MONTH END PROVISONS:
We have 2 options for Month End provisions
Option 1: Accrual / Deferral Document Method
Under option 1 of Accrual / Deferral Document method, on the Month end we make provision and on next month 1st workign day, we reverse total provison made. AT the thime of making payment we will take the actual payment made.
For Ex:
On 31.07.09 Provision for Salaries
Salaries A/c Dr 100000
to O/s Expenses 100000
On 01.08.09 Reversal of Provison
O/s. Expenses A/c 100000
to Salaries 100000
On 05.08.09 Salaries Payment
Salaries Account 105000
to Bank/ Cash 105000
Option 2: Open Item Management
Under Open Itme Management , at the end of the month we make the provision . At the time of payment we adjust the provion. If Excess payment is made, difference between actual payment and provision is booked as expenditure for that month.
For Ex:
On 31.07.09 Provision for Salaries
Salaries A/c Dr 100000
to O/s Expenses 100000
On 05.08.09 Salaries Payment
Outstanding Exp 100000
Salaries A/c 5000
To Bank A/c 105000
In both the options effect will be same. In Option 2 Tracking of Provison Made is improtant which is not possible in practical live environment.
Note: In Live Environment provisions will be made by Accountant and Payment
will be made by Cashier. The cashier at the time of making payment should
know the amount of provision and how much he has to clear at the time of
payment. Tracting is required in Option 2. In Live Environment Companies
follow OPTION-1
know the amount of provision and how much he has to clear at the time of
payment. Tracting is required in Option 2. In Live Environment Companies
follow OPTION-1
Option 1 :Accrual / Deferral Document.
Steps. 1 Define Reversal Reason and Reversal Reason shoul allow us to Reverse on any day.
2. Ener Accrual/Deferral Document
A) Rent Provision on 23.07.09
B) Salaries Provision on Month End Date
3. Reverse Accrual / Deferral Document.
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1 Define Reversal Reason and Reversal Reason shoul allow us to Reverse on any day.
PATH: SPRO---->Financial Accounting--->GL Accounts---->Business Transactions---> Adjustment Posting/ Reversal---->Define Reason for Reversal
Select New Entries Button → ENTER
Reason 15 ( Last Number in the Reasons list of the System. Number
May differ from system to system in institutue)
Text: Accrual / Deferral Reversal for PSL
Negative Posting √
Alt. Posting √ → Save
Press Enter to save in your request.
When we reverse the transaction it reduces from the same side instead of Showing it on credit Side.
Ex.
Period Debit Credit Balance Cum.Bal
4 100000 ---- 100000 Dr 100000 Dr
5 -100000 ---- - -
When we reverse the Salaries Provison on 1st of of August, it shows on
Debit Side as Negative Balance instead of on Credit Side. If it shows on
Credit Side, in Cash Flow Statement, it shows as " Cash Incoming " from
Salaries, which seems to be awkward in reports. If it shows on Debit Side
as Negative Balance, Net Effect will come in Cash Flow Statement.
Debit Side as Negative Balance instead of on Credit Side. If it shows on
Credit Side, in Cash Flow Statement, it shows as " Cash Incoming " from
Salaries, which seems to be awkward in reports. If it shows on Debit Side
as Negative Balance, Net Effect will come in Cash Flow Statement.
If we don’t select the Aleternative Check Box, system will allow us to
reverse posting only on " ORIGINAL POSTING DATE". If we select
the check box, it allows the reversal entry on any date.
reverse posting only on " ORIGINAL POSTING DATE". If we select
the check box, it allows the reversal entry on any date.
2 Enter Accrual / Deferral Document
PATH: Accounting ---->Financial Accounting ---->General Ledger---->Periodic Posting---->
Closing ---->Valuate---->Enter Accrual /Deferral Document (FBS1)
Closing ---->Valuate---->Enter Accrual /Deferral Document (FBS1)
For Rent Provision ( FBS1):
Doc.Date 23.07.09 Type SA Company Code: PSL
Post Date 23.07.09 Currency : UINR
Reversal Reason 15 Reversal Date 01.08.09
Post Key: 40 Account No: 400300 → ENTER
Amount 50000 INR Bussiness Area: PSLH
Text: Rent Provision for July
Post Key: 50 Account No: 100500 → ENTER
Amount * Bussiness Area: PSLH
Text: +
Menu----> Document----> Simulate and Save
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For Salaries Provision ( FBS1):
Doc.Date 31.07.09 Type SA Company Code: PSL
Post Date 31.07.09 Currency : UINR
Reversal Reason 15 Reversal Date 01.08.09
Post Key: 40 Account No: 400100 → ENTER
Ignore Warning Message and Press Enter
Amount 300000 INR Bussiness Area: PSLH
Text: Salaries Provison for JULY
Post Key: 50 Account No: 100500 → ENTER
Amount Bussiness Area: PSLH
Text: +
Menu----> Document----> Simulate and Save
3 Reversal of Accrual / Deferral Document ( F.81)
PATH: Same Path ( Next Level to the last Path)
Company. Code: PSL
Reverse Posting Dt: 01.08.09
Test Run √ → Select Execute Button ( F8)
Select Reverse Docs. Button
We get a Message that Documents Were reversed with another Document Number
OPTION-2: Open Item Management
This is used for Vendors / Customers / Balance Sheet Accounts, where Clearing is Required. IN Balance Sheet Accounts it is applicable like
1. Where there is Provision and Payment will be made in future Ex. O/S. Exp
2. Where there is Recovery and Payment Afterwards Ex: TDS/PF Etc.,
Concept of Open Item Management is like Bill Wise Adjustments in Other Accounting
Softwares.
Softwares.
For Making Open Item Management active, we have to select the " Open Item Management" Check Box at the time of GL Master Creations.
Suppose Consider Outstanding Expenses Account, if we see account at the end
of the year, there will be so many debits and credits. We don’t know which item is
paid and which is payable. If we select the Open Item Management check Box
at the time of GL Master Creation, while at the time of making payment system
will ask about the payment is against which provision. Once we selected payement
agaisnt Rent Provison, that item will be cleared from Open Items List.
paid and which is payable. If we select the Open Item Management check Box
at the time of GL Master Creation, while at the time of making payment system
will ask about the payment is against which provision. Once we selected payement
agaisnt Rent Provison, that item will be cleared from Open Items List.
We can see the Outstanding Expneses in 3 ways.
a) Open Items : Payable Items
b) Cleared Items: Amount paid Items
c) All Items: All items of Payable and Paid items
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IN SAP we have 3 scenarios for Open Item Management
| Scenario No | Type | Remarks |
| 1st Scenario 2nd Scenario 3rd Scenario | Full Clearing Partial Clearing Residual Clearing | Provison Amount and Payment are same Part payment against Provisions Part payment against Provisions |
Scenario1: Full Clearing
1st Step: Making Provision for Rent ( F-02)
Doc.Date 24.07.09 Company Code: PSL
Post Date 24.07.09 Currency : UINR
Document Type: SA
Post Key: 40 Account No: 400300 → ENTER
Amount 60000 INR Bussiness Area: PSLH
Text: Rent Provison for July → ENTER
Post Key: 50 Account No: 100500 → ENTER
Amount Bussiness Area: PSLH
Text: +
Menu----> Document----> Simulate and SAVE
2nd Step: How to View Open Item Managed Transactions ( FBL3N)
PATH: Accounting ----> Financial Accounting ---->General Ledger---->Account---->
Display/ Change Line Items ( FBL3N)
GL A/c # 100500
Com. Code: PSL
Select Open Items Radio Button
Select Noramal Items Check Box
Select Noramal Items Check Box
3rd Step: Out going payment with Clearing
( Outstanding Expenses Account)
Θ
√ → Select Execute Button (F8)
PATH: Accounting ---->Financial Accounting ---->General Ledger---->Posting ----> Outgoing Payment (F-07)
Doc.Date 24.07.09 Company Code: PSL
Post Date 24.07.09 Currency : UINR
Document Type: SA
Clearing Text: Outgoing Payment
Bank Data:
Account : 200100 ( Cash Account)
Bus. Area: PSLH
Amount : 60000
Text: Outgoing Payment
Open Item Selection:
Account : 100500 ( Outstanding Exp)
Account Type S ( it will come by default. S= G L Account)
Select Process Open Items Button on Left Top
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4th Step: Checking Open Item Managed A/c after payment (FBL3N)
GL A/c : 100500 Comp. Code: PSL
Select Cleared Items Radio Button Θ
Select Noramal Items Check Box √ → Select Execute Button (F8)
We can see the Report of Cleared Items in GL A/c Number 100500 ( O.S. Exp)
If we want to see the Open Items under GL A/c Number 100500 ( O.S. Exp)
Select Open Items Radio Button Θ
Select Noramal Items Check Box √ → Select Execute Button (F8)
Scenario 2 & 3: Partial Clearing and Residual Items Method:
Nature of the Transactions how system works under Partial Clearing or Residual Items
Method is explained with the following Example for understanding.
Partial Clearing Residual Clearing
A) Rent Provison A) Rent Provison
Rent A/c Dr. 70000 Rent A/c Dr. 70000
To O/S. Exp A/c 70000 To O/S. Exp A/c 70000
B) Partial Payment of 2000 by using Partial B) Partial Payment of 3000 by using Partial
Clearing Method Clearing Method
O/S. Exp A/c Dr 2000 O/S. Exp A/c 80000
To Bank/ Cash A/c 2000 To Bank/ Cash A/c 3000
To O/S Exp A/c 77000
O/S. Exp A/c at the end of the period
Open Items 70000 Cr Open Items 77000 Cr
Cleared Items 2000 Dr Cleared Items 80000 Cr
Open Items 68000 Cr 80000 Dr
In Residual Clearing Method, if we make part payment against any provision, System will
clear all the earlier provison and for the difference amount ( i.e., Balance payable) generate
another provision entry with new reference number. Residual means Balance payable.
clear all the earlier provison and for the difference amount ( i.e., Balance payable) generate
another provision entry with new reference number. Residual means Balance payable.
In Live Environment, Companies will follow Partial Clearing Method instead of Residual
Clearing. Reason is at the time of every payment in Residual a New Reference is generated. It gives practical problems in case of Vendors / Customers Bills Clearing. We may not know the actual bill amount after 2 or 3 partial payments. Both the Options are available in SAP, it depends on the company to choose which option to follow.
Scenario2: Partial Clearing
Step 1: Making Rent Provison (F-02)
Doc.Date 24.07.09 Company Code: PSL
Post Date 24.07.09 Currency : UINR
Document Type: SA
Reference # : 6789 ( Normally in Vedors/ Customers it is Bill Number)
Post Key: 40 Account No: 400300 → ENTER
Amount 70000 INR Bussiness Area: PSLH
Text: Rent Provison for July → ENTER
Post Key: 50 Account No: 100500 → ENTER
Amount Bussiness Area: PSLH
Text: + Menu----> Document----> Simulate and SAVE
Step 2: Outgoing payment using Partial Clearing Method ( F-07)
Doc.Date 24.07.09 Company Code: PSL
Post Date 24.07.09 Currency : UINR
Document Type: SA
Clearing Text: Outgoing Payment
Bank Data:
Account : 200100 ( Cash Account)
Bus. Area: PSLH
Amount : 2000
Text: Outgoing Payment Ref # 6789
Open Item Selection:
Account : 100500 ( Outstanding Exp)
Keep Cursor on Amount Field of Line Item , against which we want to adjust. Select Partial Payment Tab on top. It creates one table which contains Payment Amount Column
Double Click on Net Amount 70000. This amount will come automaticall to the next Column " Payment Amount".
Double Click on Amount under Payment Amount Column and Change the amount to Actual Payable Amount of Rs. 2000.
From Menu----> Document----> Simulate
System will warn with a message " Correct the Marked Line Items" Double Click on the Line Item which is in BLUE COLOUR
Enter Text + or type " Out going payment " in Text Column. → SAVE
Checking : See Open Item Managed A/c Transactions ( FBL3N)
GL A/c 100500 Comp. Code : PSL
Select Open Items Radio Button Θ
Select Noramal Items Check Box √ → Select Execute Button (F8)
We Can see in the account Rs 70000 in Credit and Rs. 2000 in Debit . Balance 68000 in Cr
i.e., Balance Payable.
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To View Bill Wise Outstanding :
In Account View Screen, Go to Change Layout Button
From Hidden Fields Column Select---> Reference Field
Select Amoutn in Local Currency Field under Column Content Select Left Arrow or Show Selected Fields Button
Select Copy Button . Keep Curson on Reference and Select Sub Total Button on Top
We can see the Outstanding amounts in each Bill in the Outstanding Exp. A/c
To Make the Balance Amount 68000 Payment:
Doc.Date 24.07.09
Post Date 24.07.09
Document Type: SA
Clearing Text: Outgoing Payment Bank Data:
Clearing Text: Outgoing Payment Bank Data:
Account : 200100
Bus. Area: PSLH
Amount : 68000 Text: Outgoing Payment
Open Item Selection:
Account : 100500
Select Process Open Items Button
Select Process Open Items Button
Company Code:
Currency : UINR
Currency : UINR
( Cash Account)
( Outstanding Exp)
Double click on Payable Amount 70000 and Double Click on Part Payment Amount
2000 ( when we double click , particular item will change colour into Blue )
From Menu----> Document----> Simulate → SAVE
To View Open Item Managed A/c Transactions ( FBL3N)
GL A/c 100500 Buss. Area: PSLH
Select Open Items Radio Button Θ
Select Noramal Items Check Box √ → Select Execute Button (F8)
Scenario 3: Residual Items Method
Step 1: Making Rent Provison (F-02)
Doc.Date 24.07.09 Type : SA CompanPSL
Post Date 24.07.09 Currency : INR
Post Key: 40 Account No: 400300 → ENTER
Amount 80000 INR Bussiness Area: PSLH
Text: Rent Provison for July → ENTER
Post Key: 50 Account No: 100500 → ENTER
Amount Bussiness Area: PSLH
Text: + Menu----> Document----> Simulate and SAVE
|
Step 2: Making Part Payment using Residual Method ( F-07)
Doc.Date 24.07.09 Type- SA Company Code: PSL
Post Date 24.07.09 Currency : UINR
Clearing Text: Outgoing Payment
Bank Data:
Account : 200100 ( Cash Account)
Bus. Area: PSLH
Amount : 3000
Text: Part Payment for Rent Prov
Open Item Selection:
Account : 100500 Process Open Item Button / Tab
Select Amound Field of Line Item appear to shich we want to adjust---> Select Residual Items Tab, System Will generate one table which contains Residual Items Column.
Double click on Net Amount 80000 which is to be adjusted
Double Clik on Residual Items Amount Field. Blance amount ( Acutal Provison
Less Amount paid ) will show in that column automatically ( i.e, 77000 in exp)
Less Amount paid ) will show in that column automatically ( i.e, 77000 in exp)
From Menu----> Document ----> Simulate
System will warn with a message " Correct the Marked Line Items" Double Click on the Line Item which is in BLUE COLOUR
Enter Text + or type " Out going payment " in Text Column. →SAVE
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