SAP FICO ( EPISODE - 20 )

Nilkamal: - What do we mean by Country Chart of Accounts? It basically represents Accounts structure prescribed under national regulations.

Ravi: - Sir, is it mandatory to do this setting in every project as you are saying about the national regulations?

Nilkamal: - No, it is optional. It should only be used, if a client is using the Charts of Accounts, which is not under only one national regulation. There are two types of COA. One is Standard COA and second one is the Country Specific COA.

Paul: - We are still confused, Sir. Please explain in details.

Nilkamal: - See, it is all about linking the two types of COA. Suppose, say, you are a client, who wants to use a Standard COA worldwide, but there are certain laws in some countries, which will compel you to use another COA for that local region, in accordance to your respective operative company codes in that country. Now, at the end of the day, you need a linkage between this standard COA and the country specific COA. That kind of link can be created by entering an alternate account Number in SAP FI module. These things come into play, when your project is very big and complex. At this level, you don’t have to think about it in details. Now, we will come to the 7^th setting. What is the 7^th setting?

Suhash: - The 7^th setting is about ‘Defining Accounting Groups’.

Nilkamal:- Ok, the path for ‘Defining Accounting Groups’ is:- SPRO -> SAP Reference IMG -> Financial Accounting -> General Ledger Account -> G/L Accounts -> Master Data -> Preparations -> Define Account Group. The transaction code is OBD4.

Arindam: - Sir, why are we defining accounting groups? I mean to say, what is the essence of defining it?

Nilkamal: - in SAP FICO, while creating a General Ledger account, we must specify accounting groups. The account group determines the intervals in which the account number must be. Liabilities (L), Assets (A), Incomes (I) and Expenses (E) are ranged in the index table. Here we can define which fields are required entry fields and which are optional entries, while creating and changing master records. Also, we can define which fields can be suppressed, while creating and changing master data. Basically, Account Group is that attribute, which determines the creation of master records.

Rinky: - Sir, you said about the determination of intervals. Does it mean that for L, A, I and E, there will be different ranges? If yes, then is it mandatory to do so?

Nilkamal: - It is not a mandate, but if you maintain some standard ranges, then it helps you to understand any error during ledger entry at any point of time. I always maintain a standard range. For Liabilities (L), the range is 100000 -199999, for Assets (A), the range is 200000-299999, for Incomes (I), it is 300000-399999 and for Expenses (E), the range is 400000-499999. The table that maintains all these range values is T077S. What is the next setting?

Manoj: - It is ‘Define Retained Earnings Account’.

Nilkamal: - Ok. The path for ‘Define Retained Earnings Account’ is:- SPRO -> SAP Reference IMG - > Financial Accounting -> General Ledger Accounting -> G/L Accounts -> Master Data -> Preparations -> Define Retained Earnings Account. The transaction id is OB53. Just remember one thing that the system defined retained earnings account or P&L statements account type is denoted by the letter ‘X’. Basically, this ‘X’ represents or deals with all nominal accounts.

Chaitanya: - Sir, here we are assigning a retained earnings account for each P&L account, by specifying a P&L account type in the COA area of each P&L account. What is the need for doing that?

Nilkamal: - It has a long-term advantage because at the end of each fiscal year, the system carries forward the balance of P&L account to the retained earnings account. For example, say, the salaries, wages or rents of the P&L account for 2009-10 will not get carried forward to the Balance Sheet, but will be credited to another P&L account. At a later stage, these amounts will get entry in the liability side of the Balance Sheet. That is, all losses in the 1^st year of operation will be adjusted in the ‘Miscellaneous Expense’ of the Balance Sheet of the next accounting year and all profits of previous year will get adjusted in the ‘Reserves & Surplus’ section of current Balance Sheet. Come back after a short break.