MONTH END PROVISIONS IN SAP FICO, FULL CLEARING, PARTIAL CLEARING, OPEN ITEM MANAGEMENT

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

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.

                                                                                                                                                                    45

                     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.

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.

                     2 Enter Accrual / Deferral Document

PATH: Accounting ---->Financial Accounting ---->General Ledger---->Periodic Posting---->
                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

                                                                                                                                                                   

*

                            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.

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.

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

*

          

                 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

                     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

                                                                                                                                                                   

*

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.

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.

*

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:

Account :                            200100

Bus. Area:                     PSLH

Amount :                              68000 Text: Outgoing Payment

Open Item Selection:

Account :                            100500
Select Process Open Items Button

Company Code:
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)

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