General Ledger Accounting Configuration Part 5: Maintaining GL Master

Hello Friends and welcome back again to my blog. I hope you are enjoying your SAP S/4 HANA learning journey and gearing up to explore further.

In todays blog we are going to learn about the most important part of Financial Accounting module without which financial statements do not exists. These are the GL Account master data. Without this no financial figures can be booked in the system. GL Accounts identifies each figures and defines its purpose and classification in Financial Statements.

Let us Begin!!!

Chart of accounts

Each GL Master is setup according to Chart of Accounts (COA). If you are asking to yourself what is Chart of Accounts… then do check my previous blog (Link below) where I covered definitions of different types of COA in SAP S/4 HANA system.

General Ledger Accounting: Part 3 — Understanding General Ledger Accounting.

Here are the key points to remember about Chart of Accounts:

· The COA contains definitions of all GL Accounts numbers, names and types of GL Account ie if the account is a Primary cost type or Balance sheet type account.

· Many country specific COAs are already provided within SAP, however, you can define your own COA as per your requirement. You can define as many COAs as needed. IMP Note: Always remember… in case of cross company code controlling area you can assign only those company codes within Controlling area which have same Operating COA and Fiscal Year Variant. Details will be covered within the controlling Module.

· Each company code must be assigned to atleast one COA. This is called Operating COA. Assignment of Country COA is optional.

· A COA can be assigned to multiple company codes. This means the GL Accounts of these company codes will have an identical structure.

· Maintenance Language is a the language in which accout descriptions are maintained.

· Account Numbers are max 10 digits long

· Group account number is assigned to GL Account. This is used for consolidation purpose where multiple company codes using different COAs. Group account number is entered in GL Account in corresponding field in GL definition. This is mandatory when Group COA is assigned to a company code.

· Incomplete COA can be blocked. When COA is blocked, no company code can use it.

· COA can be translated in different languages. This allows to display account name in proper logon language during display master data or posting.

Chart of Account Assignment

Fields in Chart of Account Segment

The Chart of Account segment consists of several group of fields:

Type/Description:

• Control in COA
• Description
• Consolidation data in COA

Keyword/Translation:

• Keywords in COA
• Translation

Information

• Information in COA (Group COA)

The information entered in COA segment is applicable for all company codes assigned to the same COA. This information is entered only once.

Keywords are used to search account numbers

Company Code related Settings

Before an account can be used in a company code, account definition at the Chart Of Accounts segment have to be maintained. Company code specific settings are only valid for the specific company code. For eg GL Account currency. The company code segment combined with the Chart of Account segment forms an account.

Imp Note: When GL Account currency is company code currency, account can be posted in any currency. For Eg: Company code currency is USD and GL Account currency is also USD. In this case, document can be posted in any currency and system would convert the foreign currency to company code currency on the basis of setup done in currency conversion during Ledger setup.

The information in company code segment controls entry of accounting documents and management accounting data.

Click on the link below to read about setup of currency key and exchange rates in ledger:

General Ledger Accounting Configuration Part 4: Function of currency Key and Exchange Rate Types

Field groups in Company code segment

Company code segment consists of several field groups:

Control Data

• Account control
• Account Management

Create/Bank/Interest

• Document creation
• Bank/Financial details
• Interest Calculation

Information

• Information
• GL Account Texts

You can define the following information for a company code:

• Currency
• Taxes
• Reconciliation account
• Sort key
• Field status group
• House bank
• Interest calculation information

Before we proceed with customizing steps… let us understand important theory related to customizing objects.

Account groups

Account Groups are needed to organize and manage large number of GL Accounts. This must be specified whenever a GL Account is created.

Account Group controls the Number range of GL Master Data i.e Accounts with similar business functions can be created only within the defined number range for the group.

Account group also controls the fields in company code segment of GL Account Master. Through this which fields are available during GL master data creation can be controlled. Following status can be defined for each field in GL Master with decreasing priority.

• Hide
• Display
• Required
• Optional

Field Status Groups

You can set any one of the following as the status of a field:

The Account currency and Field status group fields are always the required entry fields. The status for these fields cannot be changed.

The field status is generally controlled by the account group. However, there may be instances where you do not want specific fields to be modified after master data has been created. In this situation Field Status by transaction can be used to specify what can be changed after Master data has been created.

Fields accessed through the transaction Display Master Data can be either displayed or hidden because you cannot make an entry in a Display transaction. If you do not want to use the transaction-specific control, then you can set the field status for all fields to Optional. The Optional field status has the lowest priority, so the account group-specific control is always used to define the field status.

IMP Note: Do not get confused with the Field Status variant and Field status of GL Account group. Field Status Variant is assigned within GL Account Master data to control the fields during document entry, whereas, Fields status in Account group is used to control GL Account Master Data fields.

GL Account Types

G/L accounts are classified into the following G/L Account Types:

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

Nonoperating Expense or 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. These are the P&L accounts for which no cost element should be created. For Eg It is necessary that changes in WIP account should not be created as cost element is SAP.

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. This will allow GL accounts to be defined as primary cost elements. Once this type is selected, in control data tab a new section is activated to select the primary cost element type from the list. This will take place only when the company is assigned to controlling area. More details about primary cost element will be covered under CO module.

Secondary Costs: Income statement account that functions as a cost element for secondary costs. In S/4 HANA all secondary cost elements are also needed to be defined as GL Accounts. Secondary costs result from value flows within the organization, such as internal activity cost allocations, overhead allocations, and settlement transactions. By selecting this account type, system will allow to select secondary cost element category from the list. More details about secondary cost element will be covered under CO module.

Cash Account (Bank Reconciliation Account): A G/L account that can be assigned to more than one house bank account. For each house bank account, a G/L account is required, to which payment transactions are posted. With the cash account the number of such G/L accounts can be significantly reduced.

Imp Notes:

Controlling area data is only needed for Primary cost and Revenue type and Secondary cost type GL Accounts. Cost element category has to be assigned in Controlling area data. Cost element category determined for which business transaction in CO account can be used. This will be covered more in details in Controlling Module.

Asset and Material Balance sheet accounts can also be integrated in Controlling if:

• Asset accounts are defined as reconciliation accounts. Customizing in Asset Accounting Module.
• Accounts are assigned in account determination configuration in asset accounting or Material Management configuration. Cost element category type 90 is used for this purpose.

Changes in S/4 HANA for GL Master Data

Apart from the introduction of GL Account types in S/4 HANA, there are couple of more changes that were introduced in S/4 HANA.

Creation of Secondary cost elements: In S/4 HANA Universal Journal as a single source of truth therefore its necessary that there is and real time integration between FI and other modules especially CO. Hence, in S/4 HANA it is mandatory that all secondary cost elements should also be defined as GL Master records. This is not the case in previous versions of SAP. More details about secondary cost element will be covered in CO module.

No Line Item Display Indicator: Unlike previous versions of SAP; in S/4 HANA there is no indicator for Line item display in GL Master data. This is because all postings in S/4 HANA are stored on line item basis and aggregates are build from there. Aggregate Tables , FAGLFLEXA and FAGLFLEXT, are no longer used.

Reconciliation Account

Reconciliation accounts connect subsidiary ledgers with the general ledger in real time. This means that a posting to a subsidiary ledger posts to the corresponding reconciliation account in the general ledger at the same time.

The subsidiary ledgers, which are connected to the general ledger through reconciliation accounts, are:

• Accounts payable
• Accounts receivable
• Asset accounting
• Contract accounting

You need to enter the account type in the field Reconciliation Account for Account Type in the company code segment section of the G/L account master data. The reconciliation account is only valid for the account type specified.

IMP Note: Direct postings in Reconciliation Accounts is not possible. Postings must take place in Sub Ledgers which then posts to Reconciliation account at the same time. In document view only subledger account is visible. But when the same document is viewed in General ledger View system shows reconciliation account instead of a subledger. More will be covered in Document Posting topic later.

Retained Earning Account

Retained Earning Account is mandatory for all P&L account types GL Master data. During the month end or year end all balances from P&L account are carry forwarded to Retained Earnings accounts. Minimum there should be 1 retained earnings account defined in the system, however, there is no maximum limit. In customizing retained earning account is assigned to a character and this character need to be filled in GL Master data for every P&L account type. If there are more than 1 Retained earning accounts defined then this has to be done manually for each P&L Account type. If there is only one Retained earning account then it is done automatically.

Open Item in G/L Accounting

When the Open Item Management indicator is set in the master record for a general ledger account, the items posted to this account can be in one of the following states:

• Open
• Cleared

Open item management is a prerequisite for checking whether a given business transaction has an offsetting posting. Open items and cleared items can be displayed separately, so it is easy to identify the business transactions that still need to be cleared.

Use open item management for the following accounts:

• Bank clearing accounts
• Clearing accounts for a goods receipt or an invoice receipt (GR/IR Account)
• Salary clearing accounts

Open item management can only be activated or deactivated only when the account has a zero balance.

If Open Item management has been set up per ledger, the functionality Ledger Group-Specific Clearing (Open Item management per ledger) is available.

Account in Local Currency

You can select one of the following currencies as account currency:

• Local currency
• Foreign currency

When an account is created, local currency is set as the default account currency.

If you select the local currency, you can post to this G/L account in any currency. Other currencies are converted into the local currency for each line item. Posting of items in different currencies is possible irrespective of whether line item display is activated or not.

Accounts in Foreign Currency

When foreign currency in set in GL Account, account can only be posted in this currency. This is usually used when account is defined for a Bank account that is managed in foreign currency.

Balances in Local Currency

If Only Balances in Local Currency indicator selected in GL Master, then the transaction figures are managed only for amounts that have been converted into the local currency.

Select this field for clearing accounts when you want to clear accounts by assigning items with the same local currency amount with one another, without the need for postings for exchange rate differences.

Set the Only Balances in Local Currency indicator in the cash discount account and the GR/IR clearing account. Avoid setting this indicator in reconciliation accounts for customers or vendors. This indicator is usually set in balance sheet accounts that are not managed in foreign currencies or on an open item basis.

Balance Carryforward

You can use the Automatic Account Determination app to configure G/L account assignments, for example Define Retained Earnings Accounts.

Create GL Account

You can use the following methods to create the G/L account both chart of accounts segment and company code segment:

• One-step: Create both segments simultaneously (centrally).
• Two-step: Create a chart of accounts segment followed by the company code segment.
• Create G/L accounts by copying: Copy an existing account to create a new account with the same properties. You also need to change the name of the account. The new account inherits all the properties of the source account. You may need all G/L accounts of a company code in another company code. In this case, you can copy the entire company code segment to the new company code. In addition, you can copy the entire chart of accounts, including account determination, to a new chart of accounts. You can also copy the financial statement version.
• Transfer data: for example the S/4HANA Migration Cockpit.

Collective Processing of GL Account

SAP S/4HANA provides collective processing functions for the G/L account master records. You can make changes to the master data of several G/L accounts simultaneously.

Following options can be used to change GL Master data Collectively

• Change chart of accounts data
• Change company code data
• Change account descriptions
• Change controlling data (only with the App Manage G/L Account Master Data).

Collective processing with the App Manage GL Account

Now that you must have understood the theory… let us now move further with customizing steps!!

Create Chart of Account (COA)

There are 3 steps to create a Chart of Accounts:

• Define Chart of Accounts
• Define Properties of Chart of Accounts
• Assign Chart of Accounts to Company code

Let us begin with step 1 and 2

COA is a 4 character Alphanumeric code.

IMG Path: General Ledger Accounting →Master Data →GL Accounts →Preparations →Edit Chart of Accounts

Tcode: OB13

Click on New Entries

Enter:

• COA name
• Description
• Maintenance Language: Language in which COA is maintained.
• Length of GL accounts: Max 10. This determines the number of characters of GL Accounts.
• Group COA: For consolidation purposes.
• Status : should be unchecked if COA is in used. Activate this indicator if COA is no longer needed.
• Save.

Assign Company Code to COA:

IMG Path: General Ledger Accounting →Master Data →GL Accounts →Preparations →Assign Company code to Chart of Accounts

Tcode: OB62

• Scroll to the Company code.
• Assign COA to the company code

In our case we are not using any country specific COA and Group COA.

Define Account Groups

IMG Path: General Ledger Accounting →Master Data →GL Accounts →Preparations →Define Account Groups

Tcode: OBD4

Click New Entries

Enter:

• COA
• Account group: Max 4 Characters
• Description of account group
• From Account number
• To Account Number

• Select the Account Group and click in Field Status
• Select the category for Account group to maintain the field status for GL Master data

Create GL Master

Tcode: FS00 (Create GL Master — Centrally)

• Enter GL Account number
• Enter Company code
• Click on create
• Enter GL Account Type: This is new in S/4 HANA. More explanation is provided below.
• Account Group: Retained earning account is a Balance sheet account.
• Description

• Click on Control Data

• Account currency is Company code currency and will be defaulted.
• Select Balance in Local Currency. As recommended, all accounts defined as clearing account should have this indicator activated. This is useful during document clearing.
• Open Item Management should be selected for clearing accounts. This is used to clear documents still open. Reconciliation accounts are not to be defined as Open Item Management because open items are manages at sub ledgers.
• Select a sort key. This is to sort data during line Item report.

PS: If we have Country specific COA assigned to company code then field’ Alternative Account number’ is mandatory to map the Operative COA with Country Specific COA.

• Click on Create Bank/Interest
• Enter Field Status Group. This comes from FSV defined earlier and assigned to company code

• Click on Key word Translation: This is needed if we want to maintain description of GL master in any other language also.
• Once every thing is ok then Save.
• GL Account will be created.

Define Retained Earning Account

Now that we have created a Retained Earning Account let us go ahead and assign it for our COA.

IMG Path: General Ledger Accounting →Master Data →GL Accounts →Preparations →Define Retained Earning Accounts

Tcode: OB53

• Enter COA
• Enter ‘X’ in P&L Account Statement Type
• Enter Retained earnings GL Account
• Save

Let us now go ahead and create a P&L Account

The number range for P&L accounts starts from 2000000000 to 2999999999 according to Account Group created earlier. Let us create Account number 2000000000- Revenue Domestic

Tcode FS00

• Enter GL Account Number
• Enter company code
• Select Account Type : Primary cost or Revenue
• Select Account Group: Revenue and Expenses
• Enter short and long text: Revenue Domestic
• Go to control Data tab
• Enter account currency
• Enter Sort key
• Go to Create bank/interest tab
• Enter Field Status variant.
• Save

IMP: As mentioned earlier that for every P&L account type retained earning indicator has to be maintained in the General Data segment (Type/Description Tab). However, if you noticed here the system did not asked to enter the Retained earning indicator anywhere. This is due to the fact that we have defined only 1 retained earning indicator in customizing. Please refer to customizing ‘Define Retained Earning Account’. So all P&L accounts are automatically assigned to this retained earnings account.

If there were more than 1 retained earning accounts defined for COA then we have to manually enter the indicator in GL Master data for all P&L Accounts. This can be verified in Table SKA1 for GL Master (Chart of Account)

Define Financial Statement Version

Financial Versions are needed to extract financial statements. This is used to extract P&L statement and Balance sheet. Here GL Accounts created are assigned.

FSV contains nodes and GL accounts are assigned to these nodes.

IMG Path: General Ledger Accounting →Master Data →GL Accounts →Define Financial Statement version

Tcode: OB58

• Click on New Entries
• Enter FSV Name
• Enter Description
• Enter Maintenance Language
• Activate ‘ Automatic Item Key’ assignment as a default. Only set the keys manually if you want to enter an explanatory text for them.
• Enter Chart of Accounts
• Activate Group Account number if you want to include Group account numbers also.
• Activate Functional Area Permanent if reports are needed for Cost of Sales Accounting Approach.

• Click in Financial Statement Items.

• Here we have to assign the GL Accounts created into correct nodes.
• Double click on Liabilities and Equity to maintain description

• Click on Create Items to maintain Sub Nodes

• Select the node and click on Assign Accounts to maintain GL accounts in the node

• Similarly Assign P&L account Items
• Click on

for system to provide information on Non Assigned GL Accounts.

Once all Accounts are assigned to respective nodes. Click Save. At the moment we are only saving the Financial Statement Version but not Activating it.

The nodes and sub-nodes created here is a layout for financial statements and this is how Financial reports will look like.

The end

I hope you all enjoyed the learning and I hope you will use this knowledge in your working life as SAP consultant or Business Process Owner. If you like the content please share with others and help to spread the knowledge. Feel free to subscribe to my news letter for you to be notified when next chapter is online. Also, feel free to write comments/ feedback or ask question in case of doubts. I will try to answer your questions asap.

Until then ….. keep learning-keep growing!!

Reference:

• SAP Publications