Recording Financial Transactions for the General Ledger Accounting in SAP S/4HANA to Support the Universal Journal

Objective

After completing this lesson, you will be able to understand how financial transactions are recorded in the Universal Journal

How Financial Transactions are Recorded in the Universal Journal

Scenario

Now that Dave has learned about the steps of the record to report process, he wants to know how financial transactions are recorded in SAP S/4HANA and how different requirements for reporting of financial statements are met.

He was told that Bike Company sells bikes (Product A and B), as well as spare parts for both products and that it also offers related consulting services.

Bike Company has 2 legal entities: one company in Germany and one company in U.S. For each of these companies, financial statements are required that reflect local accounting principles and international IFRS accounting principles.

The internal management structure for profit responsibility is based on product sales (A,B), spare parts sales (A,B) and consulting services (A,B). According to IFRS rules, for external segment reporting, the distinction between A and B is not needed; reporting should be based on product sales, spare parts sales, and consulting services.

To see how a financial transaction is recorded, an example is shown of a posting of sales commission, related to the sales of Product A, in the German company. Dave wants to understand how this is reflected on the level of a legal entity and also covering both accounting principles. The sales commission should also be reflected in external segment reporting, internal management reporting, and in reporting based on cost of sales accounting.

For this scenario, the sales commission is posted according to the data in the tables below:

The figure shows an excerpt of the universal journal. It contains two line items under document 1 in ledger OL for company code 1010. The first line item enters an entry with G/L Account 61500000 (Sales Commissions), Cost Center 10101301 (Production 1 (DE)), Segment 1000_A (Segment A), Profit Center YB110 (Product A), Functional Area YB30 (Sales), an amount of EUR 100. The second line item enters an entry with G/L account 11001000 (main bank account), segment 1000_A, profit center YB110, and an amount of EUR 100. The table contains a legend that explains the codes used for G/L account, cost center, segment, profit center, functional area, and ledger.

Introduction to the Universal Journal

Financial accounting is the process of recording business transactions and their legal valuation according to an accounting principle. On the SAP S/4HANA finance and risk platform, the single source of truth is the general ledger also known as the Universal Journal.

The Universal Journal captures all accounting-relevant transactions in Financial Accounting (FI) and Controlling (CO) as journal entries. It thus represents the single source of truth for both financial accounting and management accounting. The result is a fully integrated accounting system in which all line items from business transactions, regardless of where they occur, are located in one place. The Universal Journal contains all fields (columns) required by the business processes and the individual components.

The figure shows the view of a G/L document with different columns, such as ledger, company code, fiscal year, document, line item, G/L account, segment, profit center, functional area, cost center, amount, and currency. Each column supports different types of reporting. Ledger supports Parallel Accounting, Company Code supports Legal Reporting, Segment supports external Segment Reporting, Profit Center supports Internal Management, Functional Areas supports Cost of Sales Accounting

According to international accounting principles (IFRS 8), companies are obliged to provide information in their reports on the financial results of business segments (operating segments).

General Ledger Accounting supports the segment reports required by the accounting principles IFRS (International Financial Reporting Standards) and US GAAP (Generally Accepted Accounting Principles). For this purpose, General Ledger Accounting contains the Segment dimension.

Segments are used cross-company for segment reporting within the meaning of the law (IFRS 8 and ASC 280 in US-GAAP). Customers typically have few segments in accordance to accounting regulations.

US GAAP requires a virtually complete balance sheet at the segment level for segment reporting (essentially everything apart from stockholders' equity). The segment is defined as a sub-area of a company with activities that generate expenses and revenues, with an operating result that is regularly used by management for profit assessment and resource allocation purposes, and for which separate financial data is available IFRS has almost exactly the same requirements for segment reporting.

You can use the Segment dimension to represent the segment levels

To meet legal segment accounting requirements (based on International Financial Reporting Standards (IFRS) or United States (US) Generally Accepted Accounting Principles (GAAP), for example), assign the segment accounting object to profit centers in SAP S/4HANA.

General ledger posting transactions

The figure displays the Post General Journal Entries screen-shot. It includes sections header for entering the journal entry date, posting date, period, company code, transaction currency, ledger group, and reference. The Line Items section allows for the input of company code, G/L account, debit, and credit amounts. The Tax Items section is also present but currently shows no data. Key buttons highlighted include Header, Line Items, Select Templates, Upload New Entry, Hold Journal Entry, Simulate, and Post.

You can easily create and post a G/L account document using the Fiori App Post General Journal Entries. The entry screen of the Fiori App Post General Journal Entries is divided into multiple areas:

  • Header data: Enter data that applies to the whole document, such as posting date and document type.

  • Line items: Enter the line items of the document here.

  • Tax Items: Enter tax items details, for example if the system should calculate the taxes automatically during simulation or posting, here.

  • Select Templates: Here, you can select templates as references.

To save time and effort when entering information for numerous journal entries, create journal entry templates that match your specific needs using the Manage Journal Entry Template app. When you create a journal entry template, you select those fields and values that you need for a specific use, such as for submitting and posting journal entries. You can also choose to make the template public to share it with other users in your organization. 

First, enter the data for the document header and the first line item. The information entered in the fields will be reflected in the layout of the line item, which can be seen by choosing the (Details) icon at the beginning of the line item. The detailed entry screen line item will appear so you can enter the posting data.  Once all the data is entered, you can view it as a simulation to check or simply post.

The screen shows a screen-shot of the Manage Journal Entries app, specifically for Journal Entry (100000035) in ledger 0L. The entry from the 6th March 2023 refers to company code 1010 and is entered in EUR. The journal entry type is SA (G/L Account Document). It contains two line items: the first for sales commissions (G/L account 61500000), which posts EUR 100 on the debit side, and the second for the main bank account (G/L account 11001000), which posts EUR 100 on the credit side. Both line items are linked to segment A (1000_A), profit center YB110 (product A). The first line item is additionally linked to functional area YB30 (Sales and Distribution).

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