Reconciliation Accounts and Special G/L Indicator

Most SAP people might be asking, what is a reconciliation account and special general ledger indicator in SAP Financial Accounting? Well, my dear readers surely you will be enlightened by this article.

First, you must understand the definition of general ledger. General ledger is the main accounting record of a business which uses double-entry bookkeeping. In SAP, the central task of G/L accounting is to provide a comprehensive picture for external accounting and accounts. Transactions that have a financial impact are captured by the general ledger. The transactions could be orinated from other modules. Example, posting of goods receipt (MIGO) performed by purchaing personnel (MM module) have already a financial impact. It increases the inventory balance and increases the GR/IR clearing account. The accounting journal entry the transactions MIGO create is debit (dr) Inventory account (G/L) and credit GR/IR clearing accounts (G/L).
The general ledgers summarize all financial transactions of a Company. It is the the basis of the preparation of the Company’s Financial Statements.

Now, let’s dig it further. Reconciliation Accounts are G/L accounts that receive postings from a subsidiary ledgers. Meaning, transactions data are not posted directly to recon accounts. Example of recon accounts are Accounts Receivable, Accounts Payable and Fixed Assets G/L. For accounts receivable G/L the subsidiary ledger is the customer account. All transactions with the customers are posted directly to the customer account and the recon account is automatically updated. How this thing happen? Well, when you create a customer account you specify under the Company Code data the reconciliation account.

So, all normal transactions to the customer e.g. sale of goods are posted to the recon account defined in the customer master data. Next question would be, what G/Laccount should be updated for postings of customer down payment (advance collection)? For proper accounting, downpayment should not be posted to Accounts Receivable – trade. It should be posted to different G/L account e.g. Advances from customer. Well, how would the said transaction be posted to Advances accounts.

This is one of the cases where the idea of special G/L indicator comes in. With the use of special G/L indicator you can specify in the set-up what G/L account advances transactions be posted. Standard posting key of customer transaction with special G/L indicator are 09 (dr) and 19 (cr). The system will always require you to indicate the special G/L indicator when you use the said posting keys.

 

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15 replies
  1. santrupta says:

    well can you tell me why do we post customer advance to the advance account ,which is a separate a/c , rather than a/c recivables

    thanks in advance
    santrupta

  2. sandy says:

    Hi ,
    Above article is good to clear my doubts :-)
    can u give the difference between reconciliation account and G/L account.

    Regards,
    sandy

  3. N.Bhaskar Reddy says:

    Hi can any one explain about GR/IR account and , how many GR/IR accounts is possible to create our company.

  4. Bhargav says:

    Really good article. Expecting more articles like this but little more elaborate. Thanks, Bhargav

  5. Mr. William says:

    Well, I hope that my advice could help.. So as to identify what particular GL account does the entry go.. Because deposits pertain to collections for a certain customer, which is found in a subsidiary ledger.. Subsidiary ledger is also called as Special ledger. That’s where the special GL indicator got it’s idea.

  6. Sandesh says:

    Hi ! Thank u,

    I got better clarification regarding. Recon a/c.
    but I have some doubt on what is the Diff between GL&Reconcilation.

    Regds
    Sandesh

  7. Nasir Qureshi says:

    As mentioned in your statement that a special G/L account needs to be opened for advances from customer.
    well my understanding is that new customers creation will provide a a new customer no and all related transactions be done on that customer no e.g advances, credit notes, billing , delivery can all happen under that customer code and reflect the subsequent G/L accounts.

  8. ayse says:

    Reconciliation account decreases information dirty in the G/L account. All receivable, payments or fixed assets are recorded in their account and they are posted to the G/L when they are collected under same title. That is, all of the transaction for company is made in reconciliation accounts and posted them to the G/L account clearly.

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