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SAP FI: Retained Earnings Account

Retained Earnings account defines the (P&L Account) to be used for posting the expenditure and incomes of the year. The balance of this account appears as Reserves & Surplus in the Balance Sheet for the year. This process involves carrying forward the balances on your General Ledger accounts from one fiscal year into the next. You can see the balance to be carried forward in the account balance display. The carry-forward is not performed automatically by the system, even if you have already posted data in the new fiscal year. You have to specify when you want to run the programs for this in the SAP system. (Accounting Financial Accounting ->General Ledger -> Periodic Processing-> Closing-> Carrying Forward-> Balance) (Transaction Code F.16) However, when you post items to a prior year, the system automatically carries forward the balance whether the program was run or not. The customer and vendor accounts, and the balance sheet accounts are carried forward onto themselves. The income statement accounts are carried forward into one or more retained earnings accounts. Before you can include P&L accounts in the chart of accounts, you need to specify the retained earnings account to which profits or losses are transferred. There is a special program designed to transfer these amounts to this account. In order for this program to be able to carry forward the profit or loss, you have to enter the number of this retained earnings account in the system. Each P&L account is assigned to a retained earnings account via a key. You have to enter this key in the P&L statement account type field found in the chart of accounts area of each P&L account. You create the retained earnings account and related key in Financial Accounting Customizing under General Ledger Accounting G/L Accounts Master Data G/L Account Creation Preparations Define Retained Earnings Account. SAP offers two options: 01. Using One Retained Earnings Account 02. Using Several Retained Earnings Accounts Using One Retained Earnings Account: Normally, companies use one retained earnings account. For this reason, X can be used as the key. In the chart of accounts you enter X in the P+L statement account type field, and for account determination you enter the retained earnings account under the key X. Using Several Retained Earnings Accounts: By having more than one P+L statement account type in the FI system, you are able to specify several retained earnings accounts. You would use different retained earnings accounts in an international corporate group to meet various requirements for preparing financialstatements. Expenses for special taxation provisions are relevant to income in the US but not in Germany. These provisions for taxation are posted to special P&L statement accounts which are needed in the US only. For all other postings you use P&L statement accounts which are used both in Germany and in the US. To report profits or losses of the prior year on your financial statements for Germany, you would assign the P+L statement accounts valid for all countries to one retained earnings account and to report profits or losses in the US, you would assign the P+L statement accounts that are valid only for the US to a separate retained earnings account. In generating the country-specific financial statements, you would use retained earnings account 1 for the German financial statements and both retained earnings account 1 and 2 for the US financial statements in order to report the profits or losses of the prior year. If you do not include any P&L statement accounts for a financial statement version, you must also omit the corresponding balance sheet accounts. The combined balance of the omitted accounts must equal zero.