Nilkamal: - Oh! You people have come back from the break. Accha, tomorrow, there will be no class because I need to meet a client in Warangal district. Just now, this client called me up on my mobile phone. Anyway, as there will be no class tomorrow, so, I will take an extra 2 hours session today. Don’t worry; I will give you a break after 1 hour to have your lunch. So, where were we?
Chaitanya: - Sir, we are going to learn about the ‘Accounts Control in Company Code’ tab. After clicking on this tab, we are seeing ‘Account Currency’ field. What does it indicate?
Nilkamal: - It indicates the currency in which this account is held. If a currency other than the company code currency is specified, the users can post items in that currency only to this account. For example, say, if the Company code is in INR, then the A/C Currency code will be in INR if you want to post it in any currency; it will be USD if you want to post it only in USD; it will be in Euro if you want to post it only in the Account Currency which is Euro in this case. Always remember that if the Company Code currency is strictly specified, then users can post items in any currency to this account.
Paul: - What is this Exchange Rate difference key and Account Determination function?
Nilkamal: - Exchange Rate difference key is a key for account determination to perform the valuation of the amounts posted to the Balance Sheets in foreign currencies. Account Determination is an automatic function that determines the accounts for posting amounts in financial accounting.
Arindam: - Sir, this is just a computer, not a human. In this automation process, how the system understands or valuates the foreign currency automatically when any financial transaction entry takes place?
Nilkamal: - I can explain you, but will you understand it? You are not a CA guy; anyway, let me explain it. See, for the valuation of foreign currency balances, the system uses this Exchange Rate key to find out the accounts for gains and losses from the automatic valuations that take place at the back-end. Now, there is a customized program within that SAP FI module where ABAPers had clearly specified which accounts valuation differences are to be posted to, under the exchange rate difference key in the system. Say a sales order has been completed. Sales can take place in two ways. One is Cash Sales and another is Credit Sales. In Cash Sales, the G/L entry will be: - ‘By Cash…. To Sales’ and in credit sales, the G/L entry will be: - ‘By Customer Credit… To Sales’. In Credit Sales, the actual realization of money is not automatically getting reflected to the accounts. It is still due. Say the entire sales were for 10000 bucks, where foreign currency is involved. As the foreign currency transaction is involved, you need to keep some exchange rate provisions. Say the provisions kept is another 1000 bucks. Therefore, the G/L entry will be: - ‘By Exchange Rate Provisions … To Exchange Rate Difference’. Now, when the client pays the due money in the credit sales within the payment deadline day, the 1000 bucks that was kept for provisions will add as a profit to the balance sheet after actual realization of the money in the accounts. At that point, the G/L entry is just reversed as: - ‘By Exchange Rate Difference … To Exchange Rate Provisions’. This is a very complex scenario. It takes place when you are trading with a foreign client in foreign currencies and doing credit sales.
Rinky: - Sir, in this form, there is a checkbox to select ‘Posting without tax allowed’. What is that?
Nilkamal: - Tax category means whether the tax applies to the G/L account or not. Say you made a sale of 1000 bucks and there is sales tax of 10% on it. Then the G/L entry will be: - ‘By Sales Account … To Sales, To Tax Payable’. Before any G/L entry, you need to ask the question that is it a tax relevant G/L account. The ‘Posting without tax allowed’ indicator indicates that the account can still be posted to, even if the tax code has not been entered.
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