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Unit 4: Posting Periods Process
Contents: Process overview Defining periods – highlights Post transactions to periods Internal Reconciliation Process - monitor and perform internal reconciliation Period-End Closing - at the month end vs. at year end
Posting Periods Process: Unit Objectives
After completing this unit, you will be able to: Discuss the process of defining, managing and closing periods. Utilize the process of internal reconciliation in G/L accounts and business partners
(system and user). Review system reconciliations. Perform internal reconciliation (manual). Prepare for Period-End Closing.
Perform Period-End Closing.
Posting Periods Process: Course Overview Diagram
Posting Periods Process
Topic 1: Process Overview
Topic 2: Take a Look at Defining Periods
Topic 3: Internal Reconciliation Process
Topic 4: Period-End Closing
Process Overview
Posting Periods Process
Topic 1: Process Overview
Topic 2: Take a Look at Defining Periods
Topic 3: Internal Reconciliation Process
Topic 4: Period-End Closing
Process Overview: Topic Purpose
After completing this topic, you will be able to: Discuss the process of:
Defining Managing Closing periods.
Process Overview: Business Example (1)
You are implementing SAP Business One at a new customer, OEC Computers. You explain to Maria, the accountant, that a mandatory step in creating the company
database is defining the company Posting Periods: The Main Posting Period - the Fiscal Year, which usually corresponds to the
calendar year. The Sub-Periods in the fiscal year.
You both discuss the financial processes in OEC Computers. The company creates the annual financial statement once a year. However, they need twelve posting periods for their internal controlling.
You create a new company database and define the Fiscal Year as the calendar year and the sub-periods as Months.
You define settings that relate to posting periods. Maria asks what she needs to do in order to record a certain document or a journal
entry to a posting period or sub-period. You tell her that SAP Business One determines automatically which posting period
the transaction belongs to based on the transaction’s posting date.
Process Overview: Business Example (2)
Since OEC Computers creates the annual financial statement once a year. They will use the twelve posting periods for their internal controlling.
They will not run the Period-End Closing process at the end of each month, they will do it at the end of the main Posting Period - the Fiscal Year.
There are many tasks they do at month end. You discuss those tasks, for example - sending debtor statements for outstanding debts.
You also tell Maria about the Internal Reconciliation Process and how it can help her in managing the business partner accounts at the end of each month.
You discuss the steps Maria will have to take before Year-End Closing.
*Optional
Posting Periods – Process Overview
Fiscal Year: 2010
Settings Additional settings
Period End Tasks:
Year End Closing
Period End Closing
Year End Tasks
Change Period Status
Change Period Status
Posting date
Sub-period
Sub-Periods: Months 2010-01 2010-02 2010-03 …….
Settings
Period E
nd/
Year E
nd
Closing
Operational
Reflection Question: Posting Periods
Let us discuss an example of a company that closes a period on a quarterly basis: A delivery note with a large amount of items was posted on March 31st.
The A/R Invoice for this delivery was issued on April 2nd. Would that be a problem in the Profit and Loss report for the first quarter?
Take a Look at Defining Periods
Posting Periods Process
Topic 1: Process Overview
Topic 2: Take a Look at Defining Periods
Topic 3: Internal Reconciliation Process
Topic 4: Period-End Closing
Take a Look at Defining Periods: Topic Purpose
After completing this topic, you will be able to: Discuss the tasks for defining periods.
Take a Look at Defining Periods: Business Example
You ask Maria, the accountant, how she wants to define the company Posting periods: You both discuss the financial processes in OEC Computers. The company creates
the annual financial statement once a year. However, they need twelve posting periods for their internal controlling.
Maria decides to create a calendar year as the main posting period (the Fiscal Year) and define Months for sub-periods.
You create a new company database and define the periods. You define settings that relate to posting periods: Period Indicator, Document
Numbering, G/L Account Determination.
Defining Posting Periods
1
23
4
Quarters
12
3
4
567
8
9
10
1112
Months Days
Year
Fiscal Year
1
Posting Periods Caveats
Bear in mind the following important caveats: The beginning of the fiscal year can only be the
first of the month. Periods Order - it is recommended to create the
posting periods from the oldest and up. Consider the oldest data you would like to migrate to determine the first period.
You cannot have overlapping posting periods. G/L account determination is saved by period
and is copied from the previous period to the next. You can change the G/L account determination before starting to work with a new period.
You need to make decisions together with the client accountant.
Internal Reconciliation Process
Posting Periods Process
Topic 1: Process Overview
Topic 2: Take a Look at Defining Periods
Topic 3: Internal Reconciliation Process
Topic 4: Period-End Closing
Internal Reconciliation Process: Topic Purpose
After completing this topic, you will be able to: Utilize the process of internal reconciliation in G/L accounts and business partners
(system and user). Review system reconciliations Perform internal reconciliation (manual)
Internal Reconciliation Process: Business Example
Maria asks you about the Internal Reconciliation Process. She remembers you told her that, among other processes, it relates to Period-End Closing:
Maria is happy to hear that most internal reconciliations are performed automatically by SAP Business One these are the System Reconciliations.
You give Maria examples of the automatic reconciliations:In the Business Partners Master Data accounts when an Incoming Payments is
based on an A/R Invoice (or a Credit Memo on an A/R Invoice).In clearing G/L Accounts when you deposit a check received by an Incoming
Payment. You tell Maria that SAP Business One also performs Partial System Reconciliations
if, for example, a customer partially pays an A/R Invoice. However, there will be cases where Maria will perform internal reconciliations herself
– these are the User Reconciliations. For example, when OEC Computers pays a vendor in advance and receives the A/P
Invoice later on, Maria will have to internally reconcile the Vendor Master Data and match the Payment with the A/P Invoice transactions.
Reflection Question: Internal Reconciliation Process
When Maria looks at the vendor’s account balance, it reflects the advanced Outgoing Payment and the A/P Invoice transactions.
Then why is it important for Maria to reconcile the vendor master data internally?
Internal Reconciliation Process: System Reconciliation - Full Reconciliation
Outgoing Payment based on an A/P Invoice (or invoices)
Debit Credit
Bank Account 202
Vendor 202
A/P Invoice
Debit Credit
Vendor 202
Expense / Clearing account
202Automatic Internal
Reconciliationin the Vendor Master Data
* Could be multiple A/P Invoices that are fully paid by the same Outgoing
Payment
1
2
2
Internal Reconciliation Process: System Reconciliation - Partial Reconciliation
Outgoing Payment based on an A/P Invoice
Debit Credit
Bank Account 100
Vendor 100
A/P Invoice
Debit Credit
Vendor 202
Expense / Clearing account
202
Automatic Partial Internal Reconciliation
in the Vendor Master Data
Balance Due: Credit = 102
Balance Due in the Vendors Liabilities Aging Report
1
2
2
Selected Origin Posting Date Amount Balance Due Amount to Reconcile
IN 10.07 1000.00 1000.00 1000.00
IN 17.08 2000.00 2000.00 1500.00
RC 24.08 (1000.00) (1000.00) (1000.00)
RC 24.08 (1500.00) (1500.00) (1500.00)
IN 01.09 3000.00 (3000.00)
Internal Reconciliation Process: User Reconciliation – Manual Type:
Business Partner Account
In this example, Customer Master Data
Manual Internal Reconciliation in the Customer Master Data
0.00
Internal Reconciliation Process: User Reconciliation
User Reconciliation: G/L Account
If your company uses the perpetual inventory system you usually reconcile the Allocation account that is being credited when you issue a Goods Receipt PO and debited in an A/P Invoice.
You can perform user reconciliation in this account (and in general) using one of the three reconciliation types: Manual Automatic Semi-automatic
A/P InvoiceGood Receipt PO
Demo - Internal Reconciliation Process: User Reconciliation - Manual
Internal Reconciliation Process – Terminology
Internal Reconciliation: System Reconciliations Statuses:
Full Partial
User Reconciliations Types: Manual Automatic Semi-automatic
User reconciliation statuses: Fully reconciled:
– Fully Closes transactions – Creates a journal entry to post the difference as an adjustment that results in the selected
transactions becoming reconciled. – Note: for business partner reconciliation you can also create an incoming or outgoing payment
as an adjustment. Partially reconciled: of one (or more) of the transactions by changing the Amount to Reconcile
for the transaction
Manage Previous Reconciliations
Account
2000 50003000 2000
Account
2000 50003000 2000
Cancel Reconciliation
Exercise - Internal Reconciliation Process
Period-End Closing
Posting Periods Process
Topic 1: Process Overview
Topic 2: Take a Look at Defining Periods
Topic 3: Internal Reconciliation Process
Topic 4: Period-End Closing
Period-End Closing: Topic Purpose
After completing this topic, you will be able to: Prepare for Period-End Closing
Perform Period-End Closing
Period-End Closing: Business Example
Let us go back to the business example we discussed in the first topic of the unit – the Process Overview:
Since OEC Computers creates the annual financial statement once a year. They will use the twelve posting periods for their internal controlling.
They will not run the Period-End Closing process at the end of each month, they will do it at the end of the main Posting Period - the Fiscal Year.
However, there are many tasks they do at month end - Period End Tasks. For example – internal reconciliation and sending debtor statements for outstanding debts.
You discuss the steps Maria will have to take before Year-End Closing.
Move all P&L account balances to the Retained
Earnings account and zero the P&L accounts
Period-End Closing: at the Month End vs. at Year End
*Optional
Period End Tasks:
Year End Closing
Period End Closing
Year End Tasks
Change Period Status to Locked
Change Period Status to Locked
Period End Tasks and Year End Tasks: SAP Business One supports such activities in a variety of ways. It is possible to carry forward the balances of Balance Sheet accounts and Business Partners using the Period-End Closing window for the
following localizations: Austria, Belgium, Chile, Costa Rica, Czech Republic, France, Guatemala, Hungary, Italy, Mexico, Portugal, Slovakia, and Spain.
Change the Period Status to Closing Period
Change to Closing Period
Reflection Question: Period-End Tasks (1)
Let us go back to the example of a company that closes a period on a quarterly basis: A delivery note with a large amount of items was posted on March 31st.
The A/R Invoice for this delivery was issued on April 2nd. We discussed the effects of this scenario on the periodic financial reports. Let us see the journal entries including the involved accounts, of the documents
that were issued in different periods: the Delivery and the A/R Invoice based on that delivery.
Reflection Question: Period-End Tasks (2)
Effects on the P&L Accounts:
Delivery A/R Invoice
Debit Credit
Cost of Goods Sold acc.
35600
Inventory acc. 35600
Debit Credit
Customer 44000
Income account
44000
Period 1 Period 2
Delivery - the costs of the good sold causes a negative effect on profitability in period 1.
A/R Invoice - the revenue are booked to period 2.
Reflects the periodic Financial Reports: If the business is closing periods and reports on a quarterly basis, it shows a ‘loss’ for period 1 and a ‘gain’ in period 2.
Therefore, one of the Period-End Tasks will be:To ensure you invoice all deliveries in the same period.
Prepare for Period-End Closing:Period End Tasks
Here are more examples for Period-End Tasks : Make sure that all transactions for the period were posted properly, including
adjustments and accruals. Make sure all Journal Vouchers are posted. Internal Reconciliation of Allocation and Expense Clearing Accounts. Tax and legal reports for the local authorities. Print:
Trial Balance (a balance of each account and a current status). Vendor Liabilities Aging and Customer Receivables Aging reports to reconcile
receivable accounts with the G/L Inventory Audit report to reconcile inventory with the G/L Financial Statements
Make a backup of your database and put it in an off-site storage location
Prepare for Year-End Closing:Year End Tasks
Here are some examples for Year-End Tasks : Post final transactions for the period in all modules Post any final adjusting entries in the G/L Close the last period of the fiscal year Print a final detailed Trial Balance Print Financial Statements Set up a new fiscal year (if not done already). Backup – to save the status of the previous fiscal year. Post Doubtful Debts – refer to the next slides Post exchange rate differences, conversion differences See additional tasks in the appendix–
Adjustments with Automatic Reversals Deferrals with Automatic Reversals
Refer to the Tips for Year End Closing How-To Guide.
Account Clearing Before Period Closing – Business Example:
Period end process
Validate transactions
Manual journal entries
Performcross checks
Match balances with sub-ledger
Print financial reports &sub-Ledger reports
Internal reconciliation
Validate automatic journal entries on a regular basis to ensure correct transactions
Create accruals and provisions (like doubtful debts), periodic entries and corrections
Some cross-checks to match the taxes to the sales and purchasing. Validate ‘suspense accounts’ and high risk accounts like price & exchange rate difference accounts
Ensure the internal and external reconciliations are done.
Match the account receivables accounts with the aging reports Match the inventory accounts with the inventory audit report
Print the trial balance, P&L statement together with relevant sub-ledger reports(aging, inventory audit report, etc….)
Doubtful Debts
Due Date of Invoice
Time+ x Days
+ y Days
+ z DaysAdjustments for Doubtful Debts
(Control Account)
250
250
Transfer to Doubtful Debts
(Expense Account)
Customer
1000
250
4% 5%3%
Perform Period-End Closing
And now perform the Period-End Closing: Run the period-end closing routine to close the fiscal year :
Zero all Profit and Loss account balances to the Retained Earnings account (a Balance Sheet account Capital and Reserves drawer), that now contains the total brought forward cumulated profit.
Adjust the Balance Sheet accounts.Close or inactivate the period by locking it using the posting period window.
Move all P&L account balances to the Retained Earnings account and zero the
P&L accounts
Period-End Closing
Change Periods Status to Locked
Period-End Closing Utility
Accept and Post Proposal
Proposal
Water Expense Account Balance
Debit Credit
Water Expense Account 11500
Period-End Closing Account 11500
Posting Date: December 31st
Debit Credit
Period-End Closing Account 11500
Retained Earning Account 11500
Posting Date: January 1st
Period-End Closing period
Following posting period
Automatic Journal Entries:
Demo - Period-End Closing
Exercise - Period-End Closing
Posting Period Status
Locked
Closing Period Current period -Unlocked
12
3
4
567
8
9
10
1112
Previous fiscal year
12
3
4
567
8
9
10
1112
Current fiscal year
Locked or Unlocked
Reflection Question: Period-End Closing and the Financial Reports (1)
What would be the influence of the Period-End Closing on Financial Reports such as Balance Sheet and Profit and Loss?
Reflection Question: Period-End Closing and the Financial Reports (2)
Balance Sheet – When issuing the report while in the following posting period - the total
brought forward cumulated profit (or loss) will be reflected in the Retained Earnings account balance (refer to the dates in the automatic journal entries created by the Period-End Closing utility).
Profit and Loss – For previous periods – SAP Business One allows you to issue the report for
previous periods with the expense and revenue account balances before the Period-End Closing.
For the following posting period – The period begins again collecting P&L data that is relevant to it the expense and revenue account balances will not show the previous period balances allowing you to issue a clean report.
Main Terms: Posting Periods:
Main Posting Period - the Fiscal Year. Sub-Periods in the fiscal year.
Period-End Closing process: Period End Closing Year End Closing Period Status Profit and Loss account balances; Retained Earnings account
Internal Reconciliation Process System Reconciliations Statuses:
– Full– Partial
User Reconciliations Types:– Manual– Automatic– Semi-automatic
User reconciliation statuses:– Full– Partial
Period-End Closing: Unit Summary