Define Account Determination

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In Accounts Receivable components we can assign G/L Accounts for many transactions. Today we will discuss about following:

  • Accounts for Cash Discount Granted
  • Accounts for Exchange Rate Differences
  • Accounts for Bank Charges

Accounts  for Cash Discount Granted

Definition
Cash Discount is a special type of discount which is offered to customers for paying before net due date. This is a techique employed by many businesses to recover money earlier and avoid cash crunch.

The percentage of cash discount depends on the number of days payment is made before the net due date. This percentage can be maintained in Payment Terms along with the number of days.

When we configure any percentage of cash discount in payment term, the amount of cash discount is deducted from the amount receivable and debited to the expense account. This account is to be maintained in the configuration which we are about to discuss.

Implementation Consideration
IMG Path:  Financial Accounting (New) > Accounts Receivable and Accounts Payable >  Business Transactions > Incoming Payments > Incoming Payments Global Settings > Define Accounts for Cash Discount Granted

After clicking on the above, system will ask us to enter the Chart of Accounts. After entering the COA, enter the G/L Account which is to be debited in case of Cash Discount.

Accounts for Exchange Rate Differences

Definition
Exchange Rate difference comes into picture when two different currencies come into picture.

The exchange rate difference is divided into (a) Period end revaluation and (b) Realised Exchange Rate Gain/Loss

Implementation Consideration
IMG Path:  Financial Accounting (New) > Accounts Receivable and Accounts Payable >  Business Transactions > Incoming Payments > Incoming Payments Global Settings > Define Accounts for Exchange Rate Differences

Period End Revaluation
The overseas customer invoices are raised at the exchange rate prevalent at the time of invoicing. But if this invoice is not paid at the time of drawing the financial statement, all such outstanding amounts are to be valuated again at the the exchange rate on that date.

SAP has provided a separate functionality to find the difference between exchange rate at invoicing and current rate.

The difference so calculated is posted to following accounts:

  • Bal.sheet adj.1: This is a Balance Sheet account and the same is debited/credit to reduce/increase the customer receivable amount.
  • Val.loss 1: This is a Profit & Loss Account to account loss arising out of the exchange rate difference.
  • Val.gain 1:This is a Profit & Loss Account to account gain arising out of the exchange rate difference

Realised Exchange Rate Gain/Loss
This happens typically when payment is received from overseas customer in currency other than the Company Code Local Currency. The exchange rate difference is calculated during clearing of customer invoices.

The difference so calculated is posted to accounts as explained below:

  • Loss: This is a Profit & Loss Account to account loss arising out of the exchange rate difference.
  • Gain:This is a Profit & Loss Account to account gain arising out of the exchange rate difference.

Note: All the above G/L accounts are assigned to the Reconciliation accounts. These Reconciliation accounts are maintained in the Customer Masters. It is also possible to maintain different G/L accounts for different currencies.

Accounts for Bank Charges

Definition
The Bank Charges are charges levied by the bank for certain transactions. For e.g. bank charges debited by the bank for the amount received from overseas customer.

Bank credits the amount received from customers after deducting the bank charges. Hence, it becomes important to account the same in order to properly account the amounts.

Implementation Consideration

IMG Path:  Financial Accounting (New) > Accounts Receivable and Accounts Payable >  Business Transactions > Incoming Payments > Incoming Payments Global Settings > Define Accounts for Bank Charges (Customers)

Enter the the G/L account for the bank charges and system will debit the same while posting customer receipt.

 

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