Transaction with customer needs to be recorded in account books. With each transaction with customer, account receivable may decrease or increase. Hence each customer is to be linked with GL account (account receivable). Whenever transaction with customer is entered, corresponding GL account mapped with customer is posted. This GL account is referred as customer reconciliation account in sap.
Now let’s consider below two scenarios:
Scenario 1:
Each customer is mapped with a different GL account.
When transaction with customer C1 is entered, GL account “GL1” is posted.
When transaction with customer C2 is entered, GL account “GL2” is posted.
When transaction with customer C3 is entered, GL account “GL3” is posted.
and so on…
Now if company has 1000 customer, then 1000 different GL accounts will be needed. This increases the number of GL account in chart of account. When number of GL account in chart of account increases, difficulty to manage the accounts increases as well.
Hence, we try to achieve the objective of mapping customer to GL account while keeping number of GL accounts as low as possible.
Hence this approach of mapping each customer to a different GL account is not used in sap.
Scenario 2:
Multiple customers is mapped to same GL account.
When transaction with customer C1 is entered, customer reconciliation account is posted.
When transaction with customer C2 is entered, customer reconciliation account is posted.
When transaction with customer C3 is entered, customer reconciliation account is posted.
and so on…
Hence, when customer transaction is entered, corresponding customer recon account is posted. Since multiple customers are mapped to same GL recon account hence required number of GL accounts is reduced to a great extent. This reduces the size of chart of account.
What do you understand by the term recon account?
Recon stands for reconciliation account.
Net balance of customers (C1, C2, C3, C4 & C5) should be equal to net balance in GL customer recon account.
Hence, net balance of customers (sub-ledger) should always reconcile with net balance in GL recon account in finance (main ledger).
Hence, GL account mapped to customer is called reconciliation account or recon account.
Recon account cannot be directly posted. Recon account is automatically posted when posting to customer happens.
How to define a GL account as recon account?
GL account is defined as reconciliation account in GL master as shown in below picture.
GL ACCOUNTING
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ACCOUNTS PAYABLE
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- Understanding MM FI integration in very simple terms.
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ACCOUNTS RECEIVABLE
- How sap overcomes challenges in accounts receivable process?
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- Understanding order to cash cycle in sap.
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TAX ACCOUNTING
- How sap helps in tax accounting?
- Tax configuration in sap: Tax procedure, Tax code & Tax jurisdiction code
- Concept of tax jurisdiction code & tax jurisdiction structure
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- Tax base amount and Discount base amount
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WITHHOLDING TAX
- Withholding tax in sap explained with example.
- How sap overcomes challenges in managing withholding tax?
- Withholding at the time of invoice or payment
- Withholding tax configuration in sap
- Business place & Section code in sap
- Withholding tax certificate numbering in sap
- Withholding tax report for filling tax returns
ASSET ACCOUNTING
- How sap helps in asset accounting?
- What is meant by asset accounting?
- What is the use of asset class?
- What is the use of depreciation key in asset accounting?
- Depreciation area and Chart of depreciation in sap.
- Derived depreciation area VS real depreciation area?
- Understanding asset accounting configuration needed in sap
- GL account determination for posting asset transaction
- Asset transaction and corresponding accounting document?
- How depreciation is posted in sap?
SAP CONTROLLING