SAP R/3 FI: Balance Sheet / Profit & Loss

The first unit of this course introduces you to the essential tasks, which need to be carried out at year-end. You'll also learn how to adapt the R/3 system to your company's practices using Customising.

UNIT 1: Skill Builder Introduction

In the first lesson you'll learn about the different tasks that are required at year-end closing, along with the specific order in which they must be carried out.

Then in the second lesson you'll be introduced to the Customising facility. Using the R/3 Implementation Guide, you can adapt the balance sheet and profit and loss statement to the specific requirements of your company.

Procedure for year-end closing

A number of special tasks are due at year-end. These tasks are concerned mainly with the preparations for, and the creation of, the balance sheet and the profit and loss statement.

These tasks must be carried out in a specific order.

1. General Customising

2. Opening and Closing Posting Periods

3. Balance Carried Forward

4. Balance Confirmation

5. Foreign Currency Valuation

6. Categorising Receivables and Payables

7. Customising Balance Sheet and P&L Structure

8. Balance Sheet / P&L

9. Other Reports

10. Balance Lists

11. Journal / Balance Audit Trail

12. Document Archiving

First, you must make some general customising settings. The process of Customising involves adapting an R/3 system to the particular requirements of a company.

Then a balance sheet is prepared: the posting periods must be opened and closed, balances are carried forward to the new fiscal year, balance confirmations are sent out, a foreign currency valuation takes place, and payables and receivables are categorised.

These steps form the basis for creating the structure of the balance sheet and the P&L statement. First, however, various customising tasks must be performed. Then you can create the balance sheet and profit and loss statement, as well as other external reports.

The final step in the year-end closing process is the documentation of postings material. For this, you'll need to print out balance lists. In addition, the usual tasks for the journal and balance audit trail are carried out one final time, and the postings are archived.

Now it's time to take a closer look at the individual tasks involved in year-end closing. Before a year-end closing can be performed, several general system settings have to be made.

You can adapt the R/3 system to company-specific requirements using Customising.

Specific settings can be made in each module of the R/3 system. The creation of a balance sheet and a profit and loss statement requires a number of customising steps in the Financial accounting area.

Preparation for creating the balance sheet begins with opening and closing posting periods.

You need to determine which posting periods and account types are still required to be left open for the year-end closing postings. In turn, this will allow you to determine those periods and accounts, which can no longer be posted to.

The next step is to carry the balance forward.

Account balances for customer, vendor and G/L accounts are carried forward from the previous year to the new fiscal year.

You then send balance confirmations to vendors and customers.

The external business partners involved should then check the balances, which appear in the year-end closing for accuracy.

Because of the “lowest value principle”, you'll have to re-evaluate foreign currency receivables on the last business day of the year.

As part of the year-end closing procedure, foreign currency receivables must be reduced by any difference due to a drop in the exchange rate.

For the balance sheet, you must categorise receivables and payables according to their remaining term.

Receivables are divided into those that have a remaining term of up to one year and those whose terms will run for longer than one year.

Payables are divided into those with a remaining term of up to one year, those with between one and five years, and those with more than five years.

Before the balance sheet and P&L statement can be created, you'll need to customise the structure.

During this process you determine which accounts should be assigned to which items in the P&L and the balance sheet.

At this stage the preparatory tasks for the year-end closing have been completed, and a balance sheet and P&L structure has been created for the company.

Now the balance sheet and the P&L statement can be accessed.

Other external reports connected to the balance sheet and the P&L statement may be required. These could include, for example, the tax year reporting for use and sales tax in the US.

A balance reconciliation can then be carried out and a balance list produced.

During the balance reconciliation, the account lists as of 12/31 are compared with those of 1/1.

At the same time, positing material of the current year is documented by the accounts list as of 12/31.

The journal and balance audit trail serve to document the posting material. Both types of documentation are created not only at year-end closing, but (depending on the volume of data) also monthly or, in the case of the journal, daily.

Posting transactions within a given time frame are entered into the journal and sorted according to posting date.

Line items are archived according to account in the balance audit trail.

The final step in the year-end work process is document archiving.

In R/3, to save space, documents can be archived in designated time intervals.

They are later removed from the system on the same basis.

You can re-access archived documents. The monthly debits and credits of the accounts are unaffected.

After this final task, the year-end closing procedure is complete.

In the next lesson, you'll learn how to use the Implementation Guide to adapt the Balance Sheet / P&L statements to the requirements of your company.

Customising

The R/3 system contains many pre-settings and defaults, used for a wide variety of tasks.

These defaults must, however, be adapted to the special needs of a particular company.

This adaptation is achieved using Customising.

During Customising, parameters are set which extend beyond one particular module, for example, Language or Local Currency.

Specific settings can also be made in each module.

In particular, creating a balance sheet and a P&L statement requires a series of customising steps.

In Customising, you can create various internal divisions within external reports. You can also specify the accounts for year-end postings and the design of the layout for account confirmations.

Customising is carried out using the Implementation Guide (IMG). This is designed primarily to provide new users with instructions on the system, enabling them to make the required settings accurately, and efficiently.

There are three main advantages of the IMG: settings can be carried out in a preset order, the user can call up complete documentation on each customising feature, and each step taken is recorded by the system.

You can get to the IMG from the SAP R/3 main screen.

From there, first select the Tools menu option.

In the submenu, click on the menu item Business Engineering.

Another submenu opens up. Click on the menu item Customising.

The Customising screen appears. Now click on the Enterprise IMG button.

All Customising features of the R/3 system are arranged hierarchically within the IMG. You're now at the uppermost hierarchy level from where you can select individual areas.

To make the required Customising settings, single-click with the mouse on the Financial Accounting node.

From here, you need to open up the subdivisions under the G/L Accounting by clicking on the node General Ledger Accounting.

Now perform the next two steps by opening up the hierarchical nodes Business Transactions and Closing one after the other. First click on the G/L accounting business transactions hierarchical node.

Another hierarchical level opens up. Click here on the hierarchical node Closing.

All possible Customising features are arranged under the items Valuate, Regroup, Document and Report. As before, you can access each feature by single-clicking on a hierarchical node.

In this example, the documentation area will be called up by selecting Document. The features within this area are identified by the symbol of a green check mark with a red point. You can call up a feature by single-clicking on its check mark symbol.

When you double-click on the description of the feature or on the node in front of the check mark, you bring up some text.

This text explains the feature in more detail.

UNIT 2: Preparing the Balance Sheet

In this unit, you'll learn how to prepare a balance sheet.

In the first lesson, you'll learn how to close posting periods to which postings may not be made for the balance sheet / P&L. You'll also learn how special posting periods can be opened as an alternative.

Then in the second lesson, you'll learn how balances can be carried forward from the old fiscal year to the new one in either a test run or a production run.

The third lesson deals with balance confirmations. Participating business partners to review the balances that are to be declared at year-end closing generally uses these.

In the fourth lesson, you'll learn how to evaluate foreign currency receivables and payables on the basis of exchange rate fluctuations.

Finally, the fifth lesson introduces categorisation. This is used to divide receivables and payables according to their remaining life.

Opening and closing posting periods

Only certain posting periods and certain account types are used for the P&L statement and the balance sheet.

First, you're going to close all periods and accounts to which postings should no longer be made.

You start off in the R/3 main screen and select the menu item Accounting.

In the submenu, you then select the menu item Financial Accounting.

Another submenu appears. There you click on General Ledger.

In the General Ledger initial screen, you select the menu item Environment.

In the submenu, you click on the menu item Current Settings.

Several features are available in the Current Settings: Select Activities screen.

To edit posting periods, you click on the Open and Close Posting Periods option.

This provides a list of all periods to which postings can be made, sorted according to company code.

The list begins with company code 0001.

Company code US01 will be processed in this example, therefore the Position button must be used to scroll through the list.

After clicking on the Position button, the Other Entry dialog box appears. To go to the correct position now, enter the company code that you would like to process and then confirm your entry by pressing the Enter key.

In order to go to the correct position in the list, click on the Continue button now.

The required company code has now been located in the list. There are 5 lines for company code US01 in this example.

The A column identifies the account type. There are five different entries for company code US01 here.

The first line contains a plus sign in the A column. The plus sign is valid for all account types and indicates that the entries in this line are minimum entries, which can be expanded if required.

Therefore, postings may only be made to accounts for the company code US01 between 1/1996 and 12/1996.

The entries for fixed-asset accounts (A), accounts receivable (D), accounts payable (K) and G/L accounts (S) are found in the next four lines. The entries in the top line can be further restricted here according to account type and account number.

In this example, accounts receivable from the old fiscal year, 1996, are to be closed for posting periods 1 through 12. However, postings will be allowed using the special posting periods 13 through 16 from the old year, and periods 1 and 2 from the new fiscal year, 1997.

If you'd like to learn more about posting periods and special posting periods now, click on more.

The fiscal year is subdivided into posting periods. It doesn't necessarily correspond to the calendar year and the posting periods can differ from the calendar month. Each company code employs a fiscal year variant to specify the fiscal year structure.

The variant K4 specifies that the calendar year will be used for the fiscal year (periods 1-12) and also provides for 4 additional special posting periods (13-16). These special posting periods can be used for postings that are made during the year-end closing procedure.

The system generally provides variants K1-K4, which allow for 1 to 4 special posting periods. Aside from the standard variants, alternative variants can also be created to meet specific business needs.

To open the required posting periods for accounts receivable, 13 is entered in the From column for the first time period. In the To column for the first time period, 16 is entered.

Period 1 must be entered in the From column for the second time period and 1997 must be entered in the corresponding Year column.

You then enter Period 2 in the To column for the second time period and again enter 1997 in the corresponding Year column.

You're now going to close periods 1 through 12 and open the special posting periods 13 through 16 from the old fiscal year for the A/P accounts (K). Click on the input field where you would enter the beginning of the time period.

Now enter the special beginning posting period, and then complete your entry by pressing the Enter key.

Now enter the last special posting period, which will indicate the end of the time period, and then complete your entry by pressing the Enter key.

You have now opened the special posting periods 13 through 16 in fiscal year 1996 for the A/P accounts and closed all other periods.

Now you'll open periods 1 and 2 in the new fiscal year for the A/P accounts. Therefore, period 1 in 1997 is entered as the beginning of the second time period.

For the end of the second time period, you enter period 2 in 1997.

Only the special posting periods remain open in the old fiscal year for Accounts receivable and payable.

Clicking on the Save button can save these settings.

The status bar indicates that the data has been saved successfully.

The settings you have made for the open periods relating to the company code US01 apply to all account numbers from 0 to 999,999. This interval will include all accounts, provided a setting has been made in Customising to restrict all account numbers to a maximum of six digits.

Among the G/L accounts contained within these intervals, there is a few that are important for the balance sheet. These accounts must be left open to enable postings to be made to them. Postings to all other accounts can be blocked.

To ensure that only authorised users perform postings, the system must be regulated on an organisational level. Authorisation profiles can be created within the system to assist you in this process.

In the next lesson, you'll learn how balances from the old fiscal year are carried forward into the new one.

Carrying forward balances into the new year

In this lesson, you'll learn how to transfer the balances from Accounts Receivable, Accounts Payable and G/L accounts of the previous year to the new year. Firstly, let's look at the situation before the balance is carried forward.

You start off in the R/3 main screen and select the menu item Accounting.

In the submenu, you then select the menu item Financial Accounting.

Another submenu appears. There you click on the menu item Accounts Payable.

In the Accounts Payable application area, the Account menu must be opened.

In this submenu, you must then choose the menu item Display Balances.

The chosen vendor, the company code and the fiscal year to be examined are selected in the Vendor Balances Display Initial Screen.

The number, 500028, is entered for the vendor.

The Company code, here US01, is then entered.

1996 is entered for the fiscal year because you first need to examine the account balances for the end of 1996 - the old year.

The balance overview can now be accessed using the Account Balance button.

A display screen appears which contains the balance of the account at the end of the individual periods.

Now click on the black down arrow in the scroll bar to view the lower portion of the screen.

In our example, an accurate balance of 1832.00 USD is displayed at the end of the list. This amount will also be found in the carry forward line from the balance overview for 1997 if a carry forward into the fiscal year 1997 has already been performed.

To check this, you must return to the Initial Screen. You can get there by clicking on the green Back button.

The fiscal year has changed from 1996 to 1997 in the Vendor Balances Display Initial Screen.

To obtain a balance overview for the 1997 fiscal year, you click again on the Account Balance button.

The balance display for the 1997 fiscal year shows that 0.00 USD were carried forward. Therefore, the balance still needs to be carried forward from 1996.

Click on Back, End or Cancel buttons will return you to the Accounts Payable main screen.

To carry the balance forward into the new fiscal year, the Periodic Processing menu must first be accessed in the Accounts Payable main screen.

There you select the menu item Closing.

In the next submenu, you then select Carry Forward.

Now click once on Balance Carried Forward to complete the menu path.

In this screen, you enter the details for the balance you wish to carry forward.

In this example, US01 is the Company Code.

In the Customer and Vendor fields (representing accounts receivable and payable, respectively) you should enter the accounts for which the carry forward is to be performed.

By using the Select Customers and Select Vendors selection boxes, you can select all Accounts Receivable and Payable, respectively.

For this example, only the Select Vendors selection box has been marked. This will cause the balance of all A/P accounts to be carried forward.

If the balances are not to be carried over for all A/P accounts, you can use the following lines to restrict the carry forward to a particular set of accounts that fall within a given interval.

If you're only dealing with one interval, this can be entered directly into the fields on the screen.

If there're several intervals that must be defined, the Detail button can be used to access a special screen. That is not necessary in this example.

Here, the Test Run field in the lower portion of the screen has been automatically marked by the system. Removing this setting will enable the processing to be done in a production run.

To begin the balance carry forward, you click on the Execute button.

A results screen confirms the successful completion of the production run.

In this example, the results screen shows that the vendor items from the General Ledger were considered.

Using the Back button, you can return to the Accounts Payable main screen.

Now you'll learn how to carry forward balances for Accounts Receivable. You first need to move back to the R/3 main screen by using the Back button again.

Here, you must select the familiar menu path. Now move from the Financial Accounting submenu to Accounts Receivable.

Here, the menu item Periodic Processing must be selected.

This is followed by clicking on the menu item Closing.

In the next submenu, you again select the menu item Carry Forward.

Finally, you select the menu item Balance Carried Fwd.

In the Balance Carry Forward input screen, balances from the accounts for company code US01 are going to be carried forward.

Now click on the selection box that is used to select all customer accounts.

Now click on the black down arrow in the scroll bar to view the lower portion of the screen.

A production run should also occur when carrying the accounts receivable forward. Now remove the test marking to enable this to happen.

You can now start the production run. Click on the appropriate button.

The results screen shows that the carry forward was successful.

The balances from three customer accounts were carried forward.

By clicking on the End button you return to the Accounts Receivable main screen.

By clicking on the Back button, you can then return to the SAP R/3 main screen.

You may wish to confirm that the carry forward will now display the Accounts Payable display screen. To do this, you select the familiar menu path and move from the Financial Accounting submenu to Accounts Payable.

In the Accounts Payable application area, you select the Account menu followed by the menu item Display balances.

The Initial Screen for the Balances Display still shows the entries from the last time it was accessed.

Therefore, you just have to click on the Account Balance button to bring up the display.

In the carry forward line, the correct amount of 1832.00 USD is now displayed.

In this example, the balance was carried forward to the new fiscal year in the new fiscal year. If changes are subsequently made to the balances that are carried forward as a result of closing entries, they will be updated automatically.

To illustrate this, consider an example. A posting is made to the period 13/1996 for accounts payable on 01/27/1997.

The amount in this case is 5,000 USD.

When balance display is accessed again, the altered carry forward balance appears.

This alteration will not be done automatically if the balance is carried forward during the current fiscal year to the forthcoming fiscal year. In this case, you would then have to carry the balance forward again at the end of the year.

Balances are only updated automatically when postings are made for the previous fiscal year during the new fiscal year.

In order to carry the balance forward for the G/L Accounts, you need to follow the now familiar menu path beginning from General Ledger. Now click on the menu item Balance Carried Forward.

Using this screen, the balances from the balance sheet accounts in the general ledger, along with the accounts containing the balances carried forward, can be transferred into the new fiscal year.

The company code must first be entered. Once again this example is using US01.

The marking in the Test Run selection box should be removed by clicking on it because a production run is to be carried out.

However, an Additional Log should be created for the Balances Carried Forward accounts. This allows you to see the structure of these accounts from the individual incoming statement accounts balances. To do this, the Additional Log Individual Balances selection box must be selected.

Clicking on the Execute button begins the transaction.

In the log, the entries for each G/L account are displayed in every currency.

The overview begins with the balance sheet accounts.

The balances carried forward accounts are a little further down. In our example, this is only account 900,000. The balances from all of the incoming statement accounts that went into account 900,000 are found below that.

The next lesson will introduce you to balance confirmations which the participating business partners should use to review the balances that are to be declared in the year-end closing.

Sending Balance Confirmations

At year-end closing, balance confirmations are sent to vendors and customers.

It's good practice for the participating business partners to check that these balances are correct.

To prepare balance confirmations, begin in the R/3 main screen and follow the menu path Accounting; Financial Accounting; Accounts Receivable to reach the Accounts Receivable application area.

In the Accounts Receivable application area, you open the Periodic Processing menu.

Here, you select the menu item Print Correspondence.

In the submenu, you click on Balance Confirmation.

Another submenu appears. Now select Print Letters.

In the input screen, you can now determine how the balance confirmations will be generated and printed.

The Customer fields allow you to limit your list of customers by entering a lower and higher account number. For this example, no limitations are going to be made to the customer selection.

Limitations can be set for the company code in the same way. In this example, US01 is entered as the lower company code. To select a single code, you do not have to enter anything in the upper company code field.

The annual reconciliation date should be the last day of the year, 12/31/1996.

In the Further Selections area, the first three selection boxes can be used for a more precise identification of the customers who are to receive the balance confirmations. Individual Customers are those that are neither head office, branch nor one-time clients.

In this example, all three selection boxes are marked so that every customer is included.

The contents of the Accounts Without Postings field can be viewed using the Value help key.

For this example, you're going to select entry 2. This means that clients who have accounts that have experienced no movement for a period of time (which has yet to be determined) will not receive a balance confirmation. Now click on entry 2 to select this option.

Now confirm this decision by clicking on the Enter button.

In the Only Accounts Posted to Since field, you enter the year after which there should be no movement on those client accounts that are to be excluded. In this example, the year 1995 is entered.

The next field, Total Balance, allows you to send balance confirmations to only those clients whose total balances lie within a certain range.

The Sales field (further down the screen) allows you to limit the balance confirmations to a certain sales volume.

You can also base the restriction on the sales period.

Your selection can be further limited through the use of the next two fields.

If the balance confirmations are to be sent as a type of random sample, the Every Nth Customer Selected field can be used so that only every nth customer from the current selection will receive a confirmation.

For example, if 100 customers met the selection criteria, entering 5 in the E.N.S.C. field will result in only 20 customers receiving the confirmation.

You can also specify the exact number of customers that will be selected at random from the current selection by using the Sample Sise field. If you do this, you would not fill out the E.N.S.C. field.

Other entries can now be made in the Output Control area. The Form Set field can be used to enter different types of forms. Eg, for individual clients or for head offices and branches.

Information on the sender, such as the return address, can be selected using the Value Help key.

The next two fields in the input screen can be used to influence how the balance confirmations are sorted and how they are set up.

A list of the available options for defining the confirmation procedure can be accessed using the Value Help key.

In this example, we'll select the Balance Confirmation, which has a blank space as its ID code. This type of confirmation informs the client of the balance. The client is then asked to check it and to provide comments to confirm whether or not there is a discrepancy.

Click on the Enter button will copy the selected procedure onto the screen.

The system has now copied the Balance Confirmation procedure. However, no change can be observed in the Confirmation Procedure field after the blank space has been entered.

Now enter 01/30/1997 as the Date of Issue, and press Enter to confirm.

Now click in the scroll bar below the actual movable bar to bring the lower portion of the screen into view.

The response is expected by 03/06/1997.

In the Reply To field you specify the address to which the responses to the balance confirmations should be sent. This could be the address of the sending company but, for example, it could also be the address of the auditor.

The reply address can be assigned through Customising. In this example, Back is entered.

The last 5 fields are used to specify printer details. Here, the ID code for the selected printer is bsc2.

The entries that have been made so far should be saved for later applications. To do this, you click on Goto in the menu bar.

In the submenu, you then select the menu item Variants.

Another submenu appears. Now select the menu item Save as Variant.

In the following screen, you've to enter a name for the variant that will be saved. The variant is described in more detail in the Description field. In this example, Bal. Conf. _96Ap is selected, which stands for Balance Confirmations 1996 Accounts Payable. (ie. Vendors).

By clicking on the Save button, the entries can be saved under this name and you can then return to the Customer Balance Confirmation screen.

The status bar on this screen gives confirmation that the data was saved successfully.

You can now start printing the documents by clicking on the Execute button.

The first document is a cover letter. In this example, the cover letter is designed to be sent from the accountancy firm working for Smith Tools Inc.

The annual reconciliation date that was previously entered in the input screen appears in the subject line of the cover letter.

The open items are listed one by one further down the list and the total balance is given.

The next document is prepared response form, designed for the client to send back to your company. In the standardised response text, the client has the option of confirming the balance.

Alternatively, the clients can enter the balance that agrees with their own records but disagrees with the statement.

By clicking on the Back arrow you can move to the reconciliation list.

The reconciliation list (or check list) provides an overview of all clients that have been contacted and displays their account numbers as well as the total balances that they are to review.

The list ends with the grand total for all reviewed clients and the number of balance confirmations that have been requested.

Any zero balance confirmations that are contained within this list are displayed separately.

By clicking on the Back button, you can move to another list.

You can record the responses to the confirmations statistically in the Results Table.

Clicking on the Back button again will take you to the financial statement log that is created in addition to the lists and the documents.

The status bar here shows that all balances confirmations for the customers have been printed. The procedure for sending balance confirmations to vendors is very similar.

Exchange rate fluctuations are the subject of the next lesson. They make it necessary to re-evaluate receivables and payables.

Evaluating Foreign Currencies

According to the “lowest value principle”, foreign currency receivables must be re-evaluated on the key date for year closing.

Let's assume that an invoice payment is received for an amount in Canadian dollars and that it was evaluated at the time of period at 0.80 USD to one CAD.

The exchange rate may have fallen by the closing key date.

The change in the exchange rate results in a reduction of the value of the receivable in US dollars on the closing key date by a given amount. The receivable must be reduced by this amount for the year-end closing.

Evaluation methods are set during Customising. You carry out Customising using the Implementation Guide. The IMG is reached from the R/3 main screen through the Tools menu item.

In the submenu, you select Business Engineering.

Now select the correct menu item that will take you to the IMG, where customised settings can be made.

The Customising screen appears. Now click on the Enterprise IMG button.

From within the G/L accounting business transactions hierarchy node, please select the Closing node on the next level now.

Moving from the node Valuate to Foreign Currency Valuation, you have two options. For this example, Define Valuation Methods is selected.

Since our fictitious company Smith Tools Inc. only uses the KTO valuation method, it's already displayed on the detail screen. If there're several valuation methods in use, a list appears from which you must make a selection.

The results for this valuation method are displayed by line item. The valuation is worked out according to the Strict Lowest Value Principle.

In contrast, the alternative, Always Valuate would allow for the appreciation of receivables.

Settings can be made for determining the exchange rate. The KTO valuation method fixes the bank buying rate for the debit balance with G and the bank selling rate for the credit balance with B.

In this example, another field is marked in the lower portion of the screen. The field is called Determine the exchange rate type from the account balance. This option specifies that the exchange rate type to be used will be determined solely by the total balance in the account.

It's also possible to determine the exchange rate type from the balance of specific items that belong together on an accounting basis.

If you wanted to define another method, you could use the Copy As button to copy the KTO valuation method and then adapt it to fit your needs.

Since no changes are needed in this example, you can access an overview of all available valuation methods by clicking on the Back button.

In this example, the overview shows only the variants that you just saw in the detail screen. Clicking on the Back button enables you to leave this overview.

You've returned to the IMG. Next you should determine which account is to receive the adjustment postings. To do this, access the feature called Prepare automatic postings for foreign currency valuation.

There are two types of foreign currency valuation transactions: valuation of foreign currency accounts and valuation of open items.

The Account Assignment field indicates whether or not accounts must be assigned to ensure correct processing. This is the case for both foreign currency valuation transactions here.

Now you're going to identify the account to which the exchange rate difference is posted when Open Items are evaluated. To do this, you first click on this line to mark it.

Now take a closer look at the account assignment by clicking on the Detail button.

The accounts are dependent upon a chart of accounts for the exchange rate difference, which must be entered in a detail window. In this example, it's the CAUS (standard chart of accounts for the US). After making this selection, you clock on the Enter button.

A list appears which contains all G/L accounts to which open items may be posted in a foreign currency.

You're now going to look at the individual accounts from General Ledger account 140,000 to which exchange rate differences can be posted. To do this, you mark the line by clicking on the selection button located to the left of the line.

To bring up the detailed information, click on the Detail button in the lower application tool bar now.

The accounts to which the exchange rate differences (which have been realised) are posted are now displayed.

In this example, the expense difference is posted to account 230,000 and the income difference is posted to account 280,000.

The foreign currency valuation should be posted to the accounts in the Valuation area at the end of the period. The Balance Sheet Adjustment account is used for reconciliation if various foreign currency valuations are performed within a single group.

It's also possible to post exchange rate differences which occur after the foreign currency valuation using the Translation field group. If such a translation occurred, balance sheet adjustments would need to be made.

The exchange rate differences should now be evaluated and posted. Beginning from the main R/3 screen, you follow the menu path Accounting; Financial Accounting; General Ledger.

In the G/L application area, you select the menu items Periodic Processing and Closing. Now select Valuate from the submenu.

Now take the next step by selecting the menu item Foreign currency valuation of open items.

In this screen, you enter the company code - US01 in our example. Eventually, this valuation must be performed for all accounts but for now it'll be limited to accounts receivable (D).

For the Balance Sheet Key Date, 12/31/1996 is entered.

Next, the Balance sheet preparation valuation field must be marked with a check.

Next you need to enter the method that will be used for the foreign currency valuation in the Method for company code currency field.

The Value help key can be used to access a list of possible entries.

Only one method is available in the selection box. It's the KTO method you encountered earlier. Clicking on the Enter button will copy the entry onto the screen.

The next four fields allow for a differentiated valuation of group currency, hard currency, index currency and company currency. Whether or not this is required depends on the customisation of individual companies.

The posting parameters are set further down the screen. The Posting Requested field is checked so that the posting actually takes place. The posting will take place on 12/31/1996.

The differences will be posted in period 13, which is still open.

Since the valuation is important for the year-end closing, the postings must be reversed later. So, for the reversal date you would enter a date in period 01 of the new year, such as 01/02/1997.

Once the postings have taken place, a list is obtained, Open items foreign currency valuation for 12/31/1996.

For example, a receipt of 10,000 CAD was posted here on 08/12/96.

At the time this corresponded to a local currency book value of 8,200 USD.

However, due to a slightly unfavourable exchange rate, the value on 12/31/1996 is only 8,000 USD.

The difference then is 200 USD.

The list ends with an overview of all postings that were generated. Now you can review the postings again in the document display.

Both items from document number 3 show an amount of 0.00 in CAD.

However, clicking on the Display currency button reveals the valuation posting in the local currency area.

A difference of 200 USD is revealed here.

In the next lesson, you'll learn about categorisation. This is used to divide receivables and payables according to their remaining life.

Categorising receivables and payables

For the balance sheet there's a prescribed way in which receivables and payables are differentiated, which relates directly to their remaining life.

Receivables are separated into those that will only remain in existence for a maximum of one year and those that will remain in existence longer than one year.

Payables are separated into those that have a life span of less than one year, between one and five years and more than five years.

To begin categorisation, start off in the R/3 main screen and follow the familiar menu path to the IMG.

In the IMG, you move through the hierarchical nodes Financial Accounting; Accounts Receivables and Accounts Payables, to reach Business Transactions.

On the hierarchy level below the business transactions, you select Closing followed by Regroup. Now click on the area to access the option Define adjustment accounts for receivables/payables sorted by remaining life.

The screen shows an overview of the transactions. Payables are separated into those with a remaining life of between one and up to five years, and of more than five years. A special posting is not necessary if the remaining life is less than one year.

Similarly, there's only one transaction that separates the receivables that will remain in existence for more than one year from those that will only exist for one year or less.

Now, as an example, you're going to look at the accounts that are used to split up receivables. To do this, you first mark the field with the text Receivables longer than 1 year by clicking on it.

Then you click on the Detail button.

For the chart of accounts, CAUS is entered as before.

The next step is to click on the Enter button in the detail window.

All the affected accounts are listed in the overview together with their adjustment and target accounts.

The adjustment account for account 140000 is 140099 and the target account is 140020. You need the adjustment account because G/L account 140000 is a reconciliation account for the customer, to which no direct postings may be made.

As an example, let's assume that open items valued at 10,000 CAD are posted to account 140000.

Of the 10,000 CAD, 8,000 originated from receivables that are only due after the course of an entire year or longer. In this case, -8,000 would be posted to the adjustment account.

This leaves the amount of receivable that are due within the first year, which is 2,000 CAD.

The target account displays the receivables that have a remaining life span of more than one year.

By clicking on the Back button in this and the next two screens you return to the R/3 main screen.

Now you're going to learn how to reclassify receivables. The method for payables is very similar. Beginning again from this initial screen, you follow the familiar menu path to Accounts Receivable.

Here you select the menu sequence Periodic Processing; Closing; Regroup.

This submenu consists of only one menu item, Reclassify Receivables/Payables, which you need to select.

In the first field on this screen, you enter the company code. In this example, it's US01.

In the next field, you enter the Account Type for which the categorisation should be done. In this example it's only performed for Accounts Receivable.

In the Balance Sheet Key Date field, you enter the date on which the regrouping should be done. In this example, the date is 12/31/1996.

Further down the screen the Batch Input Requested field must be checked because the required postings will need to subsequently undergo a regrouping. In this example, the name of the session and the document type are correct and don't need to be altered.

The posting date for the regrouping should be the same as the balance sheet key date, 12/31/1996. The first special posting period, 13, will be entered as the posting period.

The postings should be reversed again at the beginning of the new fiscal year. 1/2/1997 is entered as the reversal date. This date occurs during the posting period 01.

In the lower portion of the screen, you can determine the additional information to be displayed separately in the report.

The Execute button is then used to begin the process of regrouping the receivables.

An overview of the receivables for company code US01 is shown. It's divided according to business areas.

The posting totals. Along with the currencies in which they are posted, are displayed.

The corresponding amounts in the local currency and the evaluated amounts on the key date, 12/31/1996, are displayed alongside.

To the right of the overview, the postings are classified according to their remaining life: up to one year and more than one year.

The Batch Input session should now be processed so that the receivables on display can also be posted to the assigned accounts. The Initial Screen is reached through the menu path System; Services; Batch Input; Edit.

In the Initial screen for Batch Input session processing, an overview can be obtained using the button on the tool bar. It's not necessary to enter any additional specifications.

The session SAPF101 is selected.

Now click on the Process button.

While the session is being processed, you can choose what will be displayed on the screen. In this example, errors are to be shown, but the individual transactions will not display.

After clicking on the Process button in the detailed window, the session will be processed.

The system will let you know when the batch input procedure is complete. You can then leave this area by clicking on the Exit button.

UNIT 3: Creating the Balance Sheet / Profit and Loss

In the third unit of this training course, you'll learn how to call up and print out a Balance Sheet and a P&L statement.

In the first lesson, you'll become familiar with two procedures for balance sheets and P&L statements: Periodic Accounting and Product Profitability Using Cost of Sales Accounting.

The second lesson deals with the structure of balance sheets and P&L statements. This structure determines which accounts are assigned to which items in the balance sheet or profit and loss statement.

In the third lesson, you'll learn how to access a balance sheet and P&L statement.

In the fourth lesson, you'll learn about yearly use and sales tax reporting and external tax systems reporting.

Alternative P&L Statement Structures

There're two common procedures for the creation of a profit and loss statement.

These are the Cost of Sales Accounting and the Period Accounting.

In some European countries, such as Germany, Period Accounting is the most commonly used procedure.

The Product Profitability Using Cost of Sales Accounting procedure (PPUCSA), is commonly used by organisations in the US and UK.

The R/3 system allows you to create a profit and loss statement using either method. You'll now take a closer look at the differences between the two procedures.

In the Period Accounting procedure, all expenditure of the fiscal year is lined up against all sales revenue, whether the expenditure went towards production of products sold or products which remained in warehouse stock.

The opening inventory is subtracted from the final inventory to determine whether it has increased or decreased. In the following example, there has been an increase in the inventory, from which a total operating performance is then derived.

Finally, all expenses - including those for materials, human resource expenses, description and others - are deducted from this total operating performance. The result is the annual net profit.

When the data has been entered into the statement, it will appear as follows: for a sales revenue of 1 million USD, for example, the increase in inventory comes to 120,000 USD, which gives a total operating performance of 1,120,000- USD.

The individual expenditures add up to a total of 1,060,000 USD.

This results in an annual net profit of 60,000 USD.

Now let's look at the same profit and loss statement with the Product Profitability Using the Cost of Sales Accounting procedure.

The sales revenue is identical. No inventories are considered, however, instead only the costs of goods and services that left the company, i.e. sales expenses, are considered. The expenditure for goods that didn't leave the company, but were transferred to storage are not.

After the sales expenses have been determined, a total amount remains. When this total is subtracted from the sales revenue, the result is the same annual net profit as was calculated in the statement which used the Period Accounting procedure.

The Period Accounting procedure considers a cost element-oriented view, where all expenses incurred in the period in question will be taken into account.

The PPUCSA procedure, on the other hand, considers only the costs of production for goods and services purchased. “Broken down” cost accounting is required for this.

Included in the sales expenses are the costs of production for sales, and cost centre costs resulting from Sales and Distribution, Management and R&D. PPUCSA doesn't consider the costs of products and services, which are not sold.

Both procedures have advantages and disadvantages.

One advantage of PA is the low expenses for preparation, since the P&L statement can easily be derived from existing financial accounting data.

On the other hand, when you use the PPUCSA procedure, you must have cost centre accounting available, which incurs greater expense.

On the other hand, you've more control using the cost centre-oriented procedure.

Another disadvantage of the PA procedure is that it generates a great deal of very specific information. For example, the PA procedure allows you to see how high HR costs are in respect to the cost of materials.

If a company is interested in greater compatibility with German-speaking companies, using the PA procedure is recommended.

On the other hand, if you're dealing predominantly with companies in the US and UK, you should use the PPUCSA procedure.

A significant disadvantage of the PA procedure is the expensive inventory of goods which are still part of the work process. This problem doesn't arise when the PPUCSA procedure is used.

The PA procedure helps to highlight important expense items.

Finally, inventories can't be represented as clearly with the PPUCSA procedure.

As you can see, there're a number of factors to consider when deciding which procedure to use in designing the P&L statement.

In the following lessons, you'll learn how to create a profit and loss statement using both procedures. First off, there're some preparations to carry out, in order to work with the Cost of Sales Accounting method.

In order to create a P&L statement within the R/3 system based on the PPUCSA procedure, you must first determine the function areas.

For example, your function areas might be Sales and Distribution, Management and Research.

You must also define the cost centres. A function area often includes several cost centres.

The cost centres must be clearly assigned to the function areas.

As soon as a posting has been performed, the assignment information in the master records of the relevant cost centre is used to find the correct function area.

If you're following the PPUCSA procedure, then you must create a PPUCSA ledger, in addition to the general ledger and sub-ledgers.

You must ensure that the general ledger and the PPUCSA ledger have been integrated together in the system. In addition, the appropriate accounts in the general ledger and PPUCSA ledger must be assigned.

Postings are updated to this node, and ledgers are always reconciled.

In addition to the PPUCSA ledger, you must also create a reconciliation ledger.

The reconciliation ledger is used to ensure reconciliation between Controlling and Financial Accounting.

Using this facility, records are created in Financial Accounting when transfer postings are made in Controlling. This ensures that data in internal and external accounting agrees at all times.

One of the most important steps in creating a P&L statement using the PPUCSA procedure is the adjustment of the balance sheet and P&L structure in the R/3 system. This is particularly important because the P&L statement has a different design using PPUCSA.

The reporting (including year-comparison and planned figures) must be adjusted to conform to the PPUCSA procedure.

Once these tasks have been carried out, you are ready to start the PPUCSA procedure.

In the next lesson, you'll learn how to create a balance sheet / P&L structure with the period accounting procedure to prepare for year-end closing.

Designing a Balance Sheet and P&L Statement Structure

Before you can create the Balance Sheet / P&L as part of the year-end closing, you need to determine which accounts must be assigned to which balance sheet or P&L items. The default structures you use for this task are stored in the R/3 system in Balance Sheet / P&L.

From within the IMG, you click on the hierarchical nodes Financial Accounting, G/L Accounting, G/L accounting business transactions, and then on Closing.

You then open the next level by clicking on the Document node.

You now have to define a Balance Sheet / P&L structure.

You select the Define financial statement versions feature by clicking once on the green arrow with the red point in front of the feature.

The overview shows the standard balance sheet / P&L statement structures which are available for different countries. The application structure for the US is not currently available.

Now click on the scroll bar below the movable bar to go to the last page of the overview.

The structure for the US, coded BAUS, is now in view.

The balance sheet structure BAUS is based on a standard account plan, with the same name, which is contained within the R/3 system. You're now going to change the BAUS structure to adapt it to the specific needs of Smith Tools Inc.

Firstly, clicking on the box to the left of BAUS marks the entire line.

To make a copy of the BAUS structure and save it under another name, you click on the Copy As button.

The copy that is being created is named and described in more detail in this screen.

The four letter code has been altered to SMTH to stand for Smith Inc. The name is changed to Balance Sheet Smith Tools Inc.

Selecting the Enter button returns you to the overview.

The status bar indicates that one entry has been copied.

You can then save the new structure using the Save button.

Now you'll learn how to make changes to Smith Tools' balance sheet structure. To begin, mark the structure by clicking on the check box to the far left of the appropriate line now.

You then use the Balance Sheet / P&L items button to call up the first hierarchical level of the balance sheet / P&L statement structure.

Four items are displayed, along with a brief description of each. If a node has a plus sign beside it, this indicates that there're additional levels underneath that which is shown. Up to ten hierarchical levels are possible.

Item 4 has no plus sign, which means that there is no further hierarchical level underneath that item.

To find an existing assets item, you click on the node next to the item 100000 Assets.

Another hierarchical level has opened up. By clicking on the appropriate nodes, you can move to a particular area. For example, if you wish to move through the levels of long term assets, you would first click there and then on each corresponding node.

Here, the lowest hierarchical level has been reached in an area of long term assets - Shares in group companies.

Now you're going to look at the account assignment for this area. You firstly need to open up the dialog box: you can either click once on Assign Accounts or double click on the area with the white background.

The Change Accounts dialog box indicates that only account 41000 is assigned.

To return to the hierarchical tree, you click on the Cancel button in the dialog box.

You're now going to learn how to maintain the accounts of a new bank - called Bank 5 - for Current Assets items. First you must close the two lower hierarchical levels, detailing investments, by clicking on the nodes with the minus sign.

You then need to close the long term assets node 1020000, again by clicking on the minus sign beside it.

Then you need to select the node 1010000 - Current Assets.

On the next level you select the item Cash by clicking on the appropriate node.

You have reached the bank level. Bank 5 isn't listed because it's a new item which you must therefore create in the system. Now click on the Create items button.

A detailed window appears in which you can make the entry for the new bank.

1011700 is entered as the item number, along with a brief description - Bank 5.

You can then leave the detail window by clicking on the Enter button.

Bank 5 has now been added to the hierarchical tree.

The next step is to assign accounts to this new bank. To do this, you first click on the appropriate button in the toolbar.

The detail window Change Accounts appears again.

The figures 113700 to 113799 are entered here for the account interval.

Since you're dealing with a “balance change item” for the bank account, you indicate here that only debit balances can be accepted. This means that debit balances of the account in question will be taken into the balance sheet item.

You then click on the Enter button once more.

The account interval has now been added to the hierarchy.

To list all individual accounts for Bank 5, you then click on the node next to the interval.

All individual accounts for the Bank 5, along with a brief description, have been added into the hierarchical tree. These descriptive notes don't appear in the balance sheet - they must be added in individually if required.

Then you double click on the line Bank 5.

In the Item: Change texts dialog box you can enter all text that is to be printed out for Bank 5 in the balance sheet.

A start and end text for the group can be entered if needed. In this example, however, only the Start of the group is defined and the same text was used to describe the item in the hierarchical tree is chosen.

Clicking on the Enter button in the dialog window, you return to the hierarchical tree.

You have created a balance sheet item on the assets page for the debit balance of Bank 5. Since this item is a balance change item, you still have to define where it should appear in the case of a credit balance.

You're now going to define this balance change for Bank 5. To do this, you first have to mark its assets item. First you place the cursor on the Bank 5 line by clicking on it once.

You then mark the line by clicking once on the Mark button.

The marking applies to all accounts assigned to the item. The marked area has a yellow background.

After scrolling down to the Liabilities, you place the cursor on the corresponding item for Bank 5. Now you have to assign the appropriate accounts.

To define this item as a balance change item, you select the menu item Edit.

Now from the submenu, select the menu item Debit/Credit Shift.

In the next submenu, you select Define.

The system offers two possibilities in this dialog box. Since the debit balance of the accounts must flow into the assets item and the credit balance must flow into the liability item, the first line is selected.

The entry is confirmed by clicking on the Enter button in the dialog box.

The definition of the balance change for Bank 5 can be seen as an additional entry in the hierarchical tree.

Now you'll save the changes made to the balance sheet / P&L statement structure. Do this now by clicking on the Save button.

The status bar confirms that the changes have been saved.

You can use the Back button to return to the overview of balance sheet / P&L statement structures.

The balance sheet / P&L statement structure of Smith Tools Inc. has been adjusted to company-specific requirements and the results have been saved. By clicking once more on the Back button, you could return to the IMG if required.

In the next lesson you'll learn how to call up a balance sheet and a P/L statement.

Calling up Balance Sheet and P&L Statement

The work required to prepare for year-end closing is finished and a balance sheet / P&L statement structure has been adapted to the company-specific requirements of Smith Tools Inc.

Now the balance sheet and the profit and loss statement can be called up.

Beginning in the R/3 main screen, you select the menu item Information Systems.

Then select Accounting.

In the next submenu, click on Financial Accounting.

Within the Financial Accounting IS screen, you select General Ledger.

In the submenu you then click on the menu item Balance Sheet.

In the Balance Sheet / P&L screen you enter CAUS as the chart of accounts, which is standard in the US.

The company code is US01.

In the Financial Statement Version the structure BAUS has defaulted in. However, you need the structure which was created for the specific requirements of Smith Tools Inc.

The value help key can be used to select the version of the statement structure you require. Click on the value help key now.

Here's an overview of all available balance sheet / P&L statement structures. Now select the trade balance sheet for Smith Tools Inc. by double-clicking on it.

The year 1996 is entered in the Reporting Year field.

Further down the screen are the fields for the relevant reporting period interval. It's already indicated correctly with period 1 to period 16.

The year 1996 has been entered as the comparison year.

In this example, however, you are going to use the fiscal year 1995 for comparison. Consequently, 1995 is entered in the field.

The periods to be considered in the comparison year will remain at 1 to 16.

Further down the screen is the Company Code Summarisation box. This has been left at option 1, so that a separate balance sheet will be created for every company code. You could also create one balance sheet for several company codes by entering a different value here.

The Comparison Type box determines the method that will be used in comparing the new balance sheet and P&L statement with the previous year.

Method 1 determines by what percentage the result has changed. Method 2, determines to hat percentage the result has grown.

The Scaling box is used to adjust format of the numbers in the output. The current Entry 0/0 means that the display will be in dollars and cents.

Two places will be displayed after the decimal point for the local currency dollars.

Next you must specify the Balance Sheet Type. The value 1, currently entered, means that the existing balances to be carried forward from the previous year will be considered as part of the process.

Type 1 is the default setting. It considers balances carried forward in the P&L carried forward. The values you specified in the parameters are used for determining report time periods. The lower limit value is automatically set to period 0.

Type 2 analyses the flow of funds. The P&L carried forward is performed for the time period you specify, but without considering the balances carried forward.

Type 3 contains elements from types 1 and 2. For example, the P&L statement can only be performed for a month (type 2) in which the balance sheet was created as a key date balance sheet (type 1), with values which accrue up to the end of the month in question.

Type 4 can be used to create an opening balance sheet.

A non-local currency can be entered into the Display Currency box.

In this case, the following two boxes are also significant. They specify the date for currency conversion (called translation here) and the Exchange Rate Type for the conversion. The exchange types to pick from are the bank buying rate, the bank selling rate, or the average rate.

In the next field group you can set Alternative period selections which are not limited by posting periods.

For example, by specifying exact dates for the Calendar Reporting and Comparison Calendar time period, you can create a single balance sheet for company codes with different fiscal year-ends.

The Print on Form box is located at the end of the screen. By entering the name of a form, it's possible to specify the format of the balance sheet and P&L statement print out. Using this option, you can customise a form for specific company requirements.

Now you're ready to print out the balance sheet / P&L statement. All documents created, beginning with the Assets Page of the balance sheet, will be displayed.

Scrolling further to the right, the information for the Comparison Time Period comes into view. The Absolute Difference and Relative Difference are also listed.

Further down, in the Trade Receivables section, you can see the categorisation that has been made for the various amounts.

Here you can see the adjustment postings. These are necessary because of the foreign currency evaluation.

The P&L statement appears next. The data, which has been generated, can be downloaded onto a PC. Click on the menu item List now.

In the submenu, select Save.

In the next submenu, select the item File.

A dialog box appears in which you can choose from three different data formats. In this example, the Spreadsheet program is selected by clicking on the appropriate selection box.

Now click on the Continue button to confirm the selection of the data format.

Another dialog box appears. In the File Name box you enter the name of the file you wish to open.

To start the transfer of the file to the PC, you click on the OK button. Now the data in the balance sheet can be further processed in a spreadsheet program such as Excel or Lotus.

Now you'll learn how to create a P&L statement using the cost of sales accounting procedure (PPUCSA).

You first need to access the reporting area for the General Ledger account. Starting off in the R/3 main screen, you first select the familiar menu path Accounting; Financial Accounting; General Ledger.

You're in the General Ledger main screen. Now select the menu item Periodic Processing.

Now click on the menu item, which will take you on to the reporting area.

Finally, choosing Report Selection completes the menu path to view the report tree for the General Ledger.

You can now see the report tree for the G/L. First you open the node Information Systems by clicking on it.

Within this area is a report P&L statement (COS). This report is not part of the standard SAP system delivery. It's a user-created report based on a report of the SAP IDES system. The tool Report Painter has been used to create it.

Double click on the node, you start the report. In the first screen, you are required to make certain specifications - the first being a ledger.

When using the PPUCSA procedure, a special ledger must be created.

The ledger “OF” is the prepared ledger for the cost of sales accounting.

1996 is entered as the Fiscal Year.

In this example, the periods 1 through 16 are selected.

As usual, the company code in this example is US01.

Finally, version 1 is selected as before. To run the report you then click on the Execute button.

The statement begins with the sales revenue.

Listed in the next block are the costs of goods sold. Subtracting the latter figure from the sales revenue brings the gross operating result.

Scrolling right, the columns displaying the absolute and percentage variants are revealed.

In the next section, the costs of special functions, such as transportation, insurance and R&D are listed.

Adding this total - 63,330 - to the gross operating result from the previous section (84, 283-), the intermediate result of 20, 953- is obtained.

By double clicking on the Transportation… line, the different G/L accounts, which make up the amount for this item, are displayed.

Now double click on the Travel Expenses accounts line.

Here you can see the postings made on the individual account 474100. The function area the item is posted to is listed - here represented as 0300. The function area relates the posting to a certain part of the P&L statement.

This completes the lesson on creating a balance sheet and P&L statement.

In the next lesson, you'll learn about the sales tax year report, and reports for use with external tax systems.

Other External Reports

In this lesson you'll learn how to access other external reports.

You'll become familiar with the use and sales taxes report.

You'll also learn how to access reports applied to external tax systems.

The Use and Sales Taxes report is designed specifically for companies operating in the US. To access the report for the entire fiscal year, you follow a similar method to that used for the monthly report. Beginning from the R/3 main screen, you select the menu path Accounting; Financial Account; General Ledger.

In the General Ledger working area you select the path Periodic Processing; Closing; Report; Report Selection.

This path brings you to the Application Tree of the Report Selection for the General Ledger. From here you then follow the nodes Reporting and Tax on Sales / Purchases Return. Now click on the USA node.

Two features are available. Firstly, you are going to bring up the report on Use and Sales Taxes. Firstly, click on the Help button in the toolbar to find out more about this report.

The Help screen here gives information on this report for Use and Sales Taxes.

Now double click on the line to bring up the report Use and Sales Taxes.

You're now in the selection screen for the Use and Sales Taxes report.

US01 has been entered as the company code.

You can enter a document number next if you wish to limit the reporting listing. The next required entry is the fiscal year - in this example it's 1996.

The third and final required entry in this screen is for the posting date. In this example, you're going to include the whole of the fiscal year, so 01/01/1996 is entered as the starting date.

The last date of the fiscal year is entered in the to field.

This completes the required entries for this screen. Now click on the appropriate button to run the report.

You're now in the report screen, where you are first given an overview of the documents, which belong to a certain tax jurisdiction code for Accounts Receivable.

The next page has the equivalent for Accounts Payable. To exit the report, you click on the back button.

You're now back in the main User Tree area.

The second report area available concerns External Tax Systems. Companies working with an external tax system, to transfer data from the R/3 system to the external system use these reports.

However, if an external tax system is being used, errors can occur when the accounts receivables are being delivered. In such cases you can call up a Help page - here, for example, the Forced update of the external audit file is explained.

This completes the lesson on running and accessing external reports.

UNIT 4: Documenting Posting Data

The fourth unit of this training course will introduce you to documentation of posting material and document filing.

In the first lesson you'll learn how to perform a balance reconciliation between old and new fiscal year to check for balance sheet continuity.

Then in the second lesson, you'll learn how to document posting material using the journal and balance audit trail.

Balance Reconciliation and Balance Lists

After the balance sheet and the P&L statement have been prepared, the balance sheet's continuity has to be checked. To do this you must carry out a reconciliation of the account balances as of 12/31 in the old year with those of 1/1 in the new year.

This reconciliation involves comparing the balance lists of 12/31 with those of 1/1.

At the same time, the posting material of the previous year is documented in the balance list of 12/31.

Balance reconciliation are performed for vendors (account payable), customers (account receivable) and for the G/L. A balance reconciliation always follows the same pattern. Here, vendors will be used as an example.

In addition to creating the usual balance list, you can also prepare a structured balance list in the G/L. This will be discussed briefly in a later lesson.

To create a balance list for vendors, you follow the familiar menu path, beginning in the R/3 main screen, Accounting; Financial Accounting; Accounts Payable.

Following this path, you arrive in the Accounts Payable work area. Then the following menu items are selected: Periodic Processing; Closing; Document; Report Selection.

You have reached the application tree for Report Selection Vendors. Now open up the level underneath the Adequacy / Document node.

On the next level, you select the Account node by clicking on it once.

Next you mark Balances in local currency.

Then you click on the Select button. This'll take you to the input screen Vendor Balances in Local Currency.

Before the balance list is created, there are several options to enter.

The balance list can be restricted to specific A/P accounts in the Vendor Account fields. However, this would not be appropriate for a balance list for balance reconciliation. Therefore, these fields are left empty, so that all vendor accounts are included in the balance list.

You can use the Matchcode Selection to limit vendors according to additional selection criteria.

In the Company Code field, the balance list is limited to vendors for the company code US01.

Since your first task is to output a balance list for the year which has ended, you must change the default value 1997 in the Fiscal year field to 1996.

The balance list is intended to include all fiscal months of the fiscal year. The default setting in the Reporting Periods fields of 1 to 16 is therefore kept.

You wouldn't wish to impose any limits to specific Reconciliation Accounts at year-end closing, so the corresponding fields remain empty. The level of the Account Balance is not limited either.

Moving further down the screen, the Corporate Group Version check box is used to indicate the company code that goes with each account. The box is left unmarked in this example because the balance list is only being created for one company code.

The Accounting Sorting field contains the default value 1. This means the accounts in the balance list will be sorted by their reconciliation accounts. If the value were 2, the balance list would be sorted by vendor accounts.

In the Summarisation Level field you can indicate how balances should be summarised. The possible values here range from 0 for no summarisation to 3 for Summarisation for Company Code. The value 0 is appropriate here.

The addresses from One-time Accounts will not be taken into the balance list in this example, nor will unposted accounts be exported.

Accounts of debit-vendors will not be exported exclusively. The vendor's address will not be exported either.

You can use the List Separation check box to separate balance lists over several company codes and to pass the different company codes to different printers.

At the end of the screen, there is a field called Additional Heading where you enter your own notes.

The Dynamic Selections button allows you to make detailed limitations on vendors, accounts, documents being used, and other criteria.

This completes all the information required to create the balance list. Now click on the Execute button to create the balance list.

The company code designation is given on every page of the balance list.

The heading Vendor Balances in Local Currency is the standard heading for the balance list. The heading just assigned in this example is located directly beneath it.

The Periods Carried Forward and Reporting Periods covered follow in the next line.

The first column in the list shows the company code.

This is followed by the first Reconciliation Account of the vendor accounts (number 160000). The balance list is sorted by reconciliation accounts.

The name of the reconciliation account is given after the reconciliation account number - here it's Trade Payables.

The next two columns contain each vendor's number and abbreviated name.

The column Balance at Start of Period lists the balances carried forward from the fiscal year 1995.

The debit and credit totals for the report month are listed, i.e. for the entire fiscal year 1996.

On the far right of the list you can see the two columns of the balance list: the debit balances and the credit balances of individual vendors. All vendor balances for all reconciliation accounts for the specified company code are given within the list.

At the end of the list is the total of all balances for the entire company code US01. The sum of the balances must correspond to the sum at the beginning period of the new fiscal year 1997.

To verify this, you need to create a balance list for the year 1997. The method used is the same as that for the 1996 balance list: you first select the menu path to Accounts Payable.

In the Accounts Payable working area, you follow the menu path Periodic Processing; Closing; Document; Report Selection to get to the application tree Report Selection Vendors.

Now select the three menu path options to create the vendor balance list for 1997. The menu path is the same as you selected for the 1996 balance list. Adequacy / Documentation; Account; Balance in Local Currency.

Here the required entries are made. The company code is, as usual, entered as US01. This time the Fiscal year default is 1997 remains unchanged. The same applies to the Reporting Periods 1 to 16.

The account sorting can remain at value 1, which represents Sort by Reconciliation Accounts.

Since you want to check the balance carried forward for the entire company code, you must select the corresponding summarisation level. Enter the correct references number and then confirm your entry by pressing the Enter key.

To display the balance list, you then click on the Execute button.

The balance list now consists of just the total for all company codes.

The value in the balance at start of period column corresponds to the total of corresponding balances from the previous year. This confirms that the balances have been carried forward correctly.

After the balances have been compared, the balance list for 1996 can be printed out and kept as documentation.

In additional to this balance list, you can also request a Structured Balance List. To do this, you start off in the G/L main screen and move through Periodic Processing to the sub menu Closing. Now click on the menu item Document.

The only menu item available here is Report Selection.

In the application tree Report Selection General Ledger you select, in order, the report nodes Information System; Account Information; Structured Balance List.

Click on the Enter button, you reach the request screen for the list. Here the Company Code, the Balance Sheet / P&L Statement Version, the Reporting Year, the Comparison Year and the Reporting Periods are all entered as before.

After clicking on the Execute button, the structured balance list is created.

The balances for the Period Under Review are listed to the right of the list, along with balances for the Comparison Time Period.

The order of the nodes matches the divisions of the balance sheet / P&L statement structure. This means, for example, that the assets are at the top of the list.

The Liabilities are next on the list.

The P&L statement appears further down.

In the next lesson, you'll learn about the documentation of posting material.

Journal and Balance Audit Trail

The journal and the balance audit trail are important in the documentation of posting material. Both types of documentation are created not only at year-end, but also, depending on the volume of data, monthly, or in the case of the journal even daily.

The journal displays posting transactions from within a certain time period chronologically, by the posting date.

Line items are shown by account in the balance audit trail.

Within nodes, items are sorted either chronologically or by cleared and open items.

A balance audit trail may consist of the available records, which are online in the system.

As a cumulative balance audit trail, however, it can also contain previously archived documents and records.

The G/L area is used to create a journal. To get there, you select the menu path Accounting; Financial Accounting; General Ledger from the R/3 main screen.

From here you continue along the menu path Periodic Processing; Info System; Report Selection.

In the application tree Report Selection General Ledger you select the report nodes Adequacy/Document, followed by Document.

Now select the lowest level of the report tree for the Compact Document Journal.

In the selection screen for the Compact Document Journal you can restrict the journal with various parameters.

The journal is to be created for Company Code US01.

The Fiscal Year you enter the one which has ended, 1996. This will cover all posting periods from 1 through 16.

To make all selection parameters visible, you select the All Selection button.

Since you want to create a journal for the entire year, it would not be appropriate to impose restrictions based on Document Number, Posting Date or Reference Number.

Further down the screen you will see more options, for example to include special documents in the journal or to obtain additional information for microfiche data. To keep the journal complete, no further restrictions will be imposed in this example.

Now you can exit from the settings and call up the journal. Do this by clicking on the Execute button now.

The compact document journal is divided into different areas. In the area on the left you'll find information on the Document Header data. This includes the Company Code the Document Number, the Document Type, the Posting Date and the external Reference Number of the document.

Documents are sorted first by the document number, and then, within those, by the system date of the posting, which is not listed here.

In the second area there're document lines for Subledger Accounts. Those listed are: the Account Type, the Account number, the Posting Key, the General Ledger Key (GL), and the Open item amount in the local currency and the foreign currency.

In the next column on the right is the area where tax codes are normally displayed. In this example, these lines are blank, but your company's tax code would normally show up here.

The posting line for the G/L Accounts is given in the last column. Within this column are areas showing the tax code, the Posting Key, the posted G/L account, and the G/L amount in local currency.

To reach the end of the compact document journal, you click on the Last Page button.

Here we find a summary sheet. It's subdivided into G/L Accounts, Customers, and Vendors. The totals of Debit Amounts for individual posting periods are added up and displayed.

Totals of the credit amounts for individual posting periods are also displayed.

Now you're going to learn how to create an open item balance audit trail for open postings, which are available in online accounts. To do that, you must first return to the application tree. Click on the Back button now.

Now click again on the Back button.

You've returned to the application tree Report Selection G/L. Here you must click on the report node Balance Audit Trail.

Another hierarchical level opens up. Within it you select the node Open Item Accounts.

Double click now on the feature From Database.

In the selection screen for the Open Item Balance Audit Trail from the Document File you first enter the Company Code you wish the balance audit trail to be performed for - US01 in this example.

In the Fiscal Year field, you enter the year which has ended, 1996.

Here, the boxes for limiting by Document number, Posting Date and Reference Number are left empty so that a complete balance audit trail will be produced.

The default entries for the Fiscal Periods can be left as they are.

The check box for the Vendor Selection has been marked so that vendor accounts are included in the balance audit trail.

Further down the screen, the boxes Customer Section and G/L account section have already been checked. This means that vendor accounts, customer accounts and G/L accounts will all be included in the balance audit trail.

In order to obtain a fully complete list, no limitations are made for specific account intervals or for reconciliation accounts.

All necessary parameters have now been entered. To exit this selection screen and call up the balance audit trail you use the Execute button.

The list for the G/L account open item balance audit trail consists of sections for customers, vendors and G/L accounts.

Here you're in the section showing the postings for the vendor.

At the beginning of each vendor section the account type, the company code, the vendor number and the vendor's name and address are given.

The vendor's Reconciliation Account is then detailed in the next section.

After that, the Cleared Items are listed, followed by the Open Items.

The following data is then displayed: the Clearing Date for the cleared items, the Posting Period, the Posting Date, the Document Number, the Document Type, the Document Date, and the external Reference Number.

Other data which may also be shown includes the Business Area, the Baseline Date for Payment and the Net Date. There is also a section for one-time vendors (OT).

Other information which follows include the Tax Code, the Document Currency, the Debit / Credit amount in the document currency, and the Clearing document number for cleared items.

At the end of each vendor section, the account totals are listed for the individual posting periods.

At the end of the balance audit trail you will find a table with the consolidated Account Totals, listed by account type.

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