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Month-end closing is a procedure:
Month-end closing is a procedure that is performed in any company using SAP ERP
every month. This is an important procedure because if it is not completed on time,
employees of the company won’t be able to post new documents in SAP in the next
month. After studying this tutorial, you should have a good understanding of what
activities are performed durithe ng SAP month-end closing process.
The activities in the SAP month-end closing process vary by company, depending on
business requirements, but here are a few that are commonly executed:
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Enter accruals and deferrals
Process recurring entries
Clear customer, vendor, and G/L open items and GR/IR accounts
Record foreign currency revaluation
Post-taxes payables
Run asset depreciation
Display document journal and financial statements
First, we will explain the steps to close the prior month and open the current month,
then we will provide instructions on each of the activities listed above.
1.Period Closing/Opening
Before performing closing activities, the previous period is closed to prevent further
postings. Likewise, the new period is opened to allow users to continue transacting.
First, if the organization has integrated the materials management (MM) module, run
the material master period closing transaction code MMPV. On the initial screen,
enter the following information:
1. Company code or company code range
2. Fiscal period of the one you want to open (this is a bit unintuitive as the
transaction logic closes the period before the one you enter in this field,
but such is SAP!)
3. Fiscal year of the period you want to open
4. Select the appropriate radial button: Check and close period – to check
inconsistency data and negative stocks; Check period only – to check if
the conditions are met for closing the period without locking any
materials; Close period only – to run the program without negative stock
check
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5. Tick the Allow negative quantities in previous period or Allow
negative values in previous period if you want the system to perform the
negative stock check but to proceed regardless
Click execute
to process straight away, or schedule the close as a
background job by selecting Program > Execute in Background from the toolbar,
as indicated below:
Close Period for Material Master Record Initial Screen
You will see a log of any errors or a confirmation that the close was successful.
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Next, change the open period for FI. You can specify open period for assets,
customers, vendors, materials, G/L accounts and contract accounts separately, or
altogether. This is done based on posting period variant in transaction code OB52.
Use the position button
to search for the posting variant
you want to change, and update the From per.1/Year and To period/Year fields for
each account type to the periods in which you want to allow postings. For example,
for the below posting period variant, asset accounts are open from period 2, 2016
through period 2, 2019:
Change FI Posting Period
Lastly, lock the closed period for controlling postings. In the initial screen of
transaction code OKP1, enter the following:
1. Controlling area
2. Fiscal year of the periods you want to lock
Click the actual button
version and click the plan button
to lock actual postings. You can also enter a plan
to lock planned postings.
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Lock Controlling Period Initial Screen
Tick the boxes that correspond with the periods that should be closed, as shown
below:
Lock Controlling Period
Click on the save icon
to lock the periods.
2. Accruals and Deferrals
One activity that is usually a part of the SAP month end closing process is to post
accruals and deferrals to ensure that revenues and expenses are posted in the
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correct period. Accruals are expenses or revenues belonging to the current period,
where the physical invoice has not yet been received or issued. Accruals are usually
reversed in the subsequent period. Deferrals are expenses or revenues which are
posted in the current period but which actually belong in a future period.
Accruals and deferrals can be posted manually or using recurring entries.
Enter Manual Accrual/Deferral
As an example of an expense accrual, let’s assume a company has received
services from a temporary employee during the month of June. The services are
completed, but an invoice has not yet been received. The invoice is expected to be
received and paid in July with an amount of 2000 EUR. The company must record
an accrual of the expense in the month in June, to record the expense in the same
month that the service was rendered. The accrual should be reversed in the
following month to make way for the actual invoices posting.
First, record the accrual document via transaction code FBS1. Enter debit details for
the expense account where the expense should ultimately be realized and credit
details for an accrued expense account.
Enter Manual Accrual/Deferral
The document is posted as of the last day of the closing month.
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Manual Accrual/Deferral Posted
Now, reverse the accrual document as of the first day of the following month to make
way for the actual invoice posting. Execute transaction code F.81. Enter the following
information:
1. Company code
2. Posting date as last day of the closing month
3. Select Test Run tickbox
Click Execute
to run in test mode and check your entries.
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Reverse Accrual/Deferral Document Initial Screen
Review the document for proposed reversal. If everything is correct, you can either
go back and remove the Test Run tickbox and re-execute, or directly post from this
screen by clicking the reverse documents button
.
Reverse Accrual/Deferral Document
Post Accrual/Deferral Using Recurring Entry
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Recurring entries are commonly used in the SAP month end closing process to post
deferred expenses, or prepaids. Let’s assume that in January, a company has
received an invoice of 3000 EUR for rental costs for the first quarter (January,
February and March). As the February and March portion of the rental expense
should be realized in those months, the invoice itself is posted to a prepaid account,
and deferrals are posted through recurring entry.
Prepaid Vendor Invoice
Now, record a recurring entry document which will be used as a template by the
recurring entry program. Go to transaction code FBD1 and enter header details to
specify the run dates and interval as below:
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Enter Recurring Document Header Data
Enter the monthly deferral amount as a debit to the actual expense account,
deducting from the prepaid account.
Enter Recurring Document
Click on the save icon
to enter the recurring entry document. Take note of the
document number displayed on the confirmation screen.
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Next, start the recurring entry program via transaction code F.14. On the selection
screen, enter the following details:
1.
2.
3.
4.
5.
Company code
Document number of the recurring entry document
Fiscal year
Settlement period as the last day of the closing month
Batch input session name for retrieving the job that will be executed
in the background
Click Execute
to kick off the process in the background.
Execute Recurring Documents
PROCESS BATCH INPUT SESSION
Execute transaction code SM35 to retrieve your batch input session. Highlight the
row that has the session name you specified in the previous step and click
the Process button. Select the Display errors only radial button and
click Process again.
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Process Batch Input Session
If there are no errors, the system finishes the posting and we can exit the batch input
session.
Finally, let’s check the balance of the prepaid rent G/L account via transaction
code FS10N. We can see that January’s rent has been deducted from the balance,
with the remainder to be recorded by processing the recurring entry program in the
coming months.
Display Prepaid Account Balance
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3. Automatic Clearing :
Another common activity in the SAP month end closing process is the clearing of
open items from customers, vendors and G/L accounts. To clear these accounts,
execute transaction code F.13. Enter the following details:
1.
2.
3.
4.
5.
Company code
Tick the Select customers tickbox
Tick the Select vendors tickbox
Tick the Select G/L accounts tickbox
Select GR/IR special process tickbox only if you have utilized scheduling
agreements or some other process where an invoice receipt may not
match up directly with one or more goods receipts
6. Enter Clearing date as the last day of the closed period
7. Select Test Run tickbox
8. Tick the Documents that can be cleared output control setting to see
these items in the report output
9. Tick the Documents that cannot be cleared output control setting to see
these items in the report output
10. Select the Error messages output control setting to see these items in the
report output
You can also specify customer, vendor or G/L accounts explicitly if you want to target
an account. Click Execute
to run in test mode and check your results.
Automatic Clearing Initial Screen
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You will see a large report with line items depending on the output control settings
you selected, grouped by G/L account. An error log is located at the bottom of the
report. Items with clearing dates in green are matched and can be cleared, while
other items will not be cleared as demonstrated below:
Automatic Clearing Line Items
Check the results of the detailed list. If everything is correct, go back to remove
the Test Run tickbox and re-execute or schedule the close as a background job by
selecting Program > Execute in Background from the toolbar.
5.Foreign Currency Valuation
If a company processes items in foreign currencies, there may be open items that
need to be revalued to the company code currency as part of the SAP month end
closing process. Valuation ensures that the financial statements include all financial
transactions aligned in a uniform currency. Have a look at our tutorial on foreign
currency valuation to understand the configuration steps that must be set up for
revaluation to function.
Let’s assume an invoice of 5000 USD is posted mid-April 2017. The exchange rate
used for recording the invoice is 1.21 EUR to 1 USD. At the end of month, the
exchange rate is updated to 1.185 EUR to 1 USD
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Exchange Rate Overview
Thus, there is a discrepancy between the valuation of the invoice at the time of
posting and the exchange rate end of the month. If the invoice is not paid during the
same month, valuation should be run.
To execute the valuation process use transaction code FAGL_FC_VAL. In the
General Data Selection area of the selection screen, enter the following information:
1. Company code
2. Valuation date as the key date. The program will consider the documents
that were posted before the key date and which have not yet been cleared
by the key date. The specified key date also informs the posting period
and fiscal year.
3. Valuation area
In the Postings tab, enter the following information:
1. Select the create postings tickbox. If you select this check box, postings
are generated and these are either put into a batch or executed
immediately. If you want to run the valuation in test mode first, deselect the
tickbox.
2. Enter the reversal posting date as the first day of the next period. This field
contains the date that will be used as the posting date by the automatic
reversal postings.
3. Select the reverse postings tickbox to have the system automatically post
the reversal on the specified date.
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Foreign Currency Valuation Initial Screen
Click on Open Items tab and select the tickboxes to valuate the following types of
open items:
1. G/L account open items
2. Vendor open items
3. Customer open items
Click Execute
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Foreign Currency Valuation Open Items Selections
The system valuates the accounts and posts the differences to adjustment accounts.
A report is generated as illustrated below:
Foreign Currency Valuation Results
Once the valuation is run in update mode, the documents are created in the system.
Double click the document number in the output to see the valuation and reversal
postings as shown below:
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Valuation Postings
6.Tax Payables
SAP allows you to net together the input and output taxes and post the result to a tax
payable/receivable account.
Let’s assume a vendor invoice is recorded with 14% input tax, as shown below:
Vendor Invoice with 14% Input Tax
In the same month, a customer invoice is posted with 10% output tax, as below:
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Customer Invoice with 10% Output Tax
Menu path
Accounting – Financial Accounting – General Ledger – Reporting – Tax Reports – Gen
Advance Return for Tax on Sales/Purchases – Advance Return for Tax on Sales/Pur.
Transaction
code
S_ALR_87012357 – Advance Return for Tax on Sales/Pur.
Run the advance return for tax on sales/purchase report via transaction
code S_ALR_87012357.
Advanced Return for Tax on Sales/Purchase Report
Note down the respective output tax and input tax totals. Now it’s time to manually
post the transfer posting to tax payable account via transaction code FB41. Enter the
input tax total as a credit to the input tax G/L account and the output tax total as a
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debit to the output tax G/L account. The offset should post to the tax
payable/receivable account, as illustrated below:
Transfer to Tax Posting Document
7.Asset Depreciation
If the organization has implemented fixed assets, the posting of asset depreciation
should be included in the SAP month end closing process. In the selection screen of
transaction code AFAB, enter the following details:
1.
2.
3.
4.
5.
Company code
Fiscal year
Posting period as the closed period
Select the Planned posting run radial button
Select Test Run tickbox
Click Execute
to run in test mode and check the depreciation.
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Depreciation Posting Run Initial Screen
The following message box will appear, stating that your processing is limited to
1000 assets. For your test run, this is fine. Click Yes to proceed.
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Depreciation Processing Limit Notification
The output result list will show the complete asset list considered by the program for
the depreciation run as below:
Depreciation Run Results
Review the document for proposed depreciation postings. Click the error log
icon
to view and resolve errors. If everything is correct, go back and
remove the Test Run tickbox. This time, re-execute in the background to include all
assets. Select Program > Execute in Background to create the postings.
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Execute
Depreciation in Background
8.Document Journal
The document journal is created once every month as part of the SAP month end
closing process. It contains the most important data from the document header and
document items of all document postings for a particular posting period. Execute
transaction code S_ALR_87012287 to display document journal. Enter the following
details:
1.
2.
3.
4.
Company code
Fiscal year
Ledger
Posting date range from the first day of the closed period to the last day of
the closed period
5. Select Test Run tickbox
6. Leave all other values as defaulted
Click Execute
to run in test mode and check the document journal output.
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Document Journal Selection Criteria
The document journal is generated based on parameters entered in the selection
screen.
Document Journal Output
Check the results of the document journal. If everything is correct, go back to remove
the Test Run tickbox and re-execute.
Financial Statements
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Financial statements should be generated as part of the SAP month end closing
process for reporting to stakeholders. The statements include the balance sheet and
profit and loss statement for a specified period. There may be several financial
statement versions, depending on the requirements of the various stakeholders.
Execute transaction code F.01 to generate financial statements. In the selection
screen, enter the following:
1.
2.
3.
4.
Chart of accounts
Company code
Financial statement version
Reporting and comparison years/periods
Financial Statement Selection Criteria
The report is structured based on the defined financial statement version. Output the
report to PDF or Excel for distribution to necessary stakeholders.
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Financial Statement Output
—
Month End Activity
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