Defining the Chart of Accounts

topics to be covered in this chapter

At the end of this chapter, you will be able to:

• Demonstrate an understanding of the various charts of accounts repres
in SAP ERP.
• Create a chart of accounts.
• Assign a company code to a chart of accounts.
• Define an account group to the chart of accounts.
• Define a retained earnings account

The Chart of Accounts

A chart of accounts is a fundamental financial tool in SAP ERP. It contains the list of general le
accounts used by a company code or several company codes for posting daily financial activiti
reporting financial performance to the financial statement and balance sheet

The benefits of the chart of accounts are that it:

• Defines the basic structure for creating G/L accounts.
• Gives you the flexibility to use the same chart of accounts for several company codes.
You can assign an additional two charts—country-specific and group—to the minimum requir
operational chart of accounts in a company code. Add country-specific chart of accounts whe
be able to generate reports to meet country-specific reporting requirements and add group c
for consolidation purposes.
To create a general ledger and assign it to a company code, you must assign an operational ch
accounts to each company code in SAP ERP. One operational chart of accounts can be assigne
company codes if those company codes have identical general ledger structures.
Create the Chart of Accounts
The chart of accounts you create will contain a list of G/L accounts used by your company cod
reporting and posting activities. The chart of accounts is configured as a global setting. This m
chart of accounts is available to all company codes in the client rather than just one. The follo
path will take you to the screen where you can customize your chart of accounts: IMG: Financ
(New) ➤ General Ledger Accounting (New) ➤ Master Data ➤ G/L Accounts ➤ Preparations ➤
Accounts List. You can also use the transaction code OB13.

Assign Company Code to Chart of Accounts

Several company codes can be assigned to one chart of accounts, but only one operational ch
is assigned to a company code (a group chart of accounts for consolidation reporting and a co
chart of accounts for meeting specific country reporting requirements can also be assignment
code). In most cases, there are several predefined charts of accounts in the system, which you
to your company code. To assign your company code to a chart of accounts, follow this menu
Financial Accounting (New) ➤ General Ledger Accounting (New) ➤ Master Data ➤ G/L Accoun
Preparations ➤ Assign Company Code to Chart of Accounts.

Define Account Group

A chart of accounts holds a large number of account types, and they determine how G/L accounts are
created in SAP ERP. For proper management, accounts are systematically classified into appropriate account
groups by grouping accounts with similar tasks together in the same general ledger. For example, all G/L
accounts related to revenue are grouped together and assigned the same number range (array of numbers
assigned to an object). G/L accounts belonging to account groups such as Liabilities, Expenditure, and
Assets are also grouped together in the appropriate group and number ranges

Whether you want to define an account group or copy an account group, follow this menu path: IMG:
Financial Accounting (New) ➤ General Ledger Accounting (New) ➤ Master Data ➤ G/L Accounts ➤
Preparations ➤ Define Account Group. Or you can use the transaction code OBD4.

obd4

Define Retained Earnings Account

In accounting, a portion of the profits is held back at the end of a fiscal year as reta
after distributing dividends to the shareholders in proportion to their investment in
the net profit or net loss figure is carried forward to retained earnings on the balan
IMG: Financial Accounting (New) ➤ General Ledger
Accounting (New) ➤ Master Data ➤ G/L Accounts ➤ Preparations ➤ Define Retain
Or you can use the transaction code OB53.

■■Note X is a symbol used in SAP to represent an account type for retai

If you have more than one retained earnings, you cannot use account ty
You have to assign the next retained earnings account type Y and the ne

■■Note S ince you have not created a G/L account for retained earnings
message on the status bar that says . Click the Enter button twice or pre
the Enter button on your keyboard twice. The system will accept your G
continue customizing. In Chapter 5, you will learn how to create G/L acc
 MATERIAL RAW MATERIAL
FINISHED GOODS
SEMI FINISHED GOODS
chart of account
harts of accounts represented
CALIE
CAPITAL
ASSETS CURRENT ASSETS/FIXED ASSETS
LIABILITY
INCOME
EXPENSE

4digitalphaumeric CASH VEHICLE

list of gl account BANK BUILDING
INVENTORY COMPUTER
contains the list of general ledger (G/L)
r posting daily financial activities and for
balance sheet

several company codes.

roup—to the minimum required
pecific chart of accounts when you want to
equirements and add group chart of accounts
 must assign an operational chart of
art of accounts can be assigned to several
edger structures.
nts used by your company code for
red as a global setting. This means that the
rather than just one. The following menu
chart of accounts: IMG: Financial Accounting
/L Accounts ➤ Preparations ➤ Edit Chart of

Accounts

s, but only one operational chart of accounts

nsolidation reporting and a country-specific
ments can also be assignment to a company
ounts in the system, which you can assign
of accounts, follow this menu path: IMG:
) ➤ Master Data ➤ G/L Accounts ➤
G/L accounts are
to appropriate account
or example, all G/L
nge (array of numbers
xpenditure, and

menu path: IMG:

L Accounts ➤

For example, the number

range 1–1000 is assigned to the Asset account group, and related account types like Land & Building,
Furniture & Fittings, and Motor Vehicles are treated as assets in accounting. Likewise, the number
range 1001–2000 is assigned to the account group Revenue, and it contains related account types like Sa
Interest Received, and Other Income. Finally, the number range 2001–3000 is assigned to the account gr
Expenditure, and it contains account types like Salaries, Office Supplies, and so forth

the end of a fiscal year as retained earnings (net profit)

oportion to their investment in a corporation. Normally,
etained earnings on the balance sheet
 Preparations ➤ Define Retained Earnings Account.

sent an account type for retained earnings in the P&L statement.

ngs, you cannot use account type X again once it has been used.
ngs account type Y and the next one Z.

account for retained earnings, the system will issue a warning

the Enter button twice or press
The system will accept your G/L account temporarily to allow you to
ill learn how to create G/L accounts.
 RAW MATERIAL
FINISHED GOODS
SEMI FINISHED GOODS

XED ASSETS

COMPUTER
 nature of accounts /element

1
2
 3

1001 calie
1002
capital assets liabilities income
1003
cash
2001 a/c rcvable
bank
2002 inventory
machines
2003 vehicle
building
computer
funiture
goodwills
types like Land & Building, patenets
g. Likewise, the number
s related account types like Sales,
0 is assigned to the account group gl master data

balance sheet account

p&l account

assets dr increase
expense dr increase

income cr increse
liability cr increse
capital cr increse

x 101
nature of accounts /element of accounts

CALIE
CAPITAL SHARE CAPITAL, RESERVERS, PAIDUP CAPITAL CA
ASSETS CURRENT ASSETS, FIXED ASSETS CASH// BANK/ INVENTRY/ACCOUNT RECEIVABLE
 LIABILITY CURRENT LIABILTY//LONGTER//FIXED LIABILITY
INCOME SALES INCOME//RENT INCOME SALRY INCOME//COMMISSION INCOME
EXPENSE REVENUE EXPENSE//CAPITAL EXPENSES//SALRY EXPENSE//RENT EXPENSE//ADVERTISING EXP

expenses
GL GROUP
capital expenditures machine plant BALANCE CAPITAL 1-10000
revenue expenditures material purchases SHEET
labor salaries POSITION ACCOUNT
rent expense engineeres CAPITAL GROUP ASSETS
salary exp CASH
advertise expense BANK
operating LOAN LIABILTY
depreciation expenses
PERFORMANCE INCOME INCOME
p&L INCOME-EXPE STATEMENT
PROFIT//LOSS ACCOUNTS
GROUP EXPENSE

salary expenses 100

balance sheet account

p&l account

p&l account
income sale 500
profit and loss account cost 200
profit 300
opt expe 50
n profit 250

retained earnings reserves 250

balance sheets
 FA
Y/ACCOUNT RECEIVABLE MACHINERY//EQUIPMENT/TOOLS//COMPUTER/CARS AND VEHICLES//LAND AND BUILDING
XPENSE//ADVERTISING EXPENSE//ADMIN EXPENSE/OPERTAING EXPENSE

DR CR
DEBIT CREDIT MACHINERY 100000
DECRS INCRS CAPITAL 100000

INCRS DECRS

DECRES INCRES DR CR
SALARIES EXPENSE 50000
DECRS INCRES BANK A/C 50000

INCRS DECRS
ND AND BUILDING