ACCOUNT DETERMINATION : RETAINED EARNING ACCOUNT

 In accounting, retained earnings refer to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends.

Similarly, if the corporation takes a loss, then that loss called variously retained losses, accumulated losses or accumulated deficit. Retained earnings and losses are cumulative from year to year with losses offsetting earnings.

Retained earnings are reported in the shareholders’ equity section of the balance sheet. Companies with net accumulated losses may refer to negative shareholders’ equity as a shareholders’ deficit.

 The term retained earning account represents a general ledger account where you are accumulating net balance of incomes and expenses.

 After year-end closing, you do year-end balance carry forward  to transfer  balances to  your new fiscal year  through transaction code  F.16 [Menu Path = Accounting  //  Financial Accounting  // General Ledger  //  Periodic Processing // Closing // Carrying Forward // Balance Carryforward ]  in classic ledger and transaction code FAGLGVTR [Menu Path = Accounting  //  Financial Accounting  // General Ledger  //  Periodic Processing // Closing // Carrying Forward // Balance Carryforward ( New) ] . System carry forwards closing balance of balance sheet account to same general ledger account, while system calculates net balances on income statement account (Incomes GL accounts & Expenditure GL accounts) and carry forward the net balances to retained earning accounts.

SAP doesn’t restrict the maximum number of retained accounts you can have, but you need to have at least one retained account for your chart of account. Without a retained account determination you cannot create general ledger master record.

 You can reach the configuration screen of retained earning account determination by following the navigation options given below;

IMG Menu Path:  IMG // Financial Accounting // General Ledger Accounting // G/L Accounts // Master Data // Preparations // Define Retained Earnings Account

Transaction Code: OB53

Transaction Code:OB53

The above screen shows retained earning account determination for chart of account INT. This is very simple configuration screen.

Field [P & L statement] represent retained account indicator. This is one character ID to identify correct retained earning account.

Field [Account] represents a place holder for GL account.

 

In the above screen you can assign another GL account with indicator Y (as an example), if you want to add second retained account.

 

[Note: Retained earning accounts are chart of account specific, not company code specific.]

 Transaction Code:FS00

When you create a general master report, system will come up with a popup window to select retained earning account, in case of multiple retained earning account environment, for assignment of retailed earning account to general ledger master.  In case of single retained earning account, system automatically assigns retained earning account to general ledger master records.

-          System displays highlighted portion of the above screen only when you have multiple retained earning account, if you have defined one retained earning account, you will not see highlighted portion of the above screen

-          System stores retained earning account information in the general master data table “SKA1” and in field “GVTYP”

-          You have assigned multiple retained earning account assigned to your chart of account and while creating general ledger master records you are trying to save it without assigning a retained earning account,  you will get a error message saying “Make an entry in field “P&L statement acct type” Message no. FH740″

 During the year end, when you run balance carry forward transaction code F.16 (in case of SAP GL FAGLGVTR),

  • System internally looks for transaction key “BIL” and chart of account to assigned company code.
  • Once system found chart of account from company code, system looks an all general ledger accounts with “P&L statement acct” type and from the general ledger master, system finds associated retained account indicator.
  • System updates related retained account with net results( Profit = Income – Expenses ), ( Loss = Expenses – Income)

 

Let us move forward to another account determination process….  Keeps on visiting my blog pages…

 I have one question for all of blog reader. Do you know why we need multiple retained earning accounts?

Further Reading