Setting Up the General Ledger to Display Accruals and Deferrals
After completing this lesson, you will be able to:
Explain the concept of accruals and deferrals
Accruals and Deferrals
Greg needs an introduction as to what accruals and deferrals are from an accounting perspective as he's not familiar with this concept.
Secondly, as part of the close process he needs guidance on posting journal entries to record accruals or by using recurring entries. He needs to learn what Apps are used in the SAP system to record these transactions.
Accrual and Deferral Postings
During the close, the accounting department needs to identify, in line with accounting practices, any accruals or deferral (prepayments) that need to be recorded in the general ledger, in accordance with GAAP (Generally Accepted Accounting Practices).
Now that Greg has an insight into accruals and deferrals, he wants to see how they can be recorded in the SAP system.
Post and Reverse a Manual Accrual
Greg can also use a recurring entry if there is a need to enter accruals and deferrals often.
Let’s go to the next topic and see how we can also use recurring entries to record accruals/deferrals.
Recurring Entries for Posting Accruals with the Same Account and Amount
Greg will learn about using a recurring entry to set up an accrual posting in the SAP system.
Recurring Journal Entry
The recurring entry program is suitable for posting accruals since the exact same amount is posted to the same accounts in each accounting period.
The header or Recurrence Rule (see above) is where you specify the Start and End date, how often (monthly, quarterly etc.) and which day of the month the posting will take place. In each period, the posting record is Debit Expense and Credit Other Payables (or Provisions).
The booking of an accrual as an expense is posted to the account in the following way:
Other Payables: If you are certain about the reason and amount of the accrual
Provisions: If you are uncertain about the amount and/or reason of the accrual and can only estimate it
Create a Journal Entry with Auto-Reverse
Practice yourself using the interactive simulation to post and reverse a journal entry at the month-end by using the SAP Fiori apps Post Journal Entries, Schedule General Ledger Jobs and Manage Journal Entries.