SAP S/4HANA Finance: Understanding the Extension Ledger System and its Benefits

The finance industry is experiencing a tremendous wave of change, with evolving customer preferences, compliance procedures, and technological shifts. In this dynamic environment of high finance, SAP plays a vital role as a platform that helps place all businesses’ financial transactions and extracts value from them. SAP ensures a steady economic growth curve and gives a technological edge within different domains of the finance industry.

SAP S/4HANA Finance and General Ledger

SAP S/4HANA Finance is one of the primary ERP solutions. SAP S/4HANA Finance is successor to SAP ERP Financial, which was first released in 2014 and has had many enhancements since then, including single-source financial reporting, real-time financial reporting, and predictive accounting analysis. It provides users with a brief overview of all inputs regarding financial needs.

The general ledger is an essential part of SAP ERP. It offers a comprehensive overview of the client’s financial data, including internal and external accounting tasks, enabling precise reporting across an organization’s structure.

Understanding SAP S/4HANA Finance and General Ledger

Ledgers in SAP S/4HANA Finance store various accounting documents. Therefore, the general ledger’s role is to provide an overview of the accounts in alignment with business transactions in SAP.

Extension ledger S/4HANA is part of operational activities. Therefore, it ensures that the data it gathers is accurate. The documents stored in ledgers follow the standards of legal accounting and financial statements, which are taken into account by different types of principles in SAP. This method facilitates organizations in recording financial input or transactions in a standardized format.

Types of Ledgers in SAP S/4HANA Finance

As explained above, two types of Ledgers exist in SAP S/4HANA Finance. Ledgers in SAP S/4HANA Finance are of two kinds. These are the following:-

• Standard Ledgers (Leading and Non-Leading Ledger)

It maintains a complete record of all the financial transactions (credit + debit) that is done on a daily basis in any business.

If we are talking from the context of SAP S/4HANA Finance, there are two types of ledgers – leading and non-leading.

Leading ledger: it is the primary ledger from which all the non-leading ledgers derive their value. All documents posted in leading ledgers automatically flow to the non-leading ledger but not the other way around.

Non-leading ledger: it is dependent on the leading ledger as a secondary ledger. These are parallel ledgers based on local accounting principles. They find applications in reporting like International Financial Reporting Standards (IFRS) and taxation.

• Extension Ledger in SAP S/4HANA

Extension ledger in SAP S/4HANA module has also been unveiled. There are two types of ledgers, leading and non-leading, which are standard ledgers. Furthermore, extension ledger in S/4HANA fico can be used for CO reporting. These ledgers are layers on top of an underlying ledger, preventing duplicated ledger data.

Records created in the leading Ledger in ACDOCA are not copied into Extension Ledgers in table ACDOCA. The system implicitly assumes that records written for Leading Ledger are part of Extension Ledger.

The ACDOCA is an addon in SAP HANA which is based on the Universal Journal line items, containing all of the financial fields, as well as a lot of information from other modules.

Below is a screenshot of what an ACDOCA table looks like –

Key features of SAP General Ledger System

Take a detailed look at the primary features of the SAP General Ledger Module for business owners:

Parallel Accounting

The general ledger facilitates many accounting activities, enabling companies to manage different accounting activities, such as GAAP and IFRS, while also fulfilling reporting requirements.

Segment Reporting

Using general Ledger in SAP will let users create segment reports that can help generate detailed reporting by segments, cost centers, and new relevant organizational structures, further enabling financial reporting and analysis granularity.

Document Splitting

The general module allows split documents to help businesses with a diverse structure and help them with financial transactions of different verticals with complete data.

Cost of Sales Accounting

Users can leverage the SAP platform and perform cost-of-sales accounting activities, which thereby multiplies accounting capabilities and ensures seamless business transactions with accounting standards.

Leveraging SAP General Ledger for Financial Optimization

S/4HANA Finance is an ERP solution developed exclusively for supporting the financial planning and accounting processes in commercial establishments. It can be deployed either on-premise or on the cloud. With unmatched flexibility, it provides users with an extensive overview of all financial and operational data.It maintains a complete record of all the financial transactions (credit + debit) that is done on a daily basis in any business.

SAP General Ledger and its role in financial data management

The General Ledger (G/L) is the core of Financial data management and financial accounting. All financial and business transactions are posted to G/L accounts, and data is managed comprehensively across the ledger.

Importance of accurate reporting and analysis

SAP S/4HANA Architecture lets you automate your financial reporting processes. With SAP, you can quickly access financial transactions and data across multiple domains. It also displays a centralized view of all the financial data and information, enabling users to analyze and compare financial data between different business inputs. It has a seamless and easy user interface to help users create reports with accuracy and reliability. S/4HANA also allows real-time reporting and analysis.

Dive Deep into the Benefits of Extension Ledgers in SAP S/4HANA

• Flexibility – Extension ledger in SAP  are highly flexible and super easy to set up. No data migration activity is required. Once the configuration is complete, historical data is restored.
• Reuse of existing reports – Our reports indicate that the standard ledgers dwell nicely with the extension ledger in S/4HANA. This is essentially true for analytical apps and classical SAP GUI reports.
• Reduced data footprint – Data footprint is significantly reduced while working with an extension ledger in SAP.

Use Cases Of Extension Ledgers in SAP

Adjustments Ledger

Organizations usually have genuine management reporting requirements. The companies that use a standard ledger system need their data to be regrouped, elevated, and changed. Previously, you could use a particular ledger or another parallel ledger or include objects. However, these solutions could be more efficient and come with various problems.

Setting up an extension ledger in SAP will enable you to update the following

• Adjusting Management Reporting
• Recording entries post-closure
• Topside adjustments
• Tax purpose adjustments

Extension Ledger in SAP Setup

Creation Procedure

Create an Extension Ledger in S/4HANA using the accounting system’s configuration path: Follow Financial Accounting Standards > Financial Accounting Global Settings Standards > Open Ledgers > Ledger > Click on Define Settings for Ledgers and Currency Types. Press F5 to create an extension ledger in SAP.

Company Code Setting

Once you have created the extension ledger in S/4HANA, check the company code setting. Take note of the dialog structure, and go to the company code setting of the ledger. The open ledger for the extension ledger in SAP is ledger OL. The ledger indicates all organization codes in the platform that have ledger OL.

Assigning Accounting Principles

Now, you need to assign an accounting principle to the ledger, which will be similar to the accounting principle referenced to the reference ledger. Open the accounting principles for the ledger and company folder. Press F5 to create a new line for Accounting Principle LG.

Consulting Services and Recommendations

Accely provides expert consultation services for leveraging SAP S/4HANA Finance and General Ledger. From implementation to optimization, we ensure compliance and boost operational efficiency. Unlock the potential of SAP solutions with Accely and drive transformative changes in your SAP S/4HANA financial module process.

Conclusion

SAP S/4HANA Finance has shown significant promise and driven tangible results. The in-memory computing capabilities of SAP HANA are an added advantage when you think of adopting this platform. The benefits of SAP HANA enable you to enhance your computer prowess.

As the business landscape continues to change significantly, the leaders of our generation will need transformative technologies to keep pace with dynamic business needs. Considering SAP HANA to meet these business challenges will be of incredible help.

Contact us, and we will help you improve your financial management and accounting system.