Retained Earnings Account:
At the end of the fiscal year, We need to carry forward the balance of the p\L account to the retained earnings accounts( BS General Reserve Accounts).
The profit & loss statement account type it represents the retained earnings account.
The retained earnings account can also be called as net profit/net losses carry forward to be the part of the general reserves account.
The profit & loss statement account type can be defined similar to variant.
We can define more than one profit &loss statement account type per COA.
If we can define the more than one profit &loss statements account type for chart of account then we need to assign profit & loss statement account type in the G/L master for every profit &loss account.
If we define single profit &loss statement account type for COA , in this case all profit & loss accounts by default assign to the profit & loss statement account type.
Not required to assign manually in the G/L account.
The profit & loss account need to be defined for each COA wise.
Profit & loss statement account type can be defined maximum upto 2 digit code.
We can use more than one retained earnings GL account per Chart of Account if you are using the Account Approach to address the different Accounting Principles.
Examples:
X1 P&L statement Account Type for Common Accounts
X2 P&L statement Account Type for USGAP
X3 P&L statement Account Type for IFRSGAP
X4 P&L statement Account Type for IAS GAP
Note:
Not Required Multiple Retained earning accounts per Chart of Accounts if you are following Ledger Approach.
Why multiple retained earnings account required ?
We have two approaches to address the different accounting principle requirements
Approach1=======> Account Approach Approach2=========> Ledger Approach
Approach1=======> Account Approach:
We will open few additional GL accounts in addition to common GL accounts for specific to accounting principle wise for those areas need to treat differently
| IFRS | COMMON GL | USGAP |
| 25 GL accounts for specific to IFRS | 300 Common GL accounts | 22 GL accounts for specific to USGAP |
FS(Financial Statement) for IFRS =IFRS specific GL accounts + Common GL accounts
FS(Financial Statement) for USGAP =USGAP specific GL accounts + Common GL accounts
In Account approach , We will maintain more than one Retained earnings Accounts
In the above example ,
X1 ==> Retained earning accounts -common ==> Assigned to all common P&L GL accounts
X2 ==> Retained earning accounts -IFRS Accounts ==> Assigned to IFRS specific GL accounts
X3 ==> Retained earning accounts -USGAP Accounts ==> Assigned to USGAP specific GL accounts
Approach2=========> Ledger Approach:
Each Ledger represents the one set of Books
Ledger ==>L2===========> USGAP
Ledger ==>L1===========> IFRS
In the ledger approach , not required to maintain additional GL accounts for specific to accounting principle wise
Hence not required multiple retained earnings GL accounts ====> One retained earnings GL account is sufficient
Create Retained Earnings Account:
Need to be Defined P&L statement account type per Each Chart of Account wise
Operational COA(RELP)
X1 P&L Statement A/ Type for Op COA ( RELP )
Grp COA (RELG)
G1 P&L Statement A/ Type for Grp COA ( RELG )
Country COA (RELC)
N1 P&L Statement A/ Type for Country COA ( RELC )
SPRO -> SAP Reference IMG -> Financial Accounting -> General Ledger Accounting -> Master Data -> G/L Accounts -> Preparations -> Define Retained Earnings Accounts (OB53)
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