Transaction with customer needs to be recorded in account books. With each transaction with customer, account receivable may decrease or increase. Hence each customer is to be linked with GL account (account receivable). Whenever transaction with customer is entered, corresponding GL account mapped with customer is posted.
Now let’s consider below two scenarios:
Each customer is mapped with a different GL account.
When transaction with customer C1 is entered, GL account “GL1” is posted.
When transaction with customer C2 is entered, GL account “GL2” is posted.
When transaction with customer C3 is entered, GL account “GL3” is posted.
and so on…
Now if company has 1000 customer, then 1000 different GL accounts will be needed. This increases the number of GL account in chart of account. When number of GL account in chart of account increases, difficulty to manage the accounts increases as well.
Hence, we try to achieve the objective of mapping customer to GL account while keeping number of GL accounts as low as possible.
Hence this approach of mapping each customer to a different GL account is not used in sap.
Multiple customers is mapped to same GL account.
When transaction with customer C1 is entered, customer reconciliation account is posted.
When transaction with customer C2 is entered, customer reconciliation account is posted.
When transaction with customer C3 is entered, customer reconciliation account is posted.
and so on…
Hence, when customer transaction is entered, corresponding customer recon account is posted. Since multiple customers are mapped to same GL recon account hence required number of GL accounts is reduced to a great extent. This reduces the size of chart of account.
What do you understand by the term recon?
Recon stands for reconciliation account.
Net balance of customers (C1, C2, C3, C4 & C5) should be equal to net balance in GL customer recon account.
Hence, net balance of customers (sub-ledger) should always reconcile with net balance in GL recon account in finance (main ledger).
Hence, GL account mapped to customer is called reconciliation account or recon account.
Recon account cannot be directly posted. Recon account is automatically posted when posting to customer happens.
How to define a GL account as recon account?
GL account is defined as reconciliation account in GL master as shown in below picture.