Bank Reconciliation Statement 2
So we were going through the EBS, electronic bank statement settings for Chart of accounts, DRCA. So, with reference to that, we have created certain accounting symbols.
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See, we have created certain account symbols. These are all account symbols: DRLB bank charges, DRLB cheque issued out, DRLB, cheque received in, DRLB main bank. So these are the account symbols we have created and the text part. Once we have completed that, assign accounts to account symbols. So whatever the account that we have created, those accounts we have linked to account symbols. These are the account symbols and the same symbols are linked to the GL account.
Then coming to create keys for posting rules. First, we have just created posting rules: DRCH, that is Doctor Reddy Labs bank charges, DRIN means cheques received in, DROU means cheques issued out. This is posting rule with the rule name. Now, actually, we have defined the posting rules, we have created the rules and here we are defining the posting rules.
When you define posting rule, DR bank charges, DR cheques received in, DR cheques received out and which one is to debit, which one is to credit. So, I told you that these are the accounting entries which automatically should be posted. In order to post these accounting entries, so we told the system these are my posting rules. Posting rule, that is bank charges are there. DRCH means bank charges. So debit 40, credit 50, and debit the DRLB bank charges account and credit main bank account. So that is the original entry itself. See here, when we are doing this one, DRCH, these are the accounting entries we wanted.
I told you automatically it will be posted. And these are the entries which manually we post, and once we upload the EBS or MBS, that will be posting these accounting entries automatically. To get this automatic entries, what we need to do, we need to define certain posting rules. So these are the posting rules. So in case of bank charges, see bank charges account is debited and main bank account is credited. That is the original entry itself. DRIN means cheques received in. So in that case, cheques received in main bank account should be debited and cheques received in credited. That is this is subaccount, if you remember, we have created subaccount. Cheques received in account, cheques issued out. So cheques received in account should be credited because that will be credited and final credit will be going to main bank account. Similarly, cheques issued out. So when cheques issued out, main bank account should get credited. Cheques issued out is going to be, if you observe carefully, the accounting entries are exactly the same whatever they are from the accounting perspective we require.
Then coming to the transaction type. Click Create Transaction Type. So create transaction type means, let us see, we need to create 1 transaction type, like, say for example, go to New Entries. Transaction type is DRLBBRS, bank reconciliation statement for DRLB. This is the statement name. Let us first save this. Once you define this, select it and click on Assign External Transaction Types to Posting Rules. Go to New Entries. Here, I need to tell you something. I told you that whenever we are going to do the electronic bank statement that is EBS, in such a case, I am going to get a statement, a text file I am going to receive from the bank. Go to Banks, Incomings, Bank Statement, FF_5 – Import. Means, this one I’m going to import into the system. The file may be SWIFT MT940.
So, MT 940 etc., we are going to upload. When we upload into the system, whatever the transactions that we are going to receive from that statement. So I told you, we are going to receive external text file from bank. Try to understand this. So in the external text file, whatever the bank transactions that we have, cheques are received, cheques are issued, bank charges debited, wire transfer, like that whatever it may be, these transactions are defined and internationally certain numbers are given. That we call it as external transaction types. Once again, I repeat. When we receive a particular bank statement in the form of electronic file, we will upload that and upload into the SAP system, so that system will prepare a BRS. So in such case, the bank statement or that file will contain, say, what are the cheques that we have received, what are the cheques that we have issued, our bank charges debited, our RTGS, our wire transfer. So different types of transactions are there. For each transaction type, there will be one identified number there. Without that number, system cannot identify. So those numbers are nothing but, see here, I have given: Click New Entries, external transaction, the standard in MT940 etc. 701 means cheques issued out, 704 cheques received in, 705 bank charges. These are all standard, we cannot change this because that is as per MT940 whatever the method that you are going to use. But anyway, 99% of the cases, same transaction type we are going to use. That is the reason what we need to do now. Here, we give external transaction and posting rule. So 701, whatever we have defined, DROU, cheques issued out. Then 704, cheques received in, DRIN that we have already defined. So we are telling to the system. This is standard system identifies. We are telling SAP system 701 means cheques issued out, 704 means cheques received in, 705 means bank charges, DRCH.
Similarly, 702, 703, one is for wire transfer, another one is for RTGS. So we are telling to the system your entry like this. Save it. Come back.
Next, Assign Bank Accounts To Transaction Types. Now what is our bank account? Go to FBZP, House banks.
This is ICICI bank we have created for BRS. This is my bank account. Go to New Entries. So this is bank account and the bank key just now we have defined, bank key is also the same. Remember, from our bank account details, this is the bank key this is the bank account. So what I have done, bank key and bank account number, same thing we have defined. But of course, in real scenario, key may be there or may not be there. But generally, we do have this. Bank account number is nothing but customer ID. Remember that only customer ID we can use like this. And bank key is nothing but account ID. So here, bank key, bank ID, the transaction type, whatever we have defined, DRLBBRS.
So I repeat once again. First, we have created the GL accounts. After creating the GL accounts, we have defined account symbols. Account symbols identifies the type of transaction that you are going to use. The same text also I have given here. Bank charges, cheques issued out, cheques received in, main bank account. For that, we have assigned the GL accounts, whatever the GL account that we have created for that and here we have masked it because for the purpose of using any bank account number we can use. Then create posting rules, so we have created around 3 posting rules, subsequently defined the posting rules. Posting rules are used for the purpose of posting the accounting entities, whatever we planned here. Then we have created a transaction type. That is nothing but DRLBRS, and that description I have given. So what I have done, this thing has been linked to assign external transaction types. External transaction types are nothing but the transaction type that which MT940 or CASH20, some certain standard types of text files are there. In the text file, the external transaction type 701, 702, 703, 704, 705. All these things represent the postings. So already we have defined what is meant by posting rule. The posting rule and external transactions are linked now. Once that is done with, what I have done, now we need to finally link up with our house bank. So house bank account and house bank key and this transaction type all are linked now. So with this, configuration for the electronic bank statement have been completed. Now, I need to do one more step for making the manual bank statement. Under Manual Bank Statement, Create and Assign Business Transactions. Let us see what we are going to do here. Go to New Entries. So now what we are going to do is, see, we have already defined posting rules. These are the posting rules: DRCH – bank charges, DRIN – cheques received in, DROU – cheques issued out. You remember that we have defined this. To each rule we have defined, we have created the posting rules also. Means, in case if I’m going to use DRCH, what is the accounting entry system should post? If we are going to select DRIN (cheques received in), what is the accounting entry it should post when EBS is uploaded? And DROU (cheques issued out), what is the accounting entry? So these are the accounting entries we want it to post.
All those things we have linked up to posting rule and the accounting entries. Now, for manual BRS also, I have to tell to the system some rules. The previous is EBS, electronic bank statement, now manual bank statement, same thing I’ll use. See, DRCH, that is Dr Reddy Labs bank charges. DRIN, that is cheques received in. DROU, cheques issued out.
So this is the description. Since this is manual bank statement, I have to mention to the system that in case if charges are debited, whether it is plus or minus, our bank amount is going to be, negative or positive, you have to mention. If bank charges you are going to debit, our bank balance will become negative. If cheques are received, my bank balance will be increased. If cheques are issued out, my bank balance will come down. So the symbol we have to tell to the system because this is manual bank statement. The accounting entries whatever we have defined for electronic bank statement, so those posting rules we have already defined, then save it. So with this, our configuration is over. So these are the configurations assign bank account, bank account types, everything is over. Additional steps required for the manual BRS that also just now we have done.
So next, define tolerance group for GL accounts. So you have seen tolerance groups at several places. One is OBA4, that is employee tolerance. Number 2, customer tolerances, vendor tolerances we have seen, that is OBA 3. This is define tolerance group for the GL accounts. So here in SAP, in BRS, once we complete the BRS, we are going to execute on batch input session. So for that purpose, we need to assign these tolerance groups you have to do for GL account. Of course, we can do a blank tolerance group for the GL. I’ll show you what is that. The path is Financial Accounting (New), General Ledger Accounting (New), Business Transactions, Open Item Clearing, Clearing Differences, Define Tolerance Group for GL Account. Go to New Entries. Enter the company code, DRLB. Don’t give any tolerance group.
You need not mention anything because if you mention, only it’ll allow you up to that much. Just creation of this tolerance group for the company code is a must. If you are going for a debit posting, how much tolerance limit you require for the GL account, that also you can define. But for the time being, don’t define anything. Just a blank group I’m creating. So that we have defined.
Now prerequisites for BRS.
All bank transactions should be posted before executing BRS. See, what what is the purpose of executing BRS? In order to execute BRS, we need to check that the bank book balance and the bank statement balance will be different. So we need to reconcile and understand why there is a differences. And to that extent, we have to create a bank reconciliation statement. So that is the main purpose. So that’s why all bank transactions should be posted before executing BRS. For example, cheques to be issued to vendors or cheques received from customers, debiting the bank charges, etc.
Number 2, In case of electronic bank statement, banker will send statement of transactions in electronic format, which will contain the details of transactions done by the account holder. This is what I told you, electronic format as in MT9 40, that type of format. Whatever the transaction that we have done, cheques issued, cheques received, bank charges, debited, everything will be in that format. In case of manual BRS, a physical document or Word document, Excel document, Excel sheet will be sent by the banker. So in case of manual bank statement, as I told you earlier, then we’ll receive an Excel sheet or a Word document. The electronic document can be remitted by the bank in the required format like SWIFT format, multicash format, BAI format, or MT 40 format, etc. This statement is used in SAP to do an automatic reconciliation. The statement is uploaded in SAP and clears various bank clearing accounts such as cheque in and cheque out accounts to the main bank account. So I told you that cheques received in, cheque issued out. Whenever we are going to issue, we have debited or credited to the cheques issued that is credited only. Whenever we receive money, we have issued to cheques received in. So that will be cleared into the main bank account. So ultimately main bank account is debit or credit should go to that account. So main bank here it is credited means check issued out. Main bank debited means cheques received in. So for that purpose, we use that format. In our scenario, we have the following GL account for the bank subaccounts for the main. So already we have created, all these things you can go through. We are going to go for the manual bank statement. I told you before we execute BRS, we have to post the transactions. First of all, what I will do is, I’ll raise one invoice, this is the payment from customer. Now the date is 11th. So what we do is we execute BRS for the month of October month, October 31st. So for that, I’ll post one accounting entry. Go to Accounts Receivable, Document Entry, F-22. So imagine that we have made some sales. Say, for example, 1 lakh. Document to date, what I will do is I’ll take, say, 20.10.2013. DRLB.
Here, I’m first raising an invoice. So what I want to do is I want to raise one invoice to customer because, say, I told you that whatever the cheques received or cheques issued and bank charges, 3 only, for a simple BRS I want to take only 3 transactions, just to show you how to reconcile bank statement. So one cheque received from customer, one cheque issued to vendor, one bank charges. All these three, we’ll see. So in order to receive payment from customer, what I need to do? First, I’m raising one invoice so that I can receive payment for this.
So what I will do, I’ll take 1 lakh. One lakh sales, we are making it. Test for BRS manual bank statement. So customer account return to sales means posting key 50 and account 3 lakhs 1.
So we are making sales. So imagine that on the same day, we have received payment from customer. Go to F-28 (Incoming Payments). On 20.10.2013, we have received the payment, document type DZ. For bank, I have to take cheques received in the account. Now our cheques received in account is 200419, cheques deposit account. I’m taking nothing but cheques deposit account, that is cheques received in. Same amount, 1 lakh. Test for BRS. Customer account, 610021.
Let us clear the open item, click process open item.
So this is the invoice which we have created. Now I’m clearing it, double click it.
Click Document, Change.
I’ll save it. For The document number, 14 lakhs 13.
So customer sales, amount received from customer, and deposited in the cheques received account, and cheques received account is 200419.
Next, similarly, vendor account. Let me post one vendor invoice. Accounts Payable, Document Entry, F-43. I’ll take say, 21.10.2013. On this day, we have received goods from vendor, because I want to take 1 cheques received in, cheques issued out. In that way, I want to show you. First, we need to post the transactions. Posting key 31. I’m taking ABC raw materials account, 400502.
So let me take, say, around 60,000 worth of goods we have received. Same test for BRS. Vendor account is credited, and the material account is debited, means posting key 40. Material account return to vendor account. 200201 is my material account, raw material.
Now I need to make payment to vendor. Outgoing payment, F-53. See what I’m doing, on the same day, I’m making the payment, cheques issued out. So bank account, we have to select cheques issued out. 200411. Amount, 60,000. Text, Test for BRS. Vendor, 400502.
Process open item.
Save it. Document number 15 lakh 12.
Now bank balance as per passbook means here bank statement. Our bank statement is 0 because first bank account, and we do not have any balance in that opening balance. Cheques we have deposited is how much? 1 lakh. Cheques issued, how much? 60,000. So balance as per the bank is, if both above cheques are realized, will be 40,000. Means, if the cheque, whatever we have deposited, it got cleared before 31st October. And whatever the cheque that I have issued to the vendor, that also cleared before 31st, in such case, in my bank statement, balance will be 40,000. So balance as per bank statement and balance as per bank book should be same. Then only my bank reconciliation statement is correct. Go to Account, FAGLL03 (Display/Change Items (New). See, till now, we have not posted any amount to the main bank account, only cheques received and cheques issued out. Let me see here. 200410 is my main bank account, 200411, cheques issued out. 200419, cheques received in. This is FAGLL03.
Now open items as on as on 31.10.2013. Execute.
In main bank account, we do not have any balance. In cheques issued, 60,000 we have issued. In cheques received in, 100,000. Both are subaccounts. See, my main bank account should get reflected but now, we have whatever the cheques that we have issued or whatever the cheque that we have deposited are reflecting in the one cheques issued account, another one is cheques deposit account. In cheques deposit account, we have deposited 1 lakh, cheques issued, we have 60,000. Now, the balance is going to be 40,000. In case, if both these cheques are going to be cleared in the bank, bank also will have the same 40,000 balance. Now, as I told you, imagine that balance as per bank book is 0, cheques deposited, 1 lakh, cheques issued, 1 lakh and balance as per the bank statement if both above cheques are realized, realized means realized and cleared, that is, if cheques issued by us is debited to our account and cheques deposited by us, credit to our account. In such a case, balance as per the bank statement will be 40,000. Imagine that we have received a bank statement like this.
This is a bank statement received. Because, see, everything we have to go ahead with imagination only because we do not have a real bank. I don’t have any statement received from the bank. So that’s why we have to imagine that we have received a bank statement. So both cheques are realized, that’s why my bank statement is 40,000. This is the manual statement that you have received from bank. Now where do I have to enter this? So I told you that we cannot execute electronic bank statement because getting bank statement from the bank, etc, is just impossible for us for the sake of practice. Even though if you use some text file and we got it, those transactions do not build up into the system, then only system will work. That is just impossible. So that’s why what I’m doing, Manual statement I’m using and manually whatever the bank statement that we have received that I’m entering into the SAP system.
Go to Incomings, Bank statement. If it is electronic format, I have to upload it in FF-5 – Import. Since this is manual, go to Manual Entry, FF67. First time, it will ask you the variant, you can take SAP01 standard. Customer ID, vendor k, processing type, take 2- ‘further processing as batch input (generate as batch)’.
So these are certain parameters for the purpose of generating the BRS. Press Enter.
So this is the Process Manual Bank Statement screen. So it is asking for bank key. What is my bank key? Go to FBZP, House Bank. So this is my bank key.
Bank key, bank account number, both are the same. So to remember, for the sake of convenience, I use both the same. Currency, I’m going to use INR. Bank statement number, so system is asking the statement you receive from bank, what is this bank statement number? Imagine that there is one, bank statement number 1. Bank statement date, imagine that is 31.10.2013. Opening balance, do you have any opening balance in this? No, we do not have any balance, that’s why I’m taking 0. Closing balance, I told you that we have received bank statement, closing balance is 40,000. Let me put that 40,000. Means whatever the balance that you see in the bank statement. So in the real scenario also, whatever the bank statement is having, the same balance you put here.
So once you post that, here what you do, Press Enter. You get a message at the bottom of the screen ‘First statement’. Again, press Enter. Then system will open up. Transaction.
Now, whatever the bank statement that you receive from the bank, this we need to enter manually into the system. Here, transaction, now we have to mention whether cheques are received in or cheques are received out. First, cheques are deposited by us, 1 lakh. So what is the transaction type that we have defined? That is cheques received in, DRIN, select this. Value date, so when we have received it, 20.10.2013 is the date. Amount, 1 lakh. What’s the document number? So 1400013 is the document number.
Then next, cheques issued out, DROU. What is the date for cheques issued, 21.10.2013 is the date. How much amount? 60,000 is going to be reduced, so you have to take ‘-60,000’. So what is the documented number? 1500012.
Bank charges I’ll take separately again because I want to show you, in case if you are going to receive a revised statement, how to do that. Now here, since we have taken the closing balance 40, it is showing now. Because in the opening sheet 40,000 I have taken, system is showing 40,000. So equivalent to this, we have to enter here. Means anyway, whatever the bank statement that you are going to receive, if you enter debits and credits, balance is going to be that amount only. The same amount we have put in the first page. So that’s why just press Enter.
So here also it is showing 40,000. So ‘Entered’ is manually this much and the bank balance that is reflected in the bank statement is also 40,000. So well, this is over, save it.
Bank statement saved. Now, I need to post this. Select Document, Post, Individual statement. Statement has been posted. Once statement is posted, remember that when I have deposited the check, I have posted 2 cheques deposit account, and when I have issued a cheque, I have issued a cheque issued account. Now I have not used my main bank account at all. But, ultimately, my main bank account should reflect the balance. So, for that purpose, what I need to do is, we have to execute the batch input session now. Now, system is posted. I need to get these accounting entries.
So at the time of issue, I have used these entries: vendor account is debited, cheques issued account is credited; cheques deposit account is debited, customer account is credited. Now I want these entries: cheques issued account debited, main bank account credited; main bank account debited, cheques deposit account credited; and ultimately balance should effect in the main bank account. So I have already shown you my main bank is showing nil balance, only cheques received account and cheques issued account are showing balance. Now what I need to do, go to System, Services, Batch Input, Sessions. Execute the batch input session.
See here, with your session name, your account key, it will be opened. This is the session name, execute this session.
Take ‘display errors only’, then Process. In case errors are there, the system will show us. Otherwise, no. Message ‘Processing of batch import session completed’.
So that has been executed. Come back. Now what happened, let us go and see again. financial accounting, General Ledger, Account, FAGLL03. Let me check again. 200410, that is main bank account to check received in 200419. Check open items box.
See? What about cheques received in and cheques received out, what happened? You know, here, these are the entries passed by system (cheques issued account debited, main bank account credited; main bank account debited, cheques deposit account credited) and, cheques issued account and cheque deposit account both got nullified, main bank account has been reflected. Now see balance as per the main bank account, 40,000. Balance as per the bank statement received, 40,000. So that means our account got reconciled. That is balance as per the bank statement, balance as per the bank book maintained by the company, both are the same. Now because what is happening here, both cheques received account and cheques issued account got nullified and both are posted to main bank account. If main bank account is reflected, so then only my final balance will be reflected in the main bank account. Now I’ll show you the accounting entries, whatever posted by system. Here, I’ll show you. Go to FB03.
36 means there are 2 entries. Change to 35.
This is ICICI bank. ICICI main bank account is debited, cheques deposit account is credited. When I have deposited, you know what I have done, I have posted ICICI deposit account is debited, customer account is credited. Now that account nullified and posted to this account, ICICI main bank account is reflected. So in that way, what happened? If you see FS10N, I think it’s an open item, I think it will not show you. That is GL account 200419.
See, 1 lakh, 1 lakh got nullified. Cheques deposit account, when we have deposited, we have debited. Now it got credited and posted to main bank account. So this is the entry.
The same entry I’m showing you. So cheque deposit account got credited, main bank account is debited. You take second entry. Click ‘Display Another Document’. This is 35, let’s see 36.
In the 36 accounting entry, see main bank account is credited because whenever we have issued cheque, my amount should go out of main bank account. So, out of main bank account, when it has gone, know that that has been cleared in my bank statement. So when I have uploaded my bank statement or manually entered my bank statement, then only that has been the main bank account has been affected. So the system will take subaccounts like, cheque issue account, cheque received account, both are subaccounts. So when we issue or receive, we effect those accounts. When we receive the bank statement, so then we enter all the accounting entries that are given in the bank statement. In the case of electronic bank statement, we don’t enter manually, system by default automatically picks up all these transactions. Then it will reflect. I’ll show you one more thing. Say, for example, bank charges are there. I want to post bank charges. Say, for example, here, after 31st, the banker said, sorry I forgot, around 5,000 rupees we have debited bank charges, and now you have a balance of only 35,000. Imagine that he has sent a revised statement with statement number 2. In such case, what I need to do, again go back, again upload or manually enter. Now bank statement number 2 because already we have given 1. Statement date, same date. Opening balance, how much? Already we have balance of 40,000, so take that 40,000. What is the closing balance? Closing balance is 35,000, so take 35,000.
Press Enter, then transaction. So what are the transaction that we have to enter? Bank charges, DRCH. On 31.10.2013, amount, 5,000, not ordinary 5,000 you have to enter ‘-5,000-. So that is the problem with manual bank statement, you should not forget. Document number, say 1. Press enter.
So Entered 5,000, Bank also 5,000. Save it. Go to Bank Statement, Post, Individual Statement. Statement posted. Go to System, Services, Batch Input, Sessions. Select session, click Process. Check ‘display errors only’ and Process. Process completed. Now go to FB03. What is FB03? Document display. 37th document posted.
See? Bank charges account return to ICICI main bank. I did not post this entry, how did the system posted this entry? Because we have defined the posting rules. If you remember, there we have defined 3 rules how all these 3 entries are posted. These two entries. Right. This entry, this entry and this this this main accounting entry. So system has posted because we have already defined the rules. See, main bank account credited, main bank account credited in our books means amount is debited in our bank statement. So exactly vice versa. In bank statement, if it is debited, it means here it has to be credited. So bank charges account is debited, main bank account is credited. Now, go and see main bank account again. See here Accounting, Financial Accounting, General Ledger Account, FAGLL03. See account 200410.
See here, now the balance is 5,000. Balance as per the bank statement, 35,000, so here also 35,000. Hence, my BRS is tallied. But I know that, definitely for you, if you want to practice BRS, first of all, you need to have very much clarity about what bank reconciliation statement is, number one. Number two, the total configuration steps, whatever I told you, that you need to spend some time and try to understand. And subsequently, see here, everything is imaginary. Bank statement, I have not received any bank statement from bank. But with your transactions, you have to prepare your own bank statement because there is no bank, so I prepared. And accordingly, you have to enter the transactions. This process, whatever you are doing, you should have perfect clarity.