Closing Operations

 

 

Closing Operations

Purpose:

Closing operations are periodic tasks and can be subdivided in FI as follows:

• Day-end closing
• Month-end closing
• Year-end closing
  

The closing operations component helps you prepare and carry out the activities required for day-end, month-end, and year-end closing. For this purpose, the system provides a series of standard reports that you can use to generate evaluations and analyses directly from all of the posted account balance. The system helps you carry out the following:

·         (Time-based) accruals/deferrals of expenses and revenues

• Creating the balance sheets and P&L statements
• Documenting the posting data
  

Audience:

(Who need to understand the closing procedure and are involved in the closing process)

AR/AP Data Controllers, CO Budget Analysts, Cost Analysts, Plant Analysts, Inventory Analysts, Asset Mgt. Analysts, GL Accountants, GL Master Data Controllers, GL Supervisors, PCA Analysts, and other Corporate Accounting employees who need to understand the month end close process.

Prerequisites :

To carry out the closing operations in G/L accounting, you first need to carry out the closing operations in the subledger accounting areas you are using. These include:

• Accounts receivable and accounts payable accounting
• Inventory accounting
• Asset accounting
• Payroll accounting (get posting data)

 

 

 

Closing: Day-end

 

 

Day-end closing includes all the activities required at the end of the day to check that all of the business transactions posted on that day have been correctly processed.

 

No additional postings are required for day-end closing

 

Day-End Checklist:

 

The following things should be followed for day-end closing and for documenting the posting data:

• Correspondence with business partners (very Important)

·         Document journal

• Evaluation of the documents that have not been posted
  

 

 

Closing: Month End

 

The closing of a period is performed in three sets of steps: pre-closing, managerial closing, and financial closing.

 

v  Pre-Close (Old Month):

·         Open new period

·         Preparatory Posting

·         Close Sub ledgers and feeder systems ( )

·         Preliminary close of the old period

 

Pre-Close activities ensure that all necessary entries have been posted in the G/L, including entries from feeder systems/sub ledgers and accruals and recurring entries posted directly to the G/L.

Pre-close activities occur in both the old and new months.

 

Managerial Close and Financial Close (New Month):

 

v  Managerial Close:

·         Controlling

ü  Reposting

ü  Cost allocations/Settlements

·         Re-open G/L for adjustment postings

 

v  Financial Close:

·         CO reconciliation posting to FI

·         Business area/profit center/profitability segment adjustments

·         Final Close of old period

·         Reporting

 Managerial Close activities involve the re-assignment of costs throughout the entire organization, using the allocation and settlement functionality provided within Controlling (CO).

Financial Close activities include final adjustments to valuations and balances prior to the final close and preparation of reports. Adjustments from the cost flows recorded in the managerial closing activities are updated to FI through the reconciliation ledger posting.

General Steps for Month-end closing:

à Open/Close period àReverse accruals (prior month)

à Post Common  à Documents à Enter accruals (current month)

à Enter Recurring Entries  à Enter Manual documents à Check for parked documents à Ready to close.

Month-end closing includes all the activities involved in closing a posting period for the month and opening a new period for the next month.

Operations carried out for month-end closing:

• Open and close posting periods

You close one or more posting periods in the past for posting, and permit posting to be made to one or more current or future posting periods.

(Typically, you will leave two periods open. The prior period is open to allow period-end adjustments and a new open period is open for customer and vendor postings.)

• Create external reports

      You can use report programs to create the following reports, for example:

·         Financial statements

·         Sales tax report from the External Tax program

·         Withholding tax report

• Document the posting data

Report generation and study of the following:

·         Compact journal

·         Balance audit trail

·         Accounting reconciliation

·         Account balances

·         Open item list

1.  CO Period End Closing in Cost Center Accounting & Internal Orders

2.  CO Period End Closing in Product Costing, Profitability Analysis, Profit Center Accounting

3.  Period End Closing in MM, AA, AP,AR, GL

4.  Period End Closing Reporting

 

Things to check out for:

Fixed Assets

·         Execute the depreciation run and update the batch input session (SAP FI-AA)

 

Inventories

·         GR/IR clearing account – clarify any differences and correct them if necessary (SAP LO-MM)

·         Clear the GR/IR clearing account (SAP FI)

·         Prerequisite: Accounts have already been maintained by MM

·         MM Period closing program (SAP LO-MM)

·         Settle the work in process (WIP) (SAP FI-CO)

·         Post the reconciliation ledger (SAP FI-CO)

Receivables and Other Asset Items

·         Check whether all the billing documents have been posted (SAP LO-SD)

Accruals and Deferrals

·         Post accruals/deferrals (SAP FI-TR + SAP FI)

Internal Closing (SAP FI-CO)

Internal order and project-related tasks:

·         Transfer postings, surcharges, project interest calculation, settlement

 

Product and production-related tasks:

·         Release a standard cost estimate, perform inventory costing, transfer postings, surcharges

·         Variance calculation, results analysis, and settlement

 

Cost center-related tasks:

·         Transfer posting, distribution, assessment, activity allocation, transfer key figures, cost center variance, price calculation

 

Results-related tasks

·         Evaluate actual postings, transfer external data, distribution, assessment, transfer balance sheet items to PCA

Additional Requirements (FI)

·         Check whether the accrual/deferral documents have to be reversed

·         Carry out recurring entries and update the batch input session (SAP FI)

·         Reconcile cost of sales accounting/period accounting/profit center ledger (SAP FI/SAP FI-CO)

·         Close the posting period (SAP FI)

·         Run the reconciliation program

(This program checks the documents and transaction figures in the R/3 System. You can only execute this run if you do not intend to carry out any postings for the period, otherwise reconciliation differences will occur. You can schedule the job to run in the background)

Printing Reports :

·         Balance sheets and P&L statements

·         Sales tax report from the External Tax program

·         Account balances (SAP FI), Journals (SAP FI)

 

 

 

Year-End Closing

 

Year-end closing is split into two phases:

·         At the beginning of the new fiscal year, you open new posting periods and carry forward the balances from the previous year.

·         You then prepare and create the financial statements, document the business transactions using the balance audit trail, and archive those documents you no longer need online.

 

The first posting in the fiscal year automatically opens that fiscal year. You must, however, have opened the relevant posting period first.

 

The SAP System offers a range of reports with which you can carry forward balances into the new fiscal year. During this process, the profit and loss accounts are carried forward to one or more retained earnings accounts. The balances of the balance sheet accounts are simply carried forward into the new fiscal year. You do not have to create special opening financial statements.

Any postings you make in the old fiscal year automatically adjust the relevant carry-forward balance. You do not have to close the old fiscal year and carry out the closing postings before opening the new fiscal year.

As with month-end closing, you can create all the external reports required, document the posting data, and carry out the internal evaluations.

 

Things to look for:

Assets

·         Settle the AuC (SAP FI-AA)

·         Execute the depreciation run and update the batch input session (SAP FI-AA)

·         Run the fiscal year change in Asset Accounting (SAP FI-AA)

(This process creates the balance carryforwards for Asset Accounting. We recommend that you execute this run on the first day of the new fiscal year. Note: by this time, you should have completed year-end closing for Asset Accounting for the previous year.)

·         Carry out inventory postings

 

Inventories

·         GR/IR clearing account – clarify differences and correct them if necessary (SAP LO-MM)

·         Clear the GR/IR clearing account (SAP FI)

(Prerequisite: The accounts have already been maintained by MM.)

·         Run the foreign currency valuation for the open items

·         Period closing program (SAP LO-MM)

·         Settle the work in process (WIP) (SAP FI-CO)

·         Post the reconciliation ledger (SAP FI-CO)

·         Valuate the inventory (SAP LO-MM)

·         Post the valuation difference manually (SAP FI)

 

Receivables and Other Asset Items

·         Check whether all the billing documents have been posted (SAP LO-SD)

·         Clarify the open items and differences

·         Print the balance confirmations (SAP FI)

·         Settle the rebates(SAP LO-SD), accruals

·         Calculate the interest for interest-bearing receivables (SAP FI)

·         Reconcile the cash journal/print out the journal (SAP FI)

 

Accruals and Deferrals

·         Post accruals/deferrals (SAP FI + SAP FI-TR)

Accruals

·         Accruals for rebates, discounts, and commissions (SAP LO-SD)

Payables

·         Payroll accounting

 

Internal Closing (SAP FI-CO)

Internal order and project-related tasks:

·         Transfer postings, surcharges, project interest calculation, settlement

 

Product and production-related tasks:

·         Release standard cost estimate, perform inventory costing, transfer postings, surcharges, variance calculation, results analysis, and settlement

 

 

Cost center-related tasks:

·         Transfer posting, distribution, assessment, activity allocation, transfer key figures, cost center variance, price calculation

 

Results-related tasks

·         Evaluate actual postings, transfer external data, distribution, assessment, transfer balance sheet items to PCA

 

Additional Closings and Tasks (SAP FI)

·         Post accruals/deferrals (SAP FI)

·         Check whether the accrual/deferral documents have to be reversed

·         Carry out recurring entries and update the batch input session (SAP FI)

·         Carry forward the balance

·         Check the balances carried forward against the closing balances of the previous year

·         Start carrying forward the balance, if necessary (SAP FI)

·         Reconcile cost of sales accounting/period accounting/profit center ledger (SAP FI/SAP FI-CO)

·         Reconcile the asset history sheet and account balances

·         Close Asset Accounting (SAP FI-AA)

·         Close the posting period (SAP FI)

·         Run the reconciliation program

(This program checks the documents and transaction figures in the R/3 System. You can only execute this run if you do not intend to carry out any postings for the period, otherwise reconciliation differences will occur. You can schedule the job to run in the background.)

·         Balance audit trail (SAP FI)

 

Printing Reports and Notifications:

·         Asset history sheet (SAP FI-AA)

·         Balance sheets and P&L statements (monthly and annual reports using Financial Statement version 0010)