Non leading ledger helps in parallel accounting. Explain with example


Every company code needs to maintain different set of account books using different accounting principle. When a financial transaction happens, financial document is recorded in different books and this is referred as parallel accounting. Non leading ledger enables parallel accounting.

 

Let’s understand the concept of non leading ledger with example.

Nike headquarter at USA has subsidiaries in India (company code 1200) and Australia (company code 1100).

Both company code is required to produce financial reports using different accounting principle and in various currencies.

Below picture showing accounting books needed for Nike India .

non leading ledger

Parallel accounting using ledgers

 

Nike India is required to prepare financials

  • For group reporting using US GAAP in INR, USD --- Fiscal year 1st OCT to 31st SEP
  • For local authority using local GAAP in INR --------Fiscal year 1ST APR to 31st MAR
  • For global reporting in IFRS in INR, USD ----------Fiscal year 1ST APR to 31st MAR

Hence Nike India needs to maintain three different set of books.

Whenever a financial transaction happens, accounting document should be recorded appropriately in different books.

non leading ledger

Scenario 1, 2 & 3: Documents are updating all ledgers 0L, N1 & N2.

Scenario 4: Documents are updating only ledger 0L & N1. (Ledger specific document posting)

Scenario 5: Documents are updating only N1 & N2 . (Ledger specific document posting)

Scenario 6: Document is updating only 0L.  (Ledger specific document posting)

 

Normally when document is posted, data flows to all ledgers as shown in scenario 1, 2 &3.

But specific accounting principle may require adjustment hence ledger specific documents are posted as shown in scenario 4, 5 & 6. This helps in maintaining multiple set of books independently.

 

Now let’s understand difference between leading ledger and non-leading ledger.

Leading ledger

Leading ledger is the primary ledger or lead ledger. Leading ledger is always represented by 0L.

Leading ledger 0L is automatically created by sap and assigned to all the company codes. When a financial transaction happens, financial document always gets posted in leading ledger.

It’s a standard practice to keep accounting principle of leading ledger same as the group’s accounting principle (accounting principle in which consolidation has to happen).

Leading ledger configuration

Non leading ledger

Non leading ledger is used for maintaining books in accounting principle other than group’s accounting principle (accounting principle in which consolidation has to happen).

You may create as many non leading ledgers as you want but sap allows only one leading ledger. Standard practice is to keep ledger 0L as the leading ledger.

Non-leading ledgers require adjustments hence ledger specific documents are posted (as shown in scenario 4, 5 & 6).

non leading ledger configuration

What is ledger group? What is the use of ledger group?

A group of ledgers is called ledger group. Ledger group helps in posting ledger specific document.

 

How to post a ledger specific document?

While posting a financial document, the field ‘Ledger Grp’ decides which ledgers will be updated by the document.

ledger specific posting

How ledger specific document can be posted.

 

If no input provided in the filed ‘Ledger Grp’ then document gets posted in each ledger.

If input is provided in the field ‘Ledger Grp’ then document gets posted in ledgers belonging to the ledger group.

 

Is it possible to post customer/ vendor account only in non leading ledger?

No, ledger specific documents cannot be posted for customer/ vendor account.

Customer/ vendor accounts will always be posted in all ledgers.

When posting customer/ vendor account, the field ‘Ledger Grp’ needs to be empty. No input should be provided in field ledger group.

 

Does a separate document number gets posted for each ledger.

Document number in non-leading ledger may be different from document number in leading ledger. Consider below two cases

Case 1: Fiscal year variant and posting period variant of non leading ledger is same as leading ledger

Outcome: Non leading ledger inherits the document number from leading ledger.

 

Case 2: Fiscal year variant and posting period variant of non leading ledger is different from leading ledger

Outcome: Document number in non leading ledger is different from document number in leading ledger.

 

Document number range needs to be assigned to document types in non leading ledger.

Summary:  Leading ledger VS non leading ledger

Leading ledger

  1. It’s the base ledger which updates the consolidation.
  2. Only one leading ledger can be defined, sap provides leading ledger ‘0L’ which is assigned to all the company codes by default.
  3. Inherits properties (fiscal year variant, posting period variant and 1st currency) from company code
  4. Leading ledger is integrated with all non-leading ledgers.
  5. Only values from leading ledger flow from finance to controlling.

Non-leading ledger

  1. Non leading ledgers are activated by company code.
  2. Fiscal year variant, posting period variant can be different from leading ledger.
  3. Separate document number range can be assigned to document types in non leading ledger.
  4. Second local currency (LC2) and third local currency (LC3) can only be picked from currencies assigned to leading ledger.
  5. Non leading ledger enable parallel accounting by applying different accounting standards such as IFRS/ IAS or US GAAP etc.