What is Retained Earnings Account & How to Define in SAP S4 Hana

What is Retained Earnings Account in SAP

At end of every fiscal year (Financial Year), the SAP Hana system carries forward account balances of the Profit and Loss Account (P&L) to the retained earning account.

Scenario: At the end of every year, we perform the balance carry forward activity. So the closing balance of the financial year becomes the opening balance for the next year. Retained Earnings Account helps to perform this activity.

Retained Earning Account – Scenarios

• You can assign retained earning account to the Profit and Loss account by specifying the P&L account type in the chart of accounts area
• You can maintain one or more profit and loss statement account types per chart of accounts and assign them to retained earning accounts.

How to Define Retained Earning Account in SAP S/4 Hana

You can define retained earnings account in SAP S/4Hana by using transaction code “OBD4” or menu path.

• IMG Menu Path – SAP Customizing Implementation Guide > Financial Accounting > General Ledger G/L Accounting > Master Data > G/L Accounts > Preparations > Define Retained Earnings Account
• Transaction code: OB53

Step 1: Execute transaction code “OB53” in command field to define retained earnings account in SAP S4 Hana

Step 2: Enter chart of accounts – ADCA and press enter from the keyboard to continue.

Step 3: In the next screen – “Configuration Accounting Maintain Automatic Posts Accounts” update the following required details to define retained earnings account in the SAP S/4Hana system

• P&L statement acct type – You can update the P&L statement account type with the letter “X”
• Account – Assign G/L account from Reserve and Surplus account group “120001” to profit and loss statement account type. You can leave the accounting field as empty for time being and once you create the G/L account for retained earnings account, you can assign it here.

Note: All the balances will be carry forwarded to this G/L account 120001.

Step 4: Click on the “Save” button to save the configured retained earnings account. You will get a warning message as “Account 120001 not created in a chart of accounts ADCA“, ignore the warning message, and again press enters from the keyboard to save the retained earnings account.

Successfully we have maintained retained earnings accounts in SAP S/4 Hana.

Project Work – Work Space

Now it is the time to practice and learn how to define the retained earning account to carry forward the previous year’s balances.