We maintain two types of Accounts and both are used differently in closing procedure. For balance sheet, the balance is carried forwarded to the same Account in the next year. But, in case of profit and loss statement, balance is carried forward to a retained earning account in SAP and the profit and loss Account is set to zero.
When you define retained earning account in sap through transaction code OB53, a key is assigned to that. You enter the same key in the field “profit and loss statement type” in the Chart of Account segment of general ledger master to represent the retained earning account in SAP for them.
If you have defined retained earning account in sap then system will automatically use it by default. If there is more than one defined then you have to select it for each profit and loss statement while creating a master record.
At the end of the year, system carries forward the balance in profit and loss statement to the retained earning account in SAP which is shown in balance sheet.
Retain earning account is defined through transaction code OB53 or by suing following SAP path;
SPRO > FA > General Ledger A/c > General Ledger A/cs > Master Records > Preparations > Define Retained Earning Account
How to create a retained earning account in SAP
- Enter transaction code OB53 or follow the above path to reach retained earning creation screen.
- Enter your four digits ID created for your chart of Accounts to indicate that the retained earning account will be created under that chart of Account.
- Update the followings;
- P&L Statement : you can either put “X” or “Y” or anything as per your choice
- Enter any General Ledger A/c that you are planning to have as a retained earning account in SAP.
- Click on SAVE button to save the settings
If you have not created the General Ledger Account for Retained earning then a message “Account…… not created in chart of Accounts …..’ will appear. Just ignore the message and save your retained earning settings.
Now you create the Retained earning general ledger Account in your General Ledger Master through transaction FS00.
Retained earning account in SAP is a balance sheet Account created for the purpose of carrying the profit and loss balance at the year end to your organizations balance sheet. If you have a requirement of using more than one financial statement and both financial statements will have different retained earning due to the accounting policy you follow or for any other reason then SAP has a flexibility of using more than one retained earning account.
Note: SAP and SAP logo is a registered trademark of SAP AG in Germany and in several other countries. We are not affiliated or related to any division or subsidiary of SAP AG.