special GL transaction VS. special purpose ledger

What is special GL transaction?

 

Special GL transactions are those transactions other than the regular transactions in AR and AP. For Ex: Down Payments ( Made r Received) These transactions will be identified through a special indicater.          

For Ex. For Down Payment request F
                  Down Payment              A
                  Bills of Exchange           W
Mainly we use this Special Gl s  for identifying easily and for clear information vail preparing B/S Because advances paid will be considered as Asset Currents in B/S .in the same  manner advances Received.

 

 

Let us take up a NORMAL TRANSACTION ( relating to a sale made to customer ) to understand what a SPECIAL GL TRANSACTION and how it differs from a normal transaction.

NORMAL TRANSACTION explained in sequential order:

1. SALE TO CUSTOMER for US$100:

Customer Account Debit 100US$
  (Individual Customer Account affected in Sub ledger and   Customer Reconciliation Account debited in GL)

Let us also remember that Customer Account is a CURRENT ASSET in the Balance sheet (viz. money due to us pending receipt from customer )

Sales Account Credit   100US$ (Sales Account affected in GL)


2. RECEIPT OF PAYMENT FROM CUSTOMER for 100US$

Bank account Debit  100US$ (Bank account affected in GL)

Customer Account Credit 100US$
  (Individual Customer Account affected in Sub ledger and Customer Reconciliation Account credited in GL)

The entire NORMAL transaction stands cleared. Please pay special attention to the sequential order of events mentioned above.

Now let us consider the following Scenario:

The customer makes a DOWNPAYMENT even before we make a Sale.

We raise our Sale invoice subsequently.

Here the sequential order of events is the other way around though the transaction pertains to a customer sale and collection of payment from him / her.

If downpayment has been received from a customer and we are yet to raise our Sale invoice, then the downpayment is a CURRENT LIABILITY to our Customer on our part even though customers are listed as current assets in the Balance Sheet.

Such Exceptional treatment is handled using an alternative Reconciliation Account in the GL.

Let us journalize the SPECIAL GL TRANSACTION now:

3. RECEIPT OF DOWNPAYMENT FROM CUSTOMER US$100

BANK Account Debit US$100 (Bank account affected in GL)

Cutomer Account CREDIT US$100 (Individual Customer Account affected in Sub ledger and
a SPECIAL Customer Reconciliation Account debited in GL. Please note that this reconciliation account would be Listed as a Liability in the GL).


4. SALE TO CUSTOMER for US$100:

Customer Account Debit 100US$
  (Individual Customer Account affected in Sub ledger and   NORMAL Customer Reconciliation Account debited in GL)

Sales Account Credit   100US$ (Sales Account affected in GL)

Please pay special attention to the sequential order of events mentioned above.

While comparing transactions 3 and 4, we see that there is an unadjusted debit in a NORMAL reconciliation account and an anadjusted credit in a SPECIAL Reconciliation Account.
However, the sale as well as collection of payment stand accounted. The only extra thing that we see is a customer debit and customer credit remaining unadjusted in two different reconciliation accounts ( a normal reconciliation account as a current asset and a special reconciliation account as a liability- both in the GL). This is reversed by using the option downpayment clearing.

In general, any transaction which uses a different sequential order of events is treated as a SPECIAL GL
TRANSACTION by creating ADDITIONAL RECONCILIATION ACCOUNTS IN THE GL. This principle applies to Vendor related transactions also.

Of course, there are a few other such transactions ( such as downpayment requests, guarantee commitments etc. ) which also happen using additional reconciliation accounts in the GL but such transactions would not have any accounting significance (BALANCE SHEET and PROFIT AND LOSS ACCOUNT DO NOT get updated). They are for information purposes only usually appearing as notes to balance sheet or serve as mere reminders.

 

 

What is special purpose ledger?

Special purpose ledger is used for reporting purpose. It receives data from all modules and summarizes data for user 
defined reporting purpose.	
The Special Purpose Ledger is used for statutory reporting or mangement reporting purpose.  It also help us in doing 
single entry, adjstment posting like income tax deperication. Special purpose ledger used for reporting 
purpose only to meet  the requirement of needs say internal and external.

Steps for cofig. 
- Define Table Group 
Financial Accounting -> Special Purpose Ledger -> Basic 
Settings -> Tables -> Definition -> Define Table Group