SAP FICO General Ledger(G/L) Accounting

The central task of G/L accounting is to provide a comprehensive picture of external accounting and accounts. Recording all business transactions in a software system that is fully integrated with all the other operational areas of a company ensures that the accounting data is always complete and accurate. G/L account is updated each time a user posts a financial transaction in SAP system. A collection of all general ledger accounts used by a company is called Chart Of Accounts.

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Besides these G/L Accounting also fulfills other requirements for modern accounting.

  • Parallel Accounting- It allows to perform parallel accounting by managing several parallel ledgers for different accounting principles.

  • Integration of Legal and Management Reporting - In FI- G/L accounting , we can perform internal management reporting in parallel with legal reporting. For this purpose, the Profit Center Accounting functions are integrated with G/L.

  • Segment Reporting- G/L Accounting supports the segment reports required by the accounting principles IFRS and US GAAP.

  • Cost Of Sales Accounting- We can perform Cost of Sales accounting in G/L accounting. For this purpose it contains the Functional Area dimension.

G/L Master Data Structure in SAP FI:-

  1. Chart Of Accounts- COA segment in general ledger master area contains data that is valid for all company codes, such as the account number, it determines whether the account is a balance sheet or a profit and loss account. Account group which controls the field to be displayed at company code specific area, trading partner and group chart of accounts. The information that a user enters in the chart of accounts segment for an SAP G/L account applies to all company codes.

  2. Company Code Segment- Company code specific area in general ledger master contains data that may vary from one company code to another such as the currency to which account may be posted, balances only in local currency, tax category, posting without tax permitted, reconciliation account for account type, open item management, line item display, field status group. The information in the company code segment controls the entry of accounting documents and the management of accounting data. SAP G/L account can have several company code segments.

Master Data Creation In SAP FI- G/L

Step 1. Go to T code FS00

We get the below screen.

Step 2. Fill data in the fields

G/L Account - The G/L account number identifies the G/L account in a chart of accounts. Here we insert the number (4 digit alpha-numeric key) of the general ledger account that we want to create. The number should be within the number range for the type of the account that we want to create. When creating we can do it with reference to an existing account (to copy existing data and speed up data entry) or we create without referencing any existing account.

Company Code -Company Code is the main organizational unit within Financial accounting. By specifying the company code we are making sure that the general ledger account is complete and ready for use in the specified company code.

G/L Account Types- Are classified into 4 types:

  1. Balance Sheet Account- Account that is posted from business transactions. The balance of a balance sheet account is carried forward at fiscal year-end.

  2. Nonoperating Expense/Income- Income statement account that records expenses or gains from activities that are not part of the main purpose of the company, such as gains realized from financial investments by a manufacturing company.

  3. Primary Costs or Revenue- Income statement account that functions as a cost element for primary costs or revenue. Primary costs reflect operating expenses such as payroll, selling expenses, or administration costs.

  4. Secondary Costs-Income statement account that functions as a cost element for secondary costs. Secondary costs result from value flows within the organization, such as internal activity cost allocations, overhead allocations, and settlement transactions.

Account Group- It determines the number interval from which the account number is selected when a G/L account is created. Standard COA are recommended in most countries. And these are created so that the number of accounts belonging to same functional area begin with same digits.

Short Text- The general ledger account short text is used for online displays and evaluations which do not have sufficient space for the long text.

G/L Account Long Text- When there is sufficient space, the general ledger long text is used for online displays and evaluations.

Trading Partner- In this field we enter the company ID of the trading partner. The company ID is standard for the whole group.

Now we go to the next tab -> Control Data

Insert data in the fields.

Account Currency- The account currency indicates the currency in which the account is held. If a currency other than the company code currency is specified, users can only post items in that currency to this account. If the company code currency is specified, users can post items in any currency to this account.

Exchange Rate Difference key- This is a key for account determination in valuating foreign currency amounts posted to balance sheet accounts.

Valuation Group- A valuation group can include a number of different general ledger accounts. The exchange rate is determined from the foreign currency total when the valuation is carried out.

Tax Category- This field is used to decide whether you want to use the account for tax relevant postings, if not leave the field blank.

Recon. Account for Acct Type- An entry in this field characterizes the general ledger account as a reconciliation account. The reconciliation account ensures the integration of a sub ledger account into the general ledger. All postings to sub ledgers are also posted automatically to the general ledgers marked as reconciliation accounts. The reconciliation account itself is not designed for direct postings.

Tolerance Group- In real time business scenario, tolerance groups allows the SAP system to process and post the transactions beyond the tolerance groups limits. Tolerances are referred as payment differences, it can be a amount tolerance, percentage tolerance, and debit & credit tolerance.

Open Item Management- Determines that open items are managed for this account. Items posted to accounts managed on an open item basis are marked as open or cleared. The balance of these accounts is always equal to the balance of open items. Accounts that are managed on an open item basis include bank clearing accounts, payroll clearing, cash discount clearing account and goods receipt/invoice receipt clearing account. Accounts that are not managed on an open item basis are bank accounts, tax accounts, raw material accounts, reconciliation accounts, profit and loss accounts and material management accounts posted with a posting key that has account type M.

Sort Key- Indicates the layout rule for the allocation field in the document line item. The system uses a standard sort sequence for displaying line items. Among other things, it sorts the items according to the content of the allocation field.

Now go to the next control tab -> Create/bank/interest

Field Status Group- Determines the screen layout during the document entry for this account. Fields can have three statuses which are optional entry, mandatory entry and suppressed. For optional fields one can enter data in the field or leave it blank. Mandatory fields are fields that needs to be filled with data for the user to be able to proceed. Suppressed fields are fields that do not appear on the screen.

House Bank- All bank data is determined using this key. House banks are the banks that are used by the company. This field links the general account with the house bank.

After inserting all data in FS00 transaction, Click on Save. Hence SAP G/L account is created.

For more information on Field Status Groups/ Control -> check my blog SAP FICO- Chart of Accounts, Account Groups & Field Status Group

Leading & Non Leading Ledgers in New G/L Accounting

Ledgers are used to record financial transactions in general accounting by account. Using several ledgers allows us to produce financial statements according to different accounting principles.

The leading ledger 0L and the totals table FAGLFLEXT are part of the standard SAP system, meaning they are delivered by SAP. In addition to the leading ledger, you can also define other non-leading ledgers for local regulations. This approach is known as the ledger approach in the new G/L.

Leading Ledger>

  1. Each client can have only one leading ledger. The client can also have additional ledgers, which are known as non-leading ledgers.

  2. All company codes are assigned to a leading ledger for each client. This ledger contains the group valuation view and comes with the application by default.

  3. You cannot ‘deactivate’ the leading ledger because all the company codes are automatically assigned to it.

  4. The leading area of asset accounting (that is, area 01) is always assigned to the leading ledger.

  5. Only values from the leading ledger are posted to Controlling (CO) in the standard system.

Non- Leading Ledger>

  1. The Non-leading ledgers are parallel to the leading ledger and are manually activated per company code.

  2. They can be based on a local accounting principle.

  3. They can have different fiscal year variants and different posting period variants per company code.

  4. For example, one of the non-leading ledgers may be used to depict local accounting principles. The fiscal year variant and the second or third parallel currency of the non-leading ledgers do not have to be the same as that of the leading ledger.

The leading ledger reflects the accounting principles used to draw up consolidated financial statements. It is integrated with all the subledgers and is updated in all the company codes.

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