Journal Entry Process

February 21, 2009 by mySAP
Filed under: General Ledger Process

This refers to the process of making adjustments via journal entries in the GL module.

Common Business Requirement

Journal entry processing is used to maintain all the entries made directly to the GL module. Therefore, all the transactions which are not relevant to Accounts Receivable (AR), Accounts Payable (AP) and Assets Management (AM) are to be processed as journal entries in the GL module.

There are various events (usually month end activities) that will trigger the need to post journal entries.

For example:
• At period-end, after running the GR/IR clearing program, if the sum of the GR/IR and the balance sheet adjustment accounts is not zero, journal entries will need to be posted to correct the figures. For more details, refer to process flow on GR/IR Account Maintenance.
• At period-end, after the amount of customer bad debt provision has been calculated, Impairment Provision for Trade Receivable will be posted via journal entries. For more details, refer to process flow on General Ledger Period-End Closing
• After reviewing GL reports, sometimes there will be a need to post adjustments via journal entries.
• After the tax authority has confirmed the amount of corporate tax to be paid, payment will be made via journal entries if tax authority is not created as a vendor in SAP. For further details, refer to process flow on Tax.

Journal entries will also be required due to the following reasons:

• At period-end, if invoices for monthly expenses, for example utilities or telephone expenses for the month have not been received, accrual journal entries will be made.
• At period-end, if there is a need to revaluate a material based on LIFO or FIFO method, the valuation is calculated outside SAP and journal entries will be posted.
• At period-end, where payment needs to be made to tax authority for value-added tax (VAT) but where the tax authority is not created as a vendor, journal entries will be posted.
• The calculation are done outside the system and will be posted during as a journal entry.

The following standard SAP journal entry functions:

• Direct Posting/Parking: Depending on the standard operating procedures within the country, journal entry will either be directly posted, or parked and then posted upon review/approval. Account assignment model should be used to facilitate posting/parking.
• Recurring Entry: Recurring entry should be used for business transactions that happen on a regular basis such as rent and insurance.
• Accrual/Deferral: All provisions and accruals except GR/IR will be taken manually using fast entry functions for provisions. Accrual documents allow reversal date. This will be used in all countries for reversal of accrual document in next month.
• Incoming /Outgoing Payment: Incoming and outgoing payment transactions in the GL module will be used when payment parties are not defined as customers/vendors in SAP. For example, outgoing payment transaction in GL will be used to pay value VAT in countries where the tax authority is not defined as a vendor.
• Document Printing: Document printing will be done for each document.

Common Business Process Flows for Journal Entry are as follow:

Coming Soon!

Document Types

The document type is primarily used for:
• Differentiating business transactions – E.g., document type RV is a billing document generated in the SD module, or RE is a PO based invoice document.
• Controlling the posting to account types – The document type will control the types of accounts (vendor, customer, GL, assets, material) posted
• The document type determines the number range of the documents

Basically, all SAP standard document types will be used. Where standard document types are insufficient, additional document types have been created.

Posting Keys

A posting key is specified (explicitly by user or implicitly by system, depending on the screen layout) when entering a transaction in SAP. The posting key controls how the line item is entered. For each posting key, the following three (3) things should be defined:
• Which side of accounting entry is posted to; i.e. debit or credit
• Which type of account will be posted to; i.e. vendor accounts only
• Which field the system displays in the entry screens. i.e. special G/L posting keys will require the special G/L field to be displayed.

For posting to GL accounts which are not reconciliation accounts, posting key 40 is for debit and 50 is for credit. Please refer to the complete list of posting keys.

Validation

Validations rules have been set up in the system to prevent data entry error during journal entry. When criteria as specified in the validation rule are not met, message will be shown on the transaction screen to alert the user. There are 3 types of message – information, warning and error. For information and warning messages, the user will still proceed to post the transaction. For error message, the user cannot proceed to post the transaction until the input data in the transaction has been corrected to meet the criteria as specified in the validation rule.