DEFINE RETAINED EARNINGS ACCOUNTS

 Define Retained earnings accounts

Retained earnings account is basically used to carry forward the balance from one fiscal year to the next fiscal year. It is only required at the end of the year. SAP has made it mandatory while implementation. If we do not configure retained earnings, we are unable to create accounts.

Retained earnings accounts can be assigned to each P&L account in the chart of accounts. For automatic carry forward the balance to the next fiscal year, you can define P&L statements as per chart of accounts and assign them to the retained earning accounts.

[T code - OB53]

PATH:

STEP 1

Enter SPRO in the command field

STEP 2

Select SAP Reference IMG

         

STEP 3

Financial accounting (new) >> general ledger accounting (new) >> master data >> G/L accounts >> preparations >> define retained earnings account

STEP 4

Enter chart of accounts

STEP 5

Enter P&L statement account type to determine the retained earnings account for profit and loss account.

Enter the general ledger account which will be considered as retained earnings accounts.

Select save button and we get a warning message IGNORE the message and press enter and save in TR.

Questions related to:

1. What is retained earnings?

Retained earnings is used for carry forward the balances to next financial year as opening balance.

2. What is the purpose of preparing of retained earning?

Retained earnings account is prepare for transfer the surplus amount to profit and loss account in surplus account and further it in balance sheet.

3. Is retained earnings mandatory in SAP?

Yes, in SAP retained earnings account is mandatory because in the year end system can't transfer the profit and loss account balances to surplus in profit and loss account and balance sheet can't be carried forward to next year as opening balances.

4. when retained earnings is required?

Retained earnings account is needed at the year end of the fiscal year.