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SAP- Document Splitting

1. Introduction:

Earlier for generating Financial Statement below company code level required manual
effort and usually done as month end activity. With New GL, SAP provide a feature name
Document Splitting, document splitting provide balance line value for given
characteristics (e.g. Profit Center or Segment)

It is also required as Requirement of International Accounting Standards (IAS)

IAS mandate to provide financial Statement Segment wise as in report financial


information by lines of business or geographic area.

For e.g. suppose there is a Vendor Invoice of USD 11000 for two purchases

The transaction is taxable (@10%)

GL Account Dr Cr Profit Center


Vendor 11000
A. Pur. 1 8000 PC 1

A. Pur. 2 2000 PC 2

Tax 1000

Now this document is balanced at Co Code level. But as Purchases belong to different
profit center PC1 and PC2, hence document is not balance at Profit Center level.

Now we have to find a base splitting logic to split vendor amount and tax for PC 1 and
PC 2.Here it is observed that Purchases are in the ratio of 80% and 20% and also
allocated for PC1 and PC 2

So Total Purchases is USD 10000i

For PC 1 = 80% of 10000 = USD 2000, For PC 2 = 20% of 10000 = USD 8000

Same as Tax can also be split

Total Tax amount is USD 1000

For PC 1 = 80% of 1000 = USD 800, For PC 2 = 20% of 1000 = USD 200

We can use the same ratio to split vendor amount and Tax amount.

GL item Amount Profit Center


Vendor USD 8000 PC 1
Vendor USD 2000 PC 2
Tax USD 800 PC 1
Tax USD 200 PC 2

So now document will be posted as


GL Account Dr Cr Profit Center
Vendor 8800 PC 1
A. Pur. 1 8000 PC 1

Tax 800 PC 1
GL Account Dr Cr Profit Center
Vendor 2200 PC 2
A. Pur. 2 2000 PC 2

Tax 200 PC 2

Now both the documents are balanced at Co Code level also at Profit Center level.
Document is balanced with specific characteristics also.

Now with above example we can make two statements:

1. Line item for Vendor and tax are split on the base of Pre-Defined criteria

2. The Pre-Defined criteria here is Purchase Amount

So splitting Accounting line item on the basis of Pre-Defined Criteria is


Document Splitting

1.2. Example in SAP:

Now New GL do this activity automatically once configuration is done. For user (Entry
Ledger view) only single entry required, SAP will create separate line item based on the
pre-defined criteria (General Ledger View)

Here the example is based on splitting of Vendor amount based on Profit Center:
Here Vendor 9001 got credited for expense for Postage and Purchased services

So Accounting Entry Would be:

GL Account Dr Cr Profit Center


Vendor (9001) 12000
Expense (Postage) 8000 1402
Expense 4000 9990
(Purchased
Services

Now as mention above the document is balanced on co code level but not at Profit
Center level

Now before Document Splitting:

Even if we look at general ledger view document is not balanced at profit center level
After Document Splitting:

In case Document Splitting configured for Profit Center level then General Ledger view
should be look like below:

Now the document is balanced on both Co Code level and Profit Center level and User
need not to manual adjust this, SAP does it automatically as per configuration.
If we look at the accounting Entry:

GL Account Dr Cr Profit Center


Vendor (9001) 8000 1402
Expense (Postage) 8000 1402
Vendor (9001) 4000 9990
Expense 4000 9990
(Purchased
Services

2. Type of Document Splitting:

Now Document Splitting can be divided into three parts:

2.1. Passive Split

Passive Split is used when SAP spilt a document line item based on split took
place in previous process (While Payment of Vendor, splitting will be done as
logic used in vendor invoicing)

For e.g. if a payment is made for earlier discuss example

GL Dr Cr Profit Center
Account
Vendor Amount 11000
Bank 11000

Now we know for Profit Center Level vendor Amount has been already split, so
Bank Amount (Payment) will also split as same pre-defined criteria used for
Vendor Invoicing

GL Account Dr Cr Profit Center


Vendor Amount 8800 PC 1
Vendor Amount 2200 PC 2
Bank 8800 PC 1
Bank 2200 PC 2

Now the clearing transaction is also balanced on profit Center level.

This SAP do automatically as per configuration (* the rule for Passive Splitting are
already defined in System and cannot be changed)

Example of Passive Splitting:

Now if we make a payment for invoice created earlier

Accounting Entry:

GL accounting Amount Profit Center


Bank (Deustche Bank) Cr 12000
To Vendor (9001) Dr 12000
Now from User Perspective (Entry View) it looks normal payment:

But if we look the same document in General Ledger view

SAP automatically split the payment as per ratio of vendor invoice and this is example of
Passive Split.

2.2. Active Splitting


SAP split the line items of some pre-defined splitting rules.

In above example vendor and tax amount is split according to expense (purchase)
amount across profit center. SAP provide various standard Splitting rules for various
business transaction, if required customization can be done for new splitting rules.

Example for active splitting discussed earlier. (Under Basic Concept)

2.3. Splitting for Zero Balancing:

Zero balancing is taking care of document should be balanced also it should be


balanced for specific characteristics (e.g. Profit Center)

Characteristics for which Zero Balancing required can be define

GL Account Dr Cr Profit Center


GL 1 1000 PC 1
GL 2 1000 PC 2

Document is balanced but not specific to profit center. Hence an offsetting account
defined which is used to make document zero balancing for specific characteristics.

GL Account Dr Cr Profit Center


GL 1 1000 PC 1
GL 1 – Offsetting 1000 PC 1
GL 2 1000 PC 2
GL 2 – Offsetting 1000 PC 2

Example:
Now this a normal FI document which is balanced for Co Code level but both balancing
line item belongs to different Profit Center.

Now if we draw document on profit center level, it is not balanced. Under Zero balancing
account we configure an offset account which generate automatically line item to balance
the document for specific characteristics (e.g. Here profit Center)

Now in this example document is balanced from Co Code and Profit Center. As mention
in the screen shot Account 194500 Clearing w/ BA 0000 is configured Offset GL account.

3. Important Element of Document Splitting:

3.1. Splitting Rules

Splitting rules define which line item need to be split and which logic need to be
used. For e.g. in above example Vendor line item need to be split with Ratio of
Expense item ( 80 % and 20%)

3.2. Item Categories

Item Category is grouping relevant GL account which need to be split, it helps to assign
the splitting rule to complete set of GL rather individual one. Item Categories are pre-
defined in system.

In order to manage easily, system can apply splitting rule for a Group of Expense
Account instead of assigning individually. Item categories are pre-defined in
system.

Some of Pre-defined Item categories are below:


Category Expense Account
3000 Vendor Account
2000 Customer
1000 Balance Sheet Account
4000 Cash Account
7000 Asset Account

3.3. Business Transaction and Variant

Business transaction is part of any business process. For in Procure to Pay


process vendor invoice and vendor payment are Business Transaction. In SAP business
transaction can have multiple variant (pre-defined settings).In Accounting Document
Type is associated with Business Transaction and Business Transaction Variant

Category Expense Account


0200 Customer Invoice
0300 Vendor Invoice
0400 Bank Account Statement
1000 Payment
1010 Clearing Transaction

3.4. Splitting Method

It is key element for Document splitting it actually define all the major of splitting
mention above. Example Business Transaction and variant for which splitting will take
place.

4. Implementation of Document Splitting:

Document Splitting need to be activated in SAP.

But in order to activate Document Splitting following Configuration is required:


4.1. Document Splitting Activation

SPRO Path: Financial Accounting (New) -> General Ledger Accounting (New) ->
Business Transaction -> Document Splitting -> Activate Document Splitting

When Activation executed


First Document Split Check Box need to be marked and a pre-configured Document
Splitting Method need to be choose.

Here it must be noted that Document Splitting activate on client level but it can be
deactivated by Co Code.

4.2. Document Splitting Method

Document Splitting Method actually Determine which Business Transaction and Variant
will activate split and it is applicable for which GL accounts as base category and
accounts which is to be split.

SPRO Path : Financial Accounting(New) -> General Ledger Accounting (New) ->
Business Transaction -> Document Splitting -> Extended Document Splitting -> Define
Document Splitting Method

First Splitting Method is defined as an identifier

For example here we have choose Method 0000000012 Follow Up Cost line. Next this
Method identifier is configured in Splitting Rule.

4.3. Document Splitting Rule

SPRO Path : Financial Accounting(New) -> General Ledger Accounting (New) ->
Business Transaction -> Document Splitting -> Extended Document Splitting -> Define
Document Splitting Rule

In Splitting Rule first it is define that splitting method will be activated for which
Business Transaction and variant.

Next we need to define that this Business transaction will split which type of Account
(e.g. Vendor, Customer etc.)
Splitting Method are pre-defined by SAP .In order to implement document splitting
following elements need to be configure

In order to Activate Document Splitting we need to Define Splitting Rules. But in order to
have correct rule we need to first define few important elements.

4.4. Assign Item Categories to GL account

All splitting rule are define for item categories which is in turn define for a set of
GL accounts

Choose Chart of Account:


Maintain Range of Account for Item Categories:

Note that Categories are pre-defined in system.

4.5. Classify Document Types

To bring relevant Business Transaction and variant for Document Splitting a


Document Type need to be defined.
Here for given document Type Business Transaction and variant are defined:

Here we defined Vendor Invoice for Transaction 0300 and variant 0001

4.6. Define Zero Balance Account

As discussed above we have to configure zero balance account


4.7. Define Document Splitting Characteristics:

This is step is most critical, here we define document splitting will take place on which
characteristics (e.g. Profit Center, Segment)

As it can be seen for our example we choose Profit Center.

Splitting Characteristics can also define for Controlling and Asset Accounting if required.