Bank Reconciliation

1) 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.

2) 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.

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

4) 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

5) Accounting entry at the time of cheque deposit entry
Bank Cheque deposit account DebitCustomer Credit

6) Accounting entry after cheque has been cleared in the Bank statement Main Bank accountDebit Bank

Cheque deposit account Credit

7) 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

8) Accounting entry at the time of cheque issue
Vendor account DebitBank cheque payment account Credit

9) Accounting entry after cheque has been presented in the Bank
Bank cheque payment account DebitMain Bank account Credit

10) 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

11) 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

12) 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 DebitCustomer account Credit
Main Bank A/c Debit
Bank Clearing A/c Credit

Bank Fixed Deposits

13) 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

14) 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.

15) 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


16) 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.

17) 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.

18) 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.