination. Each business scenario that uses the condition technique Is associated with a field catalog. For some business sce- narlos, you are allowed to add new fields to the corre- sponding field catalog. Fields Field Catalog : Calculation Condition Table Pana Condition Type Access Sequence L Account Key User Specified G/. Accounts Figure 12 Condition Technique Fields from the field catalog are used to create Condi- tion Tables, Condition tables provide a combination of characteristics (fields) for which you would like to assign G/L account. ‘A condition table with a customer group and mate- rial group as its characteristic fields allows different G/L accounts to be assigned to combinations of customer {group and material group values. You can create another condition table for the same business scenario, with the sales organization and cus- tomer group as its characteristic fields, Standard SAP pro- vides some condition tables for each scenario; however, if required, you can create additional condition tables. {In condition tables, for every combination of char- acteristic field values, one or more Account Keys are assigned, Therefore, G/L accounts in condition tables are assigned to a combination of characteristic field values and an account key. An Account Key indicates the spe- cific purpose for which the associated G/L account will be used, 40 Galles Press 2007 Allright reserved For example, in SAP Sales and Distribution (SD) you can have separate account keys for revenue, freight expense, custom duty, discount, and accruals etc ‘Therefore, in the condition table example discussed earlier, for the same combination of customer group and material group values, you can assign different G/L accounts for revenue, freight, discount, etc. using differ- ent account Keys, SAP allows the creation of additional account keys with relative ease ‘We discussed that you can have more than one con= dition table, each with different felds us characteristics, referrring to the same business scenario. How does SAP know in which sequence it should access these tables to determine the G/L account? This is where the Access Sequence comes into play. The access sequence determines the sequence in which SAP searches through condition tables to find the required G/L account. SAP provides standard access sequences for each scenario; however, you can create additional access sequences if necessary and as required Each business scenario requires the configuration of corresponding Calculation Procedures. These proce dures (e.g. the pricing procedure in Sales schema in Purchasing) provide the structure for calculat- ing prices or desired arnounts. ‘Calculation procedures carry out the required calcu- lations using one or more Condition Types. Condition types represent the different factors that need to be cal- culated or considered for calculation of the end result The amounts calculated by each condition may impact the end result or could be part of the procedure only for reference purposes. Each condition type is assigned an access sequence. Finally, in the calculation procedure, each condition type that is expected to post to accounting is assigned lone or more account keys. The following list links all the objects we have discussed up till now: > SAP system finds G/L accounts assigned to account keys ‘Account keys are associated with condition types Condition types are part of the calculation procedure To find G/L accounts SAP uses the access sequence ‘Access sequence performs search through the condi- tion tables calculation »In this technique, the account key serves a similar pur- pose to the symbolic account described earlier. 1.4 Summary White reading this guide you may sometimes find that the information you need is scattered across multiple chapters. This is bound to happen when dealing with an Integrated system like SAP. However, | have tried to keep all the information about one topic contained within a single chapter, irespective of where It resides in the con- figuration guide. Another point to keep in mind is that its possible to override G/L accounts determined from the configura- tion by using the user exits or enhancements avalable for each SAP component In addition, you can use transaction OBBH to set up substitution rules that can change the G/L account to ‘which the posting is made. You should keep this in mind when you are trying to diagnose a problem or you are deciding on the available functionality related to the G/L account determination, 15 Reference All chapters in this guide conclude with a reference sec- tion. This provides you with a technical reference for the objects discussed in the chapter. Each Reference section consists of three lists relevant to the discussion in the chapter. The general structure of the reference section Is as follows: > Uist of configuration transactions > Ust of relevant tables and structures > List of any available enhancement routines Considering the breadth and depth of the topics being discussed, we don't claim that these lists are totally com- plete. However, they do provide a good starting point for exploring the subject matter Configuration Transactions Table 1.1 provides a list of the configuration transactions for the account determination objects discussed in this chapter ona ‘Maintain chart of accounts F800 ‘Malntaln GM accounts ent PO ‘alain G/L accounts in char of accounts F580 ‘Maintain GM aecounts in compa 0804 | Mantan GM account group Table Configuration Transsetions Tables and Structures Table 1.2 contains a lst of the tables and structures used to store data relevant for G/L account determination dis- ‘cussed in this chapter. 001 ‘Company code data parameters To9# (Chart of accounts die {G/L accounts in company cade | Accounts table based onthe wansiction techrique Table 42 Tables and Structures The symbolic account technique and the condition tech- nique use different sets of tables and structures for differ- ent business scenarios. Corresponding lists of tables and structures are provided in later chapters. wnwsap-presscom 12 General Ledger Transactions General Ledger (G/L) Accounting is a central component in SAP Financials where monetary values corresponding to all business transactions are recorded, Throughout the month, more often than not, G/L ‘Accounting is at the receiving end of postings generated In other SAP components. For example, a goods receipt posted in Inventory Management creates a G/L. entry to the debit inventory and credit clearing account. Similarly, an expense report posted in Accounts Payable creates a GAL entry to the debit travel expense and credit pay- ables. At the end of the month, as part of month-end pro- 18, quarter-end processing, or year-end processing (collectively called period-end processing), you must carry out several activities in G/L Accounting in order to prepare financial staternents that are in statutory compll- ance and reflect the state of the business as accurately as possible. ‘These activities typically include the reconciliation of ‘sumbers, the reversal of accrual entries from prior months, the creation of new accrual entries based on current month business, valuation of foreign currency transactions, adjust- iment postings for errors or reclassification, etc. Some of these activities must be done manually—e.g.. adjustment postings to correct errors, However, for some other activities, such as valuation of foreign currency, some level of automation can be introduced ‘As you will se in this chapter, the G/L account deter- rmination process in G/L Accounting mostly uses the transaction’ key technique to obtain the required G/L. accounts for business transactions. 24 Foreign Currency Transactions In this day and age, itis very likely that at least some part cf your purchase-to-pay process or order-to-cash process (most likely, both) involves transactions in foreign cur- rency—i.e., currency other than your own operating cur- rency. Operating currency is the currency in which your company does most of its business and prepares its fnan- ial statements, such as balance sheets and income state~ ments. To prepare accurate financlal statements, you must first convert foreign currency transactions to your operat- ing currency using the currency valuation process. These transactions could represent entries posted to accounts maintained on an open item basis but denominated in operating currency (e.g. receivables, payables accounts), or they could represent transactions in an account that is denominated in foreign currency (e.g., bank account in foreign currency). Figure 2.1 on the next page shows the menu path in the IMG that leads to where currency valuation con- figuration is done, Currency valuation uses the transac- tion key technique for G/L account determination. All transaction keys corresponding to currency valuation are grouped under Transaction Group FWA (Exchange rate differences) Depending on the Open item management fag set in the G/L account master data (see Section 1.2), there are two different currency valuation methods and configura tions of G/L account determination. ‘Open Item General Ledger Accounts Ifthe G/L account is maintained as an open item account, G/. account determination is configured under Transac- tion Key KDF (Exchange Rate Dif: Open Items/GL Acct). This transaction key has two optional rule modifess, which are: > Currency > Currency type vwwwisap-presscom 13,2 General Ledger Transactions Figure 21. Currency Valuation Inthe Implementation Guide Both ofthese can be used to cary out G/L account deter- > Translation loss (06) mination at a lower level of classification > Translation loss—offsetting (07) Figure 2.2 shows the G/L accounts available for post.» Translation gain (08) ing. G/L Aecount (00) isthe account maintained on an» Translation gain—ofseting (09) open item basis. Other accounts in Figure 2.2 are posted When valuation of this G/L account is carried out. Chart of Accounts [THT] sample chart of When an open receivable or payable item in foreign | Gy gcc ‘ ‘ OA. Account 140899 (00) currency is cleared (paid or adjusted with an offseting |S ic} cy I entry), any loss or gain due to exchange rate difference caravans 's posted to the Exchange rate difference realized—Loss (O01) or Exchange rate difference realized—Gain (02) account, Any gain or loss due to exchange rate difference at the time of currency valuation In open receivable or pay- able Items in foreign currency (i.e, those that are not yet cleared) is considered unrealized. During the currency valuation process, such unreal- lzed loss is posted to the Valuloss 1 (03) account, and Unrealized gain is posted to the Val.gain 1 (04) account, The offsetting entry for both of these accounts is posted to the Bal.sheet adj.t (05) account. If your corporate group currency is different from your ‘operating currency, you may be required to submit your financial data in the group currency. You can do this by translating the entire financial statement from the oper- ating currency to the group currency. If currency transla- tion is carried out, SAP uses the following G/L accounts Malioss 4 for posting exchange rate differences: Figure 22 Foreign Currency Open Item Accounts 14 OCalleo Press 2007, Al cights reserved24. Foreign Currency Transactions — H i iP i har of Aceou TAT ] Sample chart of accounts “Transaction {R02} Exch, Rete Dit, using Exch, Rate Key| Resguntassionment onange [eomense a. JER game _ [Roting vat, Jrong va Gey Pon faa) fc) Figure 23. Foreign Currency Ending Balance Accounts From SAP ECC 5.0 onwards, SAP also provides programs to carry cut translation of parallel currencles—i.e., a sec~ cond or third currency maintained for the company code, Ending Balance General Ledger Accounts If a G/L Account is maintained as an ending balance account, G/L account determination is configured under Transaction Key KDB (E/R diffusing Exchg Rate Key). The rule modifier available for this transaction key is the exchange rate key. Thisis freely definable code that is ‘maintained in the G/L account master (see Section 12). Figure 2.3 shows G/L account determination using the exchange rate key. In the figuee, the exchange rate key corresponds to different currencies; however, it can refer to any user-defined criterion, G/L account determination in this case is fairly simple At the time of currency valuation, any loss or gain due to the exchange rate difference is posted to the Expense account (10) or E/R gains account (11) G/L accounts, respectively Ifyouare using rolling valuation, SAP uses G/L accounts Expense account—rolling valuation (72) and Revenue account—rolling valuation (13) to post exchange rate loss or gain, respectively ‘Other Accounts Relevant to Foreign Currency ‘There ire few other accounts that are relevant for foreign ‘currency valuation, If corresponding functionality has been activated and is being used, These are seen below: » Document Split Functionality {if document spilt functionality i active, you can set up G/L accounts under Transaction Key CEX (Docu- ment spit for currency exchange) for balancing entries This transaction key Is configured using the menu ppath shown in Figure 2.7. The only rule modifier available for this transaction key is “debit/credit” Rounding Differences If any rounding differences must be posted due to foreign currency transactions, these differences are posted to G/L accounts determined using Transaction Key RDF (internal currencies rounding differences) This transaction key is also configured using the menu path shown In Figure 2.1, and again, the only rule ‘modifier avalable for this transaction key Is “debit/ credit Financial Statement Versions A relatively new functionality in SAP allows foreign currency G/L account determination based on finan- cial statement versions. This configuration is carried out via the menu path: IMG Financial Account- ing + General Ledger Accounting « Periodic Process- ing + Valuate + Foreign Currency Valuation + Define ‘Account Determination for Currency Translation. Figure 2.4 shows the maintenance of these G/L accounts. Fields (14) and (15) provide the exchange rate type that should be used to determine the effective exchange rate, wre sap-presscom 15[chartoraces [iti] Yatuatonares | _[g) Finstmtvers. —__[TRT ] [Fin statorat im JOonitual Ee type| Croct bal. CFR ype [a sheet ac, valloss 1 |vagain t st 600 a) a) ce [aa [ce Figure 2.4. Foreign Currency General Ledger Account Determination by Financia Statement Versions For each financial statement item, any valuation loss or Bain due to an exchange rate difference is posted to the Val.loss 1 (17) and Val.gain 1 (18) accounts, respec- tively. The offsetting entry for these accounts is posted to the Bal.sheet adj. (16) account. This G/L account determination is maintained for '@ combination of charts of accounts, valuation area (optional), and financial statement version. Even though this configuration is relatively simple, It provides you with the ability to control, at a very detailed level, how exchange rate gains/losses are posted and presented in financial statements, 2.2 Other General Ledger Transactions ‘This section covers automatic G/L account determination for other functionalities in SAP. Retained Earnings One of the year-end closing activities at the end of a fs- cal year is to carry forward G/L account balances to the next fiscal year For balance sheet accounts, balances are carried for- ward to the same G/L account in the next fiscal year. For Income statement accounts, net income is calculated and ‘carried forward to the retained earnings account in next fiscal year. ‘SAP determines the retained earnings account based fn the income statement account type maintained in the G/L account master data (see Section 1.2). If required, ‘you can have more than one income statement account type, and therefore more than one retained earning account. 16 ©Galleo Pres 2007. All rights served AAs the configuration in Figure 2.5 shows, the balance of all income statement accounts of type T1 will be carried forward to retained earnings account 330000, whereas the balance of all income statement accounts of type 72 will be carried forward to retained earnings account 330001. a oAccouia] iv 30000 E faaar Figure2.5 Retained Eamings Account This configuration Is implemented via the menu path: IMG « Financial Accounting + General Ledger Account- ing » Business Transactions Closing + Carried Forward + Define Retained Earning Account. Inter-Company Transactions SAP can post inter-company accounting documents by the direct or indirect specification of other company code(s). For example, you camenter a different company code in a line item when posting a manual journal entry in another company code; or ifa vendor invoice is posted in one company code, you can pay for that invoice from 2 different company code, It is configured under the menu path: ING - Finan- cial Accounting + General Ledger Accounting « Business ‘Transactions + Prepare Cross-Company Code Transac- tions,(Transseton [BUY] cleaeng betwoen comrany codes Posted in gared agahe! sa (Aa ‘Account debit oe Debt posing key ‘account deb Figure 2.6. Cross-Compary Code Clesring Accounts Such inter-company postings require clearing accounts in each company code, so as to analyze and settle inter- company receivables and payables. SAP uses Transaction Key BUV (clearing between company codes) for deter- mining these G/L accounts. Figure 2.6 shows the maintenance of Inter-company GAL clearing accounts. In this figure, accounts (01) and (02) are posted in USO1 for receivables from CAO and payables to CAO1. Accounts (03) and (04) are posted in CAO1 for receivables from USO1 and payables to USO1, ‘Account Receivable/Accounts Payable Reclassification Even though this activity refers to the adjustment of AR and AP documents, itis included in this chapter, because itis primarily used atthe time of preparing financial state- ments, The purpose of this activity is to group receivables and payables based on their maturity date, so that you ‘can classify and report on short-term, medium-term, and long-term receivables or long-term payables. Before you carry out this G/L account determination, you have to create different time frames by which you ‘would like to group your receivables and payables. This configuration is carried out via the menu path: IMG « Financial Accounting «General Ledger Accounting - Peri- 22 Other General Ledger Transactions odie Processing + Reclassify + Transfer and Sort Receiv- ables and Payables + Define Sort Method and Adjust- ment Accounts. ffime unddvame fear Payables within 1 year jean - BiPayables due between 1- 5 yea fear Payables due after 5 years te same a ee | Figure 27. Sort Method Definition a=TSS] Figure 2.7 shows you three time frames defined for pay- ables (you can select whether the time frames defined are applicable for customers and/or vendors). Even though the example shows time frames in years, you can define ‘them for months or days also. For each time frame, SAP automatically generates a Transaction Key Vix under Transaction Group B12 (Receivables/payables sorting). Subsequently, you can assign G/L account determi- nation for each combination of AR/AP reconciliation account and transaction key generated in the previous step. Figure 2.8 shows the assignment of G/L accounts. ‘The target account (02) specifies the G/L account to which the balance as per the specified time frame is posted. 7The adjustment account (01) specifies the G/L account to which the offsetting entry is posted Chart of Accounts cana Transaction [ves Abspuit aSStanmen fReconciliat [Adjustment rarg.acct {r4eeae cory co) | Figure 2.8, Reclasifiation Account Assignment Bad Debt Reserve ‘This activity also refers to receivables in AR, but it is used during the preparation of financial statements. The pur- pose of this activity isto analyze open accounts receiv- ables and then, based on assumptions, loge, and experi ence, determine what portion of the recelvables you may not be able to collect. Based on this, you create a reserve that you can use in the future if indeed you are unable to collect those receivables. Before you can set up G/L account determination for bad debt, you have to set up provision methods, where {you specify the period after which an open receivable is moved to a special G/L account. A bucket consisting of the number of months and percentage Is assigned to a provision method. fa recelvable is due atleast for that ‘many months, then specific percentage ofthat receivable 1s put in the bad debt reserve As Figure 2.9 shows, you can assign four such buck- ets for each provision method. Here 15% Is reserved for receivables due in two months, 25% is reserved for receivables due in three months, and 50 on. [Prov [Per. fitofPeret JwolPerc2 [uajPares Iwalpore « NS 5 5 tbe fice Figure 29. Bad Debt Provision Method SAP uses Transaction Key ACC (Provision for doubtful receivables) for this G/L account determination, It can be 18 OGalleo Press 2007. Alleights reserved configured via menu path: IMG « Financial Accounting + Accounts Receivable and Accounts Payable » Business Transactions « Closing + Valuate + Reserve for Bad Debt + Define Accounts for Reserve for Bad Debt. 2.3 Accrual Transactions You use accrued expense or accrued revenue to record expenditure or revenue for activities that have already occurred but for which you haven't received or gener- ated invoices or official documents. This functionality can be useful for any periodic postings that are based on amount or value—e.g., contract transactions lke insur- ance contracts or leasing contracts, or periodic subserip- tions, et. SAP has introduced a useful feature called the Accrual Engine in Financials. It lets you set up accruals based on. user-defined criteria, and then the system handles calcu- lation, recalculation, and posting on a periodic basis. The discussion in this section focuses only on what SAP 2eallpfhanal accrual that se the Accrual Engine, ‘Accruat Engine Figure 2.10 shows the different parts of the Accrual Engine. The Accrual Engine posts accrual amounts for accrual objects. An accrual object can be any contract, order, agreement, etc. that isto be accrued over a period of time. The Company Code and Accrual Method are assigned to the accrual object as its attributes. An accrual method {s just a function module that determines how the accrual 's calculated. SAP provides function modules for standard accrual methods, such as linear accruals, period-specific linear distribution, day-specific linear distribution, etc. The Accrual Type represents the type of accrual, such as cost, revenue, discount, etc. An accrual object is assigned fone of the accrual types as its attribute, There can be ‘multiple accrual types assigned to an accrual object only if the accrual object has multiple components, This can be the case, for example, if a contract has a revenue component as well as a cost component, both of which must be accrued over the life of the contract,Accrual Process ‘Accrual Type Company Code | -— Standard |} Fields | | | Fields Account Symbol Manual Accrual | MAccount | Figure 240 Accrual Engine The Accrual Process in the Accrual Engine determines winat types of postings are implemented forthe accrual There are three different types of accrual processes, Which are: » Opening Posting (1) Creates the accrual by posting the total value that is to be accrued > Periodic Posting (P) Posts a periodic amount (usually) from the accrual account tothe income statement account > Final Posting (F) This posting Is made only if the accrual i terminated before the end of the accrual period. Depending on the configuration setting, either no further accrual posting occurs, or the remaining portion of the acerval amount is posted immediately in the period in which termination occurs. For the purpose of G/L account determination in the ‘Accrual Engine, you can use standard fields that are avail able In a standard SAP system and user fields for which you must do additional configuration. Standard fields Include Accounting Principle, Accrual Process, Accrual Type. ete. The following subsection describes how G/L accounts, are determined based on account determination objects associated with the Accrual Engine. General Ledger Accounts for the Accrual Engine In a simple account determination setup for accruals, for a combination of standard fields and user fields, the fol- lowing two G/L accounts are assigned: > Start Account Account to be posted from (credit) > Target Account Account to be posted to (debit) Depending on the accral process (opening, periodic, or final) and accrual type (cost, revere, oF count), the start and target accounts are diferente g, the ta- get account isthe acrual account for opening posting, whereas It ste income statement account for periodic poating However, this account determination logic becomes difcult to maintain If there are multiple company codes that use the same accrual logic but diferent charts of accounts For this type of situation, SAP provides extended account determination that uses symbolic account ogi. Instead of the account determination refering to an actual Gt account, refers to symbolic accounts. In a different step, individual G/L accounts are assigned to symbolic accounts by mitans of user-defined rules. 2.4 Summary In the G/L Accounting component, most of the G/L. account determination functionality provided assists in period-end closing activities. wwwsap-presscom 19 24 Summaryi ' 2 General Ledger Transactions This chapter focused only on G/L account determina- tion, However, when implementing the currency valu- ation functionality, you should also take into account all applicable statutory guidelines to determine the G/L accounts to be processed, the exchange rate(s) to be used, and how to treat exchange rate difference(s). The Accrual Engine Is a powerful tool that provides a virtual accrual subledger with the ability to create self-cor- recting, mass processing of accruals that are tied together Via business documents (such as contracts or orders) in Chapter 3, we will discuss G/L account determi nation in the other two most commonly used Financials components: Accounts Recelvable and Accounts Pay- able. 2.5 Reference ‘This Reference section provides technical detalls relevant to G/L account determination for general ledger transac- tions. Configuration Transactions ‘Table 2.1 provides a list of the configuration transactions for the account determination objects discussed in this chapter. 8a (G/L account determination for foreign currency valuation ‘nya ‘Maintain lnter-ompany earng G/L. sccounts oss ‘Malntan retained earings accounts oan ‘Assign ARTAP adjustment accounts (08x0 ‘Maintain bad deb eseve accounts REACAD “Accral account determination (simple or eended) 'ACACADMETASGL | Accrual account determination strategy ‘ACACTREEO] | Crete acral objects Table 24 Configuration Transactions 20. ©Calileo Press 2007 Allrights reserved. Tables and Structures Table 2.2 contains a list ofthe tables and structures used to store data relevant for the G/l. account determination discussed in this chapter. ee] T0305 For ending balance G/. accounts 0200 For open tem G/L accounts FAGL_TO30TR For currency tention 7030 For etained eamings accounts, bad debt accounts Tos0u For AIVAP adjustment accounts R030 For intercompany clearing accounts ‘ACEDSASSGMT Standard account assignment for ace objects ‘AGEDSOLACCOUNTS | Accounts for accrual postings pr acral item ‘ACEOB) ‘Accrual objects Table 22 Tebles and structures Enhancements Table 2.3 provides a ist of the enhancements that can be used to influence G/L account determination in transac- tions discussed In this chapter, F1o40001 Reserve for bad debt-—ealculate percen- tages Table 23. Enhancements3 Accounts Receivable/Accounts Payable Transactions Accounts Recelvable/Accounts Payable (AR/AP) trans- actions refer to business transactions with customers or vendors. The most basic ofthese transactions are sending an invoice to a customer, recsiving payments from a cus- tomer receiving an invoice from a vendor, and sending 2 payment to a vendor. However, there are many other transactions-that can occur with customers and vendors, such as receiving or making advance payments, offering Account type/special G/t indicator You can also determine a customer reconciliation account dynamically while processing sales documents (see Chap- ter8) svwusappress.com 23 lon Account s13 Accounts Receivable/Accounts Payable Transactions 3.2 Basic Accounts Receivable/Accounts Payable Transactions ‘Most of the ARVAP transactions use the transaction type technique to determine G/L accounts. However, since AR and AP share some common functionality, you may be able to access the same configuration activities through multiple menu paths under AR/AP business transactions. Figure 3.8 shows the menu path that contains most of the configuration activities discussed in this section. Incoming Invoice If discount terms are offered on an incoming invoice, you “an choose 10 pow Gocurent type configuration, the incoming inwice for inventory materials i poste et method, then 7 Meitssino ‘Cany Out and Check Document Setings . ‘® Define Accounts for Cash Discount Taken ® Define Accounts for Lost Cash Discount some countries, statutory requirements dictate the post- ing of all invoices using the net method. Cash Discount Clearing Under the net method, any cash discount on an incoming invoice fs posted to the cash discount clearing account when the involee is posted. The G/L accounts are deter- mined using the following: » Transaction Key ‘SKV (Cash discount clearing—net method) Lost Cash Discount When these invoices are paid, any difference between the discount calculated when the invoice is posted and ‘the discount calculated at the time of payment is posted ‘eth “etermined using the > “Transaction Key SKE (Los cash escourt—net method) > ule Modiers Debitered, tax code lost cash discount account, This G/L account is IB @ Configure Automatic Generation of Cash Discount Documents By-@ Detine Accounts for Overpayments/Underpayments B & Define Accounts for Exchange Rate Differences: By @ pefine Accountfor Rounding Differences By ® Define Accounts for Payment Differences with Altern. Currency B @ Define Clearing Accts for Payment Diff. with Altern Currency BB ® Define Accounts for Bank Charges (Vendors) BB @ Define Posting Keys for Clearing By © Enable Translation Posting Figure 38 Accounts Recelvable/Accounts Payable Tansations 24, ©Galleo Press 2007 Allright reservedCash Discount Taken ‘Any discount received on outgoing payments is posted to GA. accounts determined by the transaction key and rule modifier seen below: » Transaction Key SKE (Cash discount received) > Rule Modifiers Debit/credit (not changeable), tax code The calculation of the discount is implemented based on payment terms and the actual payment date. Overpayments/Underpayments ‘These accounts are posted in AR or AP transactions when there is a difference between the payment amount and the invoice amount. First, the system tries to adjust this difference against the discount amount, if that is not possible, then the difference is posted as underpayment (payment less than Invoice amount) or overpayment (payment more than Invoice amount) as applicable. The list below shows you the relevant transaction key and rule modifiers: > Transaction Key ZDI (Payment differences by reason) > Rule Modifiers Debit/credit, tax code, reason code Rounding Differences These accounts are posted with the differences that arise due to inaccuracies in the calculation of automatic post- ings. See the transaction key and rule modifiers below: > Transaction Key RDF (internal currencies rounding difference) > Rule Modifiers Debit/eredit If the transactions are in foreign currency and different exchange rates are applicable for different line items, 3.2 Accounts Receivable/Accounts Payable Transactions then the total difference is spit into two parts, These are, the difference due to exchange rate variance, and the difference due to calculation/rounding differences. Of these, only the calculation/rounding difference is posted to these accounts. Alternative Payment Currency These accounts are applicable ifthe payment transaction currency is different from the currency of the invoice, Alternative Currency-Payment Difference ‘Any payment differences that arise because an alterna- tive payment currency is used are posted to G/L accounts Getermined using the following » ‘Transaction Key KOW (Payment difference for alternative currency), > Rule Modifiers Debit/credit, tax code ‘Alternative Currency-Offsetting Payment Difference The offsetting entry to the above posting is posted to Gil accounts determined using the folowing, » Transaction Key Dz (Payment difference for alternative currency oft- set) > Rule Modifiers Debit/credit (not changeable), tax code Bank Charges ‘When payment methods such as a wire transfer, bill of ‘exchange, etc. are used, banks may collect an additional processing charge. Any such bank charges that are sep- arately identified while posting payments are posted to the G/L account determination as follows: > ‘Transaction Group BAN (Bank transactions) » Transaction Key BSP (Bank charges) > Rule Modifiers No rule modifiers for this transaction key Down Payments When down payments are made to a vendor or received from a customer, you can choose to post them using the ‘net method or the gross method. Under the net method, www.sap-presscom 253 Accounts Receivable/Aecounts Payable Transactions orresponding nwo Is posted, The system uses a tax clearing account for this purpose. / . Down Payments-Output Tax Clearing For output tax clearing (down payments received), the G/L account is determined using the following setup: > Transaction Key BAVA (Output tax clearing on down payments) > Rule Modifiers Debit/credit, output tax code Down Payments-Input Tax Clearing For input tax clearing (down payments made), the G/L account is determined using the folowing setup: > ‘Teansaction Key VA (input tax clearing on down payments) > Rule Modifiers Debit/credit, input tax code 3.3. Payment Card Accounts ‘SAP provides a functionality that enables you to receive payments from your customers via credit cards. SAP col- lectively refers to credit cards, corporate cards, affinity cards, etc. as payment cards. Therefore, credit card and payment card are used interchangeably for the purposes of our discussion. ‘To accept payments by credit card, you have to open an account at a clearing house. The clearing house acts as a go-between between you and the card-Issuing insti- tution. When you accept payment by credit card, you first authorize the amount, at which stage you can verify authenticity and block the fund on the customer credit, card. ‘Subsequently, after goods are shipped and an Invoice is generated, you settle this amount, at which point the charge ts placed on the customer creditcard via the clear- ing house. Within a few days of the settlement process, you receive payment from the clearing house. ‘You may associate with more than one clearing house, depending on the type and size of your business and the 26 @alllea Press 2007. Allights reserved. types of payment cards accepted. There is no impact on accounting during the authorization process. uring the settlement process, there are two touch-points with G/L account determination, These are discussed in the next section, Clearing House Account ‘This account is posted when the customer invoice is pro- ‘cessed, Since the customer Is paid by credit card, the receivables in the customer account should be cleared when the invoice (s posted. SAP credits the customer account to clear the receivables, and debits the clearing house account. SAP uses the condition technique to determine the Clearing house account. You can make configuration set- tings for this account via menu path: IMG + Sales and Distribution « Billing » Payment Cards « Authorization and Settlement « Maintain Clearing House + Account Determination. ‘The standard system provides the Sales Organization and Payment Card Type in the field catalog thats avall- able for clearing house account determination (see Figure 3.9). However, any other field from structures KOMCY or KOMKCY can be used for G/L account determination iaoalcndty fonAe|Sors [Type|ot account [on account i fost. ann 0set 16k i poet xia poet he jo foot ANe|a0et AMEX Figure 3.9. Payment Card General Ledge Account Determination Cash Clearing Account When the settlement process is carried out, credit card transaction details are sentto the clearing house. The cash clearing account is used to record this receivable from the clearing house. The clearing house processes the credit card transactions in a settlement request and sends pay- ment to you after deducting relevant charges and fees, ‘This account is set up via the menu path: ING + Finan- cial Accounting Accounts Receivable and Accounts Pay- able + Business Transactions » Payments with Payment Cards « Assign G/L Account to Cash Clearing Account. This account should be set with the open item manage- ment fiag selected (see Section 1.2). Each clearing house[TohadlRecenabie [Shon Toa [clearing [shor Tex, JWR- Payment Cards 113030 H IcaNAa 125360 Paymnt Card Acct Figure 320. Cash Clearing Account should have a separate account assigned to it as seen in Figure 3:10, Bank Account ‘This account can be considered part of the credit card transaction process—although its just lke any other bank account. It is posted when payment from the clearing house is received toward one or more settlement run. This posting can be automatic if you are using the auto- ‘matic bank statement functionality. You can also post this entry manually, The G/L account for the bank account is assigned in configuration by navigating to the menu path: IMG + Financial Accounting » Bank Accounting - Bank Accounts + Define House Bank Accounts, 3.4 Summary AL account determination for standard ARVAP transac- tions is relatively easy. All the necessary configuration transactions are grouped neatly, in the configuration guide, under different business transactions ‘The assignment of alternative reconeillation accounts, ‘which is explained in this chapter, is relevant only for documents posted in Financial Accounting. For the cus- ‘tomer billing documents posted from Sales and Distribu- tion, reconciliation account determination can be done using the condition technique. This is covered in Chap- ter 8 Since SAP is a highly integrated system, AR/AP G/L. account determination is closely tied to Purchasing and Sales and Distribution. Therefore, the G/L account deter- mination described in this chapter is applicable in most cases for transactions originating in Purchasing or Sales and Distribution also. ‘Another subject matter closely integrated with Accounts Receivable and Accounts Payable is tax calcula tion. Chapter 4 discusses G/L account determination for posting sales and purchase tax, 3.5 Reference This section provides you with a technical reference for the Accounts Receivable and Accounts Payable transac- tions discussed in this chapter, Configuration Transactions Table 3.1 provides a list of the configuration transactions for the account determination objects discussed ‘AKOF Recancilaton accounts with exception handling ‘one Recondition accounts for down payments recelved fom customers eer Reconaliation accounts for other speclal G/L eansactions for custom ovr Reconaation accounts for down payments made to vendor: oaxt Reconllation accounts for other special G/L. transactions fr vendors ons ‘Offsetting acount for special GM transac (0800 For rounding diferences ony A lecourt taken ae For bank charges For overfunderpayments For input tx clearing For ouput oxo For alemative payment cure over Payment crde—constion tables oves Payment cards Feld catalog ves ‘Table 34 Configuration Transactions wwsap-presscom 27 35 Reference3 Accounts Receivable/Accounts Payable Transactions ayant cards—G/. account determination Payment eards—eath clearing account Fz Maintain bank account Table 31, Configuration Transactions (cont) Tables and Structures ‘Table 3.2 contains a list of tables or structures used to store data relevant for G/L account determination ls- cussed In this chapter. on Payment eard-—Gil account determina tion (Note) TCCAA, Payment card daring account Tork Howie bank accounts Table 32 Tees and Stuctures Mats Gincnatemammnnsnnncee nme enalien Tort Spacal G/treconelation accounts be possibly used to Influence G/L account determination 7030 ‘Offsetting GA. accounts for special trans in transactions discussed in this chapter. mvi2a Payment card—condltion generator ‘SDvECOOt ‘Account determination from payment ord 28 OGalleo Press 2007, Al rights reserved4 Tax Transactions This chapter covers G/L account determination for tax cal- culation and postings. It primarily focuses on G/L account determination for sales and purchase taxes. ‘Tax calculation is highly specific to Individual coun- tries, so it is difficult to provide a single source for tax eal- ‘ulation. However, since the focus of this guide is on G/L account determination and not on tax calculation, it will suffice to use one of the tax procedures as an example and describe G/L account determination for it In this chapter, the US tax procedure is used as the example procedure to describe G/l account determi nation. From here, you can extrapolate or extend your understanding to other tax procedures. The following types of tax calculation are possible using the standard US tax procedure, as follows: > Calculation of Purchase Tax on Inbound Goods and Services ‘Tex posted as a separate line item in the invoice > Calculation of Purchase Tax on Inbound Goods and Services ‘Tax distributed to other line items in the invoice Calculation of Purchase Tax on Inbound Goods and Services ‘Where the vendor should have, but did not, charge tax Calculation of Sales Tax on Outbound Goods and Services Sales tax and purchase tax calculations in SAP could be implemented in different ways depending on ‘which of the modules (Financials, SO or Purchasing) are used, Im each case, the G/L account determination method is slightly different. We will first discuss G/L tax account determination in SAP Financials, and then gradually expand the discussion to address other variations. 44 Account Determination Objects Figure 4.1 shows account determination objects involved in tax G/L account determination in Financials. Here SAP. uses a simplified condition technique for tax calculation and G/t account determination. The tax proceduce in the tax configuration corresponds to the calculation procedure in the condition technique. ‘The tax procedure contains the necessary specifications and posting for different types of tax calculations (usu- ally) relevant for a country. Country Company Code Tax Procedure | SD, MM. Chart of Accounts Tax Codes | G/L Accounts Figure 42, Tax Account Determination for Finance wrwwrsap-presscom 294 Tax Transactions ‘Standard SAP provides many country-specific calculation procedures that can be used as is or can be modified as required. Figure 4.2 shows some of the tax procedures that are available in SAP. These procedures can be maintained va the menu path: Financlal Accounting IMG + Finan- clal Accounting Basic Settings +Tax on Sales/Purchases + Basle Settings + Check Calculation Procedure. ales Tax- Canada faien Jotye[Deserinton fae [hoods i090 ASB pase Amount ges] Jer oistouted alos Tax- Canada ales Tax- Chile "Sales Tax- China iSales Tax- Colombia jales Tax- Germany ales Tax- France ales Tax- Hongkong ales Tax- Hungary ales Taxindia ales Tax-Haly ales Tax- Japan ales Tax- Peru ales Tax USA w. Jurisdicions fax USA m Jurisdictions (eo) Figure 4.2 Standard Tax Procedures The tax procedure is assigned to a country. You can assign cone tax procedure to more than one country. However, considering that tax calculation is highly country-specific, more often than not, you will find a separate tax proce- ure for each country. Figure 4.3 shows an example of the tax procedure provided for the US. Figure 4.4 shows the assignment of the tax procedure to a country. This assignment is carried out via the menu. path: Financial Accounting IMG « Financial Accounting, Basic Settings «Tax on Sales/Purchases « Basic Settings + Assign Country to Calculation Procedure, ‘Once you have defined or have decided on the tax procedure you will use, tax codes let you specify different tax percentage and tax rates in SAP SD, and in Purchas- ing. These tax codes (usually) correspond to tax rates/ layers specified by your local regulatory authority. 30 OGalleo Press 2007 Al cights reserved id] _We Use TaxDistributed {ij shPiu WBEaemeRiiage [428.<44°20 je BalbgttaKa Use [fg0AP3U PP GalectTaxs Use» PI Figure 43. Sample US Tax Procedure (TAXTR E axe AKU, raXUSS Figure 4.4 Country—Tax Process Asignment Tax codes are configured for a tax procedure. Out of all the conditions available in the tax procedure, tax rates or percentages for a tax code are assigned only to a few rel- ‘evant conditions. This configuration is done via the menu path: Financial Accounting IMG + Financial Accounting Basic Settings + Tax on Sales/Purchases + Calculation + Define Tax Codes for Sales and Purchases. For example, in Figure 4.5, tax code 1 is configured for tax procedure TAXUS. The specification of tax per- centage 6.250 with VR sales tax (and the corresponding account key—not shown in the figure) Indicates to thesystem that this percentage is for sales tax (outbound) and not purchase tax (inbound). Figure 45 Tox Code Definition Section 4.2 shows you how these objects are used to determine G/L accounts for tax posting. 42. General Ledger Account Determination For every condition in a tax procedure to which tax rates are assigned, you must enter the G/L. account to which the corresponding posting will be made. Since tax rates are assigned for each tax code, you have to assign G/L accounts for every non-zero condition, i., for every tax code associated with the tax procedure. For example, in Figure 4.6 tax code O1 has tax rates defined only for account keys MW1, MW2, and MWS. ‘Therefore, when you select the Tax Accounts command button in the Tax Code Maintenance transaction, the popup window expects you to assign G/L accounts only for those three account keys, So far we have only discussed the most simple forms of tax G/L account determination. Of course, there are cother variations and combinations that influence this determination. The remainder of this section Is devoted to these oil acet 2iite 216120 218130 | WABales Tex? NRBales Taxa AR Bales Tat Figure 4.6 Tex General Ledger Account Determination ‘Tax Jurisdiction Code In many countries, taxis levied at multip fevels of gov- cemnment. For example, inthe US, taxislevied atthe state, county, and city level. A business transaction may be tax- able at each of these levels, none of these levels, or any combination thereof. Since tax codes are created for different tax percent- ages, if separate tax code is to be created for each com- bination, there could be titerally thousands of tax codes— cone for each unique combination of state, county, and: city. Usage of tax jurisdition codes eliminates the need to create that many tax codes. A tax jurisdiction code helps in uniquely identifying @ geographical area from a tax calculation standpoint Even though the tax Jurisdiction code has an impact on tax rate determination, It does not have any impact on G/L account determination. This attribute is merely associated with tax codes and tax rates. ‘Therefore, respective of whether texjurisdetion func tionality fora country is activated or not, the G/L account can be determined once the tax code and account keys are known, wasap-presscom 314 Tox Transactions External Tax Systems Depending on the number of tax authorities and the fre- quency of tax rates changes and regulations, it may not be practical to maintain the complete tax calculation con- figuration within SAP. SAP provides the al ity to Interface to external tax systems that are highly specialized in providing tax cal- culation and keeping It up to date. The existence of such an interface necessitates additional configuration in the system—particularly in the areas of derivation of & tax Jurisdiction code based on an address and tax calculation based on a business transaction. ‘Again, there is no impact on G/L account determina- tion. Of course, percentages assigned to conditions are different—in SAP, 1009 is assigned to applicable condi- tons, as the external system calculates the actual tax per- centage and tax amount, However, tax codes are stil defined in the SAP system, and G/L accounts are still assigned to the tax codes as described above. Non-Taxable Transactions As discussed in the introduction to this chapter, G/L account attributes determine whether the account is tax- able, and if so, what types of transactions can be posted, ‘Therefore, when a non-taxable business transaction is posted to a taxable G/L account, SAP refers to the con- figuration in the menu path: Financial Accounting IMG + Financial Accounting Basic Settings « Tax on Sales/Pur- chases + Posting + Assign Tax Codes for Non-taxable Transactions. |As shown in Figure 4.7, you specify tax codes for input tax and output tax to be used for non-taxable transactions. These tax codes have zero percent assigned to them, so that tax Is not calculated. Subsequently, G/L account determination takes place as described earlier, Tax Caleulatio In a typical configuration scenario, SO and Financials axe both implemented and used in SAP. In this case, the applicable tax code is determined In Sales, and mainte- ance of tax codes, tax rates, and posting accounts are determined in Financials Since you have to calculate and collect tax for all of your customers, the configuration is slightly more com- plicated in Sales than in Purchasing. You mus ist config- ure the applicable tax determination rules in the source county. These rules are merely the concitions used in the Sales pricing procedure. This configuration is carried cout va the menu path: Sales & Distribution IMG «Basic Functions «Taxes «Define Tax Determination Rules. Figure 4.8 shows the tax rule determination forthe US, where three levels of taxes are calculated. These are indl- cated by sequence numbers. Each condition is defined with condition type Taxes and is assigned to the appro= priate access sequence in Sales Figuee 4.8 Sales Tax Rule Determination ‘The maintenance of the conditions and access sequences for the pricing procedure Is carried out via the menu path: Sales & Distribution IANG - Basic Functions «Pr ing + Pricing Control asa he - 0 Ae Figure 477 Non-Taxable Transactions 32 OCalleo Press 2007 All ights reserved “ypleally, the access sequence assigned to these con- dition types provides, at a minimum, the ability to differ- entiate between domestic transactions and foreign trans- actions,Figure 49 Tax Code Determination in Sales Figure 4.9 shows the tax code determination for foreign transactions, for condition UTX, (Condition Table 78) and access sequence UTK1. As per this configuration, for business transactions sriginating in the US, tax code 01 is used if the destination ts Bazil or Canada, and tax code 00 is used ifthe destination is China or India, for instance. Once the tax code has been determined, the tax cal= culation and G/L account determination forthe tax code happens on the finance side, as described earlier. ‘Two additional objects that influence tax code deter- mination are the tax classification indleator for customers and the tax classification Indicator for materials, These are defined via the menu path: Sales & Distribution IAAG + Basic Functions «Taxes + Define Tax Relevancy of Mas- ter Records. These indicators differentiate customers and materials ftom a taxation standpoint—e-g., taxable, partially tax- able, nontaxable, ete, In the customer master, these indicators are main- tained on the Billing document tab in the Sales Area data, in the material master, these indicators are main- tained on the Sales Org 1 tab for sales-organization- specific data, These indicators are available in the access sequence, and therefore they can be used for tax code determination, Ifyou are using only the Sales component of SAP, and not the Financials component, then tax calculation can be faélitated by creating conditions for the different types of tax calculation required. Values for these conditions are maintained in SAP SD, therefore providing functionality for tax calculation. G/L account determination is catied 4.2 Goneral Ledger Account Determination ut using the account keys associated with conditions, This technique is discussed in detail in Chapter 8. ‘Tax Calculation in Purchasing in a typical configuration scerario, both the Purchasing and Financials modules are implemented and used in SAP. In this case, the applicable tax code is determined in Purchasing, and the maintenance of tax codes, tax rates, and posting accounts is determined in Financials. You should read Section 1.2 if you haven't already done so, before continuing on. in Purchasing, usually your vendor invoice already includes the tax amount. Therefore, your function is verifying the tax already charged on the vendor invoice However, ifthe purchasing transaction is taxable and the vendor invoice does not include tax, then some countries require you to selfassess that tax (use tax in the US). In Purchasing Its important to maintain accurate tax classification for materials, plants, and account assgn- iments. These tax classification indicators group materials into different types from a tax standpoint, such as taxable, nonctaxable, etc. These indicators are maintained and assigned via the menu path: Purchasing ING + Taxes. ‘tab abd the Sales ja sab aespentivelyallh Purehase Ing the material can have only one Indicator pet plant, whereas in Sales the material ‘can have multiple fax indlcatdes—one foreach destination enunty. In Purchasing, the conditions assigned to the calculation schema are used for tax code determination, Standard SAP provides condition MWST for this purpose. This con- dition is assigned an access sequence, which can make use of any or all of the tax indicators described earlier to determine the tax code. At a very minimum, the access sequence should be able to provide a separate tax code calculation for domestic and foreign purchases. ‘Maintenance of the conditions and access sequences for the calculation schema is carried out via the menu path: Purchasing IMG Conditions « Define Price Deter- ‘mination Process. wovw.sap-presscom 33