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Basic General Ledger Terms 4Chapter 4

Basic General Ledger Terms

Company CodeIn terms of International Accounting Standards (IAS), the legal or independent

accounting unit is the central concept of financial accounting. One of the basic

requirements of an ind epend ent accounting un it is the publication of a balance

sheet and a profit and loss statement. In the SAP system, the company code

represents the ind epend ent accoun ting u nit. It is the central organizational entity

that integrates accounting data from many different comp any areas.

Fig. 4-1: Company Code as an Independent Accounting Unit

The company code is the smallest organizational entity of external accounting.

You u se it to represent a complete, self-contained accoun ting system. A comp anycode is usually established using tax-related, commercial, or other financial

accoun ting considerations. In this regard, it is very similar to a legally independ ent

company. However, it can also be established using different criteria.

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4 Basic General Ledger Terms

For instance, the compan y code can represent a legally d epend ent operating u nit

abroad, if this operating u nit requires separate evaluations (for examp le, in country

currency).

Fig. 4-2: Company Code as a Central Organizational Structure

What is the function of the company code within financial accounting?

The company code is the central organizational structure of financial accounting.

It controls the publication of balance sheets and profit and loss statements.

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Basic General Ledger Terms 4

Business AreaAs a legal entity, the company code represents the independ ent accounting un it.

In add ition, you can create organizational un its beyond the company code, which

represent a specific business segment or responsibility center. These are used to

assign value transactions entered in financial accounting. The business area can

contain an y typ e of entity (division, p rofit center, plant, office).

Fig. 4-3: Business Area

In a docum ent, the bu siness area is included for each line item to allow classification

of postings in the general ledger. This enables you to generate a nu mber of views

of data that is entered in d ifferent company codes.

All major items, such as the complete profit and loss statement, fixed assets,receivables and payables, and goods in stock are available for evaluations u nd er

the bu siness area.

What is the function of the business area within financial accounting?

The business area is an organizational structure that goes beyond th e company

code. It offers an additional level for publishing internal evaluations.

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Document

Document Principle R/ 3 FI is based on strict adh erence to the documen t principle. Each business

transaction is filed in the system as a transaction-related posting document. The

docum ent is a separate and coherent u nit. It contains information th at results in

balances and line items.

A uniform document creation system, clear posting rules, and strict document

verification for form and content ensure that only correct and complete posting

docum ents enter the system. As a result, all account balances and summ ary d ata

in the FI comp onent can be traced back to correctly p osted single documents.

To process the large variety of business tran sactions using u niform criteria, the FIcomponent offers:

u Stand ardized d ocument creation with uniform posting and entry rules

u A great variety of individu al param eters for efficient d ocument en try

The document consists of the document h eader, wh ich contains data th at app lies

to the whole document (unique document number, document date), and any

num ber of line items for entering the respective transaction (amount, accoun t,

add itional accoun t assignment).

Once the document h as been posted, the resulting d ata can be displayed, changed,

reversed, and archived at each detail level, from report analysis to single documents.

The whole document is always considered as a unit. Consequently, document

interrelationships are maintained for all document d ata and do n ot become lost

du ring any of the processing ph ases.

The uniform document principle ensures that all integrated systems and their

posting-based transactions (= logistics) or line items (= sub-ledger accoun ting) are

linked at transaction level.

Changing a Document Documen ts can also be changed after they have been posted . However, fields used

for upd ating accoun t balances can no longer be changed.

For all fields, you d efine rules that sp ecify w hether, wh en and how the fields are

to be chan ged . You can specify, for instance, that certain a dd itional accoun t

assignments can be changed only as long as the posting p eriod of the docum ent is

still open for posting. You can set the system parameters so that data can no longer

be changed, once the accounting dep artment h as closed the m onth an d transferred

the d ata to other systems for evaluation.The functions available for changing documents are the same as those for displaying

docum ents and accounts. They also include all search and sort options. With the

appropriate authorization, you can switch dynamically from the display to the

change function without losing the selected view.

What is the funct ion of documents within f inancia l account ing?

As a database for all individual transactions and summary updates, thecomprehensive docum ent logic fulfills the basic requ irements of the Generally

Accepted Memory-Based Accounting Principles. Documents are adjusted

quickly and easily to meet your requirements, while maintaining a correct

posting record.

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Chart of AccountsThe FI comp onent offers a flexible meth od for setting u p a gen eral ledger to m eet

various goals concerning legal issues, value flow, and classification of postings.

The chart of accounts is a classification system defined by accounting to record

values or value flows. Moreover, it ensures a correct rendering of accounts.

The chart of accoun ts can be represented in the SAP system as one of three functions:

u As an operational chart of accounts:

The operational chart of accoun ts contains th e accoun ts currently used in d ay-to-day transactions with the system. It allows uniform, company-wide

classification of business transactions. Financial accounting and cost account ingwork with th e same chart of accoun ts.

u As a local char t of accoun ts:

The local chart of accounts conta ins the accoun ts that are necessary to fulfilllegal requirements. The posting data can be represented based on country-

specific, predefined classification criteria. The items in th is chart of accounts

are derived from the op erational chart of accoun ts.

u As a group chart of accounts:

The group chart of accounts contains all accounts th at app ly throughou t the

corporate group . The posting d ata can be processed or represented based on

the requirements of external group accounting. The items of this chart of

accounts are derived from the op erational chart of accounts.

The ability to define different charts of accounts permits flexible evaluation. Posting

data can be processed on mu ltiple levels in the company h ierarchy. Daily document

postings are posted from the operational chart of accounts using accoun t num bers.

Alternately, you can a lso perform evaluat ions for a specific count ry. This allows

you to stand ardize operations within a corporate group withou t ignoring externalevaluation requirements.

Chart of AccountsOrganization

To meet the various requirements for organizing a chart of accounts, the FI

component offers two basically d ifferent m ethods for defining one or more charts

of accoun ts:

u Using central organization, you define a uniform, usually maximum chart of

accounts at the corporate group level that applies to all companies in the

corporate group.u Using decentralized organ ization, you d efine the chart of accounts at compan y

code level. You can d efine a sp ecific chart o f accoun ts for each company. For

examp le, these can be for internation al organizations, profit center operationswith many divisions, or corporate groups covering several industries. The

various charts of accoun ts can be linked to the grou p chart of accounts so that

both consolidation an d country-specific requirements are met.

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Multi-Lingual Flexibility By specifying the d esired langu age key, each chart of accounts can be translated

into the available langu age versions. The international setup of R/ 3 software allows

you to specify the language in wh ich each chart of accounts is to be m aintained

(for example, the language of the consolidation parent). As a result, the chart of

accounts can be m aintained in its primary language, but can also be d isplayed for

G/ L account evaluation in the langu age version selected.

Fig. 4-4: Chart of Accounts Organization

What is the function of the chart of accounts within financial accounting?

By displaying the chart of accounts at various levels, you can process posting

data at mu ltiple levels within the compan y hierarchy.

G/L AccountsEach account used for posting is defined in the general ledger and contains

informat ion that reflects or describes its function. This information is stored in th emaster record of an account. It controls how business transactions are entered and

posted to th e account as well as how p osting d ata is processed.

Structure of G/L AccountMaster Records

G/ L account m aster data is divided into two areas:

u Chart of accounts area:

This area contains information that applies to the complete master record

(G/ L account nu mber, account n ame, P&L accoun t, or balance sheet account).In add ition, you use it to store data th at controls the creation of a master record

in the compan y code (account group and screen layout).

u Comp any cod e-specific area:

This area contain s data th at controls the entry of business tran sactions for the

related account and account management in the respective company code

(currency; open item m anagement).

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Depend ing on comp any organization, both areas can be created and processed

jointly or separately. This allows you to control the master data responsibility

according to you r company’s philosoph y.

Processing Master RecordsSeparate fun ctions are available for creating, changing, and displaying G/ L account

master records. Employees can be authorized to access these functions based on

their resp ective areas of respon sibility. Each new master record is assigned to an

accoun t group wh ich classifies the G/ L accounts based on the following criteria:

u Assignment of account nu mbers:

For certain account group s with comm on attributes (such as bank accounts,

or reconciliation accoun ts), you can p redefine a nu merical range for the master

record accoun t nu mber.u User interface layou t:

You can specify mand atory and optional attributes for each group of G/ L

accounts. Attributes that are not requ ired can be hidd en on the screen. This

allows you to enter only d ata that id entifies an account.

The FI comp onent offers various method s of creating G/ L account master d ata.

These method s perm it flexible and simple representation of the d esired chart of accounts in the system. All steps are supported, whether you use the charts of

accounts supp lied with the standard system or develop your own chart of accounts.

The following methods are available:

u Copy a chart of accounts:

You can u se charts of accounts su pp lied w ith the stand ard system and easilyadap t them to meet the relevant requirements.

u Reference method:

Accounts from the desired chart of accounts are assigned to the accounts in

the chart of accounts supplied with the standard system. Then, the system

creates all accounts in th e system. This method offers optimu m supp ort if youuse accounts from the standard system, but give them new nam es and nu mbers.

u Data transfer method :

G/ L account m aster data from a previous system can be transferred to the FI

component.

u Samp le accounts method :

Samp le accounts can be used to pred efine values for the attributes of an account.This method p rovides optimum supp ort if you p redefine G/ L account attribute

values for several company codes.

You can also change, block, or d elete individu al master d ata elements du ring the

current fiscal year. In ad dition, you can expand individu al attributes or add new

G/ L accounts. The system p rovides a flexible search fun ction th at allows you to

search for any su bject m atter. All entries are logged simu ltaneously to ensure propermaintenance of master d ata.

Line Item DisplayA line item display p rovides an overview of the open , cleared, and parked items

from an account. You d etermine which information abou t the individ ual line items

is to be displayed on the screen. However, you can also change the view

dynamically after the list of items has been processed. Various sort options (by

assignm ent, docum ent n um ber, or clearing data) allow you to interactively select,

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vary, and total the required d ocuments on the screen. Search an d summ arization

functions are ava ilable on the initial screen as w ell, so it is not necessary to disp lay

all items. Line item disp lay functions are ava ilable for:

u An account in a company code

u An account g roup in a group of comp any codes (worklist)

You can switch from the line item list to the d ocument d isplay at any time.

A line item list can also be exported and processed furth er u sing a spread sheet.

The line item list can be filed in SAP Office and sent to the relevant accountingclerk. You can file it as a PC file or you can store it directly in Microsoft Excel

format an d th en process it in Excel.

Account Balance Whenever d ocuments are posted to an account, the system autom atically up dates

the account balan ce. For G/ L accounts with line item disp lay, it also indicates

which items from a docum ent are posted to the account. You can display the account

balance and - depen ding on the account attribute - the line items for each account.

The accoun t balance offers an overview of transaction figures for each p eriod by

debits and credits. Possible differentiating criteria include account number,

company cod e, fiscal year, business area, and currency. You can also d isplay a

grap hic representation of account balances. From there, you can bran ch directly to

the line item d isplay. Worklists for several accounts can a lso be created.

What is the funct ion of G/ L accoun ts within f inancia l accoun t ing?

Defining G/ L accoun ts and their functions provid es a basis for the correctposting of business transactions as well as efficient management of resulting

docum ents and line items.

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