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Banking Transaction Financial Accounting Entries

posted Oct 21, 2010, 9:00 PM by Sen Long   [ updated Oct 21, 2010, 9:01 PM by Sap Team ]

 1) Settlement of advance will be done by the Accounts Department based on the Travel Expense Statement submitted by the employee, which is approved by the Concerned Department Head.

 2) Expenses  Account                         DR 
     Cash/Bank  Account                       DR  (if, refund) 
           Employee Advance Account                                            CR 
            Cash/Bank Sub ledger Account                                       CR  (if, payable)

 3) Banking Operations - Maintenance Of Bank Master 

 4) A House Bank is a combination of a Bank and a Branch. Account id is the account number. A house bank can have multiple account IDs.. There could be a main account as also payable account, which will be defined as separate account ids. General Ledger accounts have to be created for each combination of a house bank and account ID. The bank master details are to be provided by HZL. 

 5) General Ledger accounts have to be created for each account ID in the house bank. Bank Account Master data will be maintained by the Finance Department centrally.

 6) Each house bank and account ID combination shall have one main general ledger account and several sub accounts mainly based on broad transaction types. These sub accounts are necessary to facilitate automatic bank reconciliation process in R/3 system. 

Bank Accounting 
 7) The accounting entries will be generated automatically according to the posting rules attached to the Transaction type. The following accounting entry is passed by the system in respect of cheque deposit on account of collection from domestic customers. 

    Bank cheque deposit account         Debit  
           Customer account                                                         Credit

 8) In this case, a bank sub account is selected based on the transaction code entered by the user. The customer account is cleared i.e. invoice is cleared against the receipt. In respect of any other deposits, the relevant accounts to be credited will depend on the nature of transaction. 

 9) Payment against bills for collection. Based on the bank advices falling due on a particular day one payment advice is made debiting the vendors and crediting bank.

Cheque Deposit - Customer Receipts 
10) All cheques received from customers shall be accounted at the point of receipt.  The entry posted shall be 

                          Bank  Sub account  Dr  
                                   Customer Account    Cr

Cheque Deposit - Other Than Customer Receipts 
11) All  other receipts will be accounted through the Incoming Payment Transaction of the Accounts Receivables module.

Cheque Bouncing – Other Than Customer Receipts

12) Based on the information of cheque bounced from the Bank, the accounts Department will pass accounting entries for the cheque that have been bounced. The procedure to handle bouncing of a cheque has been discussed under the following

13) Reset the clearing document – If the document has been cleared i.e. an    open outstanding item has been cleared against an incoming receipt, then the clearing document has to be reset to its original status of open item. This process is known as reset of cleared document. 

14) Reverse the entry passed for cheque deposited earlier – Once the document has been reset it will be reversed. The following accounting entry will be passed. 
                          FI Customer       DR 
                                   Bank cheque deposit account  CR

15) In case of cheques being damaged while printing, the concerned cheques no. has to be voided and the payment will be rerun. 

Bank Reconciliation  
16) The Bank reconciliation process is based on the entries passed through the Bank sub account and main account. The process is dependent on the Bank Statement received from the Bank that will be entered into SAP. Accounting rules are to be defined for each transaction type and posting rule for posting accounting entries as per bank statement.  Bank statements to be uploaded into SAP.

17) Bank Main account balance is the actual balance as per the bank statement whereas the Bank sub accounts denote the reconciliation items. These sub accounts show those entries, which will flow from the sub account which are not cleared in the bank statement.

18) Adding or subtracting the Bank sub accounts will help in preparing the Bank reconciliation statement.

19) The following scenarios would explain the reconciliation process: 
- Cheque received from customer 
- Cheque issued to vendors 
- Cheque received from Other than Customers 
- Direct Debits in Bank Statement 
- Direct Credits in Bank Statement 
- Fund Transfer between Bank Accounts

Cheque Received From Customer 
20) Accounting entry at the time of cheque deposit entry 
                    Bank Cheque deposit account   Debit 
                                          Customer                            Credit

21) Accounting entry after cheque has been cleared in the Bank statement Main Bank account  
                   Debit Bank  
                           Cheque deposit account  Credit

22) The clearing criteria for updating the bank main account and bank sub account will be amount and document  number which will be captured in the allocation field of the bank sub account. The items, which have not been cleared in the bank statement, will remain open in the bank sub account and will form part of the bank reconciliation statement.

Cheque Issued To Vendors 
23) Accounting entry at the time of cheque issue  
                   Vendor account     Debit 
                            Bank cheque payment account  Credit

24) Accounting entry after cheque has been presented in the Bank  
                   Bank cheque payment account  Debit 
                             Main Bank account     Credit

25) The clearing criteria used for updating vendor account and Bank cheque payment account will be amount and cheque number. The cheques presented to the bank and are cleared are transferred to the bank main account. The remaining cheque issued will form part of the bank reconciliation statement.

Direct Debit In Bank  
26) Direct debit instructions will be given to the bank for example, LC payments or certain bank charges are directly debited in the Bank Statement. In this case accounting entry is passed only after the entry is passed in the bank statement. 
                   Vendor / Expense Account  Debit  
                              Bank clearing account  Credit

Direct Credit In Bank 
27) Customer receipts are sometimes directly credited in Bank. E.g. export receipts. In this scenario accounting entry is passed only at the time of bank statement entry.  The following accounting entry is passed 
                   Bank clearing account    Debit 
                                Customer account    Credit 
                   Main Bank A/c    Debit 
                                 Bank Clearing A/c    Credit

Bank Fixed Deposits 
28) HZL has a practice of converting any amount above Rs. 1 crore in its Main bank account, to a fixed deposit subject to a minimum of Rs. 1.01 crores. The FDR number can be filled in one of the fields available in the accounting document. 

Cheque Management / Cheque Printing Cum Advice 
29) The function of cheque management will enable printing of cheque through SAP. Cheque series will be defined for a combination of a Company code and Bank Account. Cheque numbering will be sequential order. 

30) Cheque series for automatic payment has to be in sequential order. Cheque printing facility will be available for the bank account.

Cash Management / Liquidity Analysis 
31) The day-to-day treasury process in a company includes a number of transactions. This includes determining the current liquidity using bank account balances (cash position), determining open receivables and liabilities (liquidity forecast), manually entering planned cash flows (payment advice notes), through to clearing bank accounts, that is, collecting multiple bank account balances on one target account.

32) The main objective is to ensure liquidity for all due payment obligations. It is also important to control and monitor effectively the incoming and outgoing cash flows.

33) This section shows you the overall liquidity status of your company by displaying together the cash position and the liquidity forecast. The cash position is used in Cash Management to show the value-date-dependent bank accounts and bank clearing accounts, as well as the planned cash flows (payment advice notes). The liquidity forecast comprises the incoming and outgoing cash flows, as well as the planned items on the sub-ledger accounts. 


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