Bill Of Exchange in Detail

After accounts receivable and foreign exchange evaluation, the next topic we’ll see is Bills Of Exchange. Now under this topic, first, we’ll cover the posting procedure for bills of exchange receivable. Let us see what is there in this particular content, posting procedure for bills of exchange receivable. 

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For bills of exchange receivable, there are three (3) events, which are posted in financial accounting. Now first is pay by bill of exchange, second is bill of exchange deposit, and third is cancel potential bill liability. So these are the three events, which are posted in financial accounting. 

Payment by Bill of Exchange: 

Now here, firstly, the payment by bill of exchange is posted and used to clear the receivable against the customer. There is now a bill of exchange receivable, which is recorded on the customer account and the special GL account. 

So, here the bill of exchange payment is posted first and used to clear the amount against the customer, and they’re recorded under the customer account and the special GL account.

Bill of Exchange Usage:

If the bill of exchange is used for refinancing and is passed on to a bank, then the bill of exchange usage must be posted. The bill of exchange liability that we now have is recorded on the special accounts in the system until it has expired.

So this is the bill of exchange usage, which is done on the special accounts in the system until it is expired.

Canceled the Bill of Exchange Liability:

Now here, once the due date of the bill of exchange has elapsed, including any country specific period for the bill of exchange protest, we can cancel the bill of exchange receivable for our customer and the bill of exchange liability. So this is the process of canceling the bill of exchange liability. 

Once the due date has elapsed, the bill of exchange can be canceled, that is, for any of the customer and the bill of exchange liability. 

So these are the 3 events under financial accounting.

 

So this is the SAP menu path. 

First, we’ll go to Accounts Receivable, then Document Entry. Under that we have an option of Bill Of Exchange.  Next, we’ll see how to do the acceptance of bill of exchange. For that, we’ll go to the transaction code F-36.

So we’ll go to transaction code F36 or we’ll follow the same path as shown in the previous slide. After that, in this screen, we’ll provide the company code and the posting date, and we’ll select the radio button as incoming payment. After that, we’ll get a screen where we have to provide the line item details like amount, and the bill of exchange details like due on i.e. the due date and the planned usage date. 

So, here we have provided the planned usage as Discount. Then we’ll provide the details of drawer and drawee, that is the drawer details will be Greaves Cotton Limited in our case and drawee details is Kirti Jain, that is the customer details. So after maintaining these details, we’ll go to the next screen, where we have to provide the company code and account details, and we’ll select the process open items icon.

After that, we’ll get the open items under that bill of exchange. 

So here we’ll select those entries and we’ll click on the simulate option. So once we click on the simulate button, we’ll get an overview where we have to check for the entries. Once the entries are correct, we’ll click on the save button. So this is how we maintain the bills of exchange payment process. 

This above is the overview screen, and we’ll click on the save button. Then we get a statement stating that the document was posted in the company code.

So this is how we post the transaction.

 

Next, after acceptance of bills of exchange, we’ll see bill discounting. We use the transaction code F-33. 

Now here in bills discounting, we have to provide the posting details like usage. So here, we’ll provide discounting and the discount on the bank account. So we’ll provide the bank account number and the amount on which the discount is to be made. After that, we’ll get a screen where we have to choose the postings. 

So here we’ll provide the document number in this particular section. So the document number is 803000060. After that, we’ll press on the enter button. So once we press on the enter button, we’ll get a pop up stating that bank posting of this much amount and bill of exchange of this much amount is used. And we’ll get another pop up stating that the document was posted in company code 1,000.

So, this is how we make the discount, that is the bill discount. And next, we’ll get a screen where it will give the overview of the line items. 

So this is how we do the bill discounting.  Then here, we’ll get a general ledger view. Here, we’ll select the line item, where it has the amount in negative. So, we’ll select the line item of description bill discounting for account 160050. 

 

Next, we’ll see reverse contingent liability. Now here we’ll use a transaction code F-20. 

Now here we have to provide the GL account number, and we’ll provide the usage details. So here our usage details is discounting. So after maintaining this header data, we’ll click on the enter button. Now on the next screen, we’ll have to maintain the settings for the selected items. 

So here we’ll enter + in the entry field for which we want to reverse the transaction. So after entering that, we’ll click on the save button to save this transaction. Once we do that, we’ll get a message stating that the document was posted in company code 1000. So this is how we do the reverse of the bill liability. That is where we reverse the transaction. 

So this is the general ledger view of that particular document.

 

Next, we’ll see noted items, that is, memorandum entries. Now if you remember in accounts payable section, we have seen noted items. Here in this particular part, we’ll learn noted items in detail. The transaction code used is F49. Here, this is the SAP menu path. 

Under Financial Accounting, we go to Accounts Receivable, then Document Entry, and then we’ll go to Others part where we have the transaction code for Noted Items. So F-49 is the transaction code. Now this can be used for recording bank guarantee or any other entries which we don’t want to post in the customer account or the general ledger account. It will be working as a single sided entry. These entries will have no effect on the financial books. We use them only for the record purpose and after the purpose is over, we can reverse the sale.

 

Here, first, we’ll create the transaction with the posting key as 09 or 19 and special GL indicator as “D”, that is discount. Then we’ll provide the customer account number and the amount. Then we’ll fill in the bank guarantee due dates so that on the maturity date, we can reverse the same. Then we’ll fill up the bank guarantee number in the assignment field and details in the text field. Here, this will be single screen entry, and simulation is not there as it does not affect the finance books. So these are the details, which we maintain in the notate items. 

So here we’ll maintain the posting key as 09 or 19. Then the general ledger indicator as D, that is discounting. Then we’ll maintain the account details, the amount, the due date, and in the assignment block, we’ll provide bank guarantee, and we’ll provide a text as a description to it. So, these are the header data which we need to maintain for noted items. After this, we’ll save this document. Once we save this document, it will create a document number for that particular company code. So this is how we maintain the memorandum items. 

 

Now, for viewing the noted items, we have to go to the line item display. We’ll use a transaction code FBL5N, that is display or change line items. Now here we’ll select the checkbox Noted Items for viewing only noted items, or we’ll select the checkbox as Normal Items And Noted Items for all the items. Here we can view the noted items in the line item display. It forms a part of the customer balance and affects the balance of the customer. If you want to see only the noted items, click on the noted items only checkbox, and we get the list of the noted items. So this is how we view the line item display. So initially, we have created the header data. Once we save, we get a document number. If we want to view that line item details for that noted items, we’ll go to transaction code FBL5N, where we can select the appropriate checkbox and display the data which we want.

Now this is the customer line item display. It is FB5LN. 

Here we’ll provide the customer account and the company code, then we’ll select the appropriate type. So here we have selected the radio checkboxes Normal Types And Noted Type. So after that we’ll click on the Execute button And then it will give the list of the line items. 

So these are the line item display. Here, we have the line items and the document numbers for those particular line items. So this is a display view of the line item. 

On the other hand, if we see the customer ledger balance, it does not incorporate these noted items. So, we go to FD10N, that is, display balances and see the balance. Now in this particular screen, we get the noted items, but we do not see the balance for that particular items. So for that, we’ll go to FD10N transaction code where it displays balances and bills can see the balance. So it was showing the balance of 108,000 INR and in the customer balance, it is showing the balance as 98,000 INR. Hence, it does not affect our financial books by using noted entries. So here we have the balance as 108,000 INR. That is 1 Lakh 8,000 INR.

So we’ll go to that particular transaction code of customer balance display. 

There we’ll click on the cumulative balance so that we get the detailed line item wise entry without noted items. So here is the cumulative balance of all the line items, that is 98,000, without the details of the noted items. So, once we click on that, we’ll get the display overview for that particular line item. 

So this is the 98,000 balance that is for line items without noted items. So, here in general, it appears as the open item as it cannot be matched with any finance transaction. For removing the line items from the statement on the lapse of the guarantee or the maturity of the same, we have to reverse the document so that the effect is nullified. 

 

Last, we’ll see reversal of the noted entries. Now first, we have said how to see the noted items using the transaction codes, and now we’ll see how to reverse the created noted items using transaction code FB08. So here as normal documents are reversed, we can in the same way reverse the noted entries by using FB08 transaction code. Now here we’ll provide the noted item document number, the company code, and the fiscal year. Along with that we’ll have to provide the reversal reason for this particular document. 

After this, we’ll save this document. Once we save this document, we’ll get a message stating that document number was posted in the company code 1000. This is how we do the reversal of the noted items. 

For display of the noted items, we’ll click on the Display Before Reversal tab. So these are the topics covered under bills of exchange.