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Financial closing is critical and accrual accounting is at its core, yet many organizations still struggle with manual spreadsheets, fragmented processes, and error-prone journal entries that slow down period-end close and compromise accuracy.
SAP S/4HANA's Accrual Engine changes everything. This powerful functionality automates the calculation, posting, and reversal of accruals, delivering efficiency, consistency, and transparency across your enterprise. By integrating seamlessly with Financial Accounting (FI), Controlling (CO), and Materials Management (MM), it provides a centralized approach to managing both manual and purchase order–based accruals.
This comprehensive guide bridges accounting theory and system implementation with practical, step-by-step instructions. Learn how to configure and operate manual accrual objects for prepaid expenses and recurring services, as well as purchase order–based accruals for timing mismatches between goods receipt and invoicing. The book covers complete configuration, end-to-end execution from proposal runs to posting, and advanced enhancements using BAdIs.
Whether you're a finance professional, SAP consultant, or business user, this book will equip you to design and operate accrual processes that reduce manual effort, improve accuracy, and accelerate financial close.
In this section, we outline the fundamental procedures for implementing manual accruals in SAP S/4HANA. These procedures can be refined or adjusted to align with your specific business needs.
This customizing activity enables you to preset the application component whose Accrual Engine you want to configure.
Each time you start a customizing activity for the Accrual Engine, the system displays a popup asking you to enter the application component for which you want to perform the required customizing activities.
Because you will typically make most Accrual Engine customizing settings for a single application, you can avoid this popup by presetting the application in this activity.
To do so, open the value help (press F4) and select the relevant application from the dropdown list in the Component field. Once you have entered your application component, the system will no longer show the popup when you start an Application Engine customizing activity (see Figure 2.1).
Figure 2.1: “Application Component” window
Use the following IMG path to access the node for customizing the application component: Accruals Management • Set Application Component.
Be aware that presetting the application component means that the Application Component field will be read-only and cannot be overwritten in the Accrual Engine customizing activities. To change the preset value to a different application, you have to return to this activity.
Because we are working with manual accrual objects, the application component to configure is ACAC.
In this step, you assign the company codes for which the Accrual Engine should be active. The assigned company codes can then be used to calculate and post the accruals. For this step, use transaction ACEIMG or follow the IMG path Accruals Management • Basic Settings • Assign Company Codes.
Select Assign Company Codes (see Figure 2.2).
Figure 2.2: “Assign Company Codes” selection
After selecting Assign Company Codes, a pop-up window will appear with the preselected Application Component: ACAC (see Figure 2.3). Press Enter.
Figure 2.3: “Application Component” field
The list of the company codes that have already been assigned to the Accrual Engine is displayed. Select New Entries from the ribbon and add company code ACCR. As shown in Figure 2.4, the added company code ACCR will then be displayed in the list.
Figure 2.4: Company code assignment
In this configuration step, you define the accrual item types for the accrual objects you previously created. An accrual item type classifies an accrual item. The system calculates and posts accruals for each accrual item.
We will use the following accrual item types:
You can maintain the configuration for accrual item types using transaction ACEIMG or by following IMG path Accruals Management • Basic Settings • Accrual Item Types • Define Accrual Item Types.
To execute the prepaid insurance expense example that we introduced in Section 1.2.1, we will leverage the ACCRUALS item type, as shown in Figure 2.5.
Figure 2.5: Defining the accrual item type
In this configuration, you maintain the item type settings for the ledger group. The two primary configuration settings that need to be maintained here are the company codes and the ledger group to which the accrual entry needs to be posted.
To execute the prepaid insurance expense example that we introduced in Section 1.2.1, we define the Accr Item Type as ACCR and assign it to Ledger Group 0L. The Posting Frequency is defined as Per Posting Period (see Figure 2.6).
Figure 2.6: Maintaining accrual item type settings for the ledger group
Several additional settings can be maintained, including the following (see Figure 2.7):
Figure 2.7: Item type settings for the ledger group, including the representative ledger
You can assign the Threshold Variant on the level of the company code, accrual item type, ledger, and currency type. The system applies the thresholds you define only if the review or the approval process is active in the relevant company code, accrual item type, ledger, and currency type. The threshold variant defines thresholds for accrual amounts, not for planned costs or actual costs. This means that you can only assign a threshold variant to accrual item types representing accruals, not to other accrual item types.
If the accrual amount in a given period is equal to or above the upper threshold, the accrual amount will not be automatically approved. The responsible user, who is typically a GL accountant, will have to manually approve the accrual amount on the screens for reviewing and approving accruals. If the accrual amount in a particular period is less than the upper threshold, but above or equal to the lower threshold, the system automatically approves the accrual amount.
Equal threshold amounts
If you do not want the system to approve accrual amounts automatically, you can enter the same amount for both the upper and lower threshold amounts. This prevents accruals from being automatically approved by the system and requires them to be approved manually.
If you only activate the review process for the accrual item type and not the approval process, the review process functions in the same way as the approval process described above.
The approval interval variant defines the time intervals used for reviewing and approving periodic accrual amounts. You can assign this variant to company codes, accrual types, and accounting principles.
These settings are used by the Review and Approval of Accruals view. The time intervals defined for reviews and/or approvals are only applied if the approval or review process is active for the relevant company code, item type, ledger, and currency.
You can define the threshold variants via the following menu path: Accrual Management • Review and Approval of Accruals • Thresholds for Review and Approval of Accruals • Define Threshold Variants (see Figure 2.8).
Figure 2.8: “Define Threshold Variants” screen
Here, you can define the thresholds for accrual amounts that will be manually reviewed.
You can define the lower limit and upper limit of a threshold for the review and approval of periodic accrual amounts. Then you can assign this threshold variant to company codes, item types, ledgers, and currency types using the Define Accrual Item Types activity. The following list outlines these configuration settings in more detail:
Accrual amount approval
If you do not want the system to approve accrual amounts automatically, enter the same amount for both the upper and lower threshold amounts. This prevents accruals from being approved automatically and requires them to be approved manually.
When you maintain the threshold variant setting, enter the value that the Accrual Engine should use to control the review and approval for the relevant company code, accrual item type, ledger, and currency type. In practical terms, this is the amount and currency basis that the finance team uses to decide whether a periodic accrual can be processed automatically or has to be checked manually. For example, if the company code ACCR has the company code currency USD and the threshold variant is intended to control material accrual differences in the leading ledger, you might enter $500 for the lower threshold and $5,000 for the upper threshold. Amounts below the lower threshold are not posted automatically. Amounts from $500 up to $4,999 can be automatically approved, and amounts of $5,000 or more require manual review or approval, depending on the review active and approval required settings.
Choose the currency type and value so that the threshold is compared against the currency in which the business monitors the accrual. If the company manages the threshold by legal entity, use the company code currency. If the decision is made for a specific ledger or ledger group, align the setting with the ledger currency used for that ledger. If the accrual amount is held in another transaction currency, the Accrual Engine converts it to the threshold currency using the configured exchange rate type and conversion date before applying the threshold. Therefore, keep the threshold currency consistent with the review policy:
The time interval variants for review and approval variants are defined using the following menu path: Accruals Management • Review and Approval of Accruals • Define Time interval Variants (see Figure 2.9).
Figure 2.9: “Define Time Interval Variants” configuration node
If you select Define Time Interval Variants, the screen shown in Figure 2.10 will open.
Figure 2.10: “Define Time Interval Variants” screen
If the Default checkbox is selected, the system will use this variant as the default option if no other variant for review and approval time intervals is assigned to the company code and accrual type.
As part of each variant, Time Intervals for Review and/or Approval are defined as part of customizing activities (see Figure 2.11).
Figure 2.11: “Time Intervals for Review and Approval” screen
Here, you define date and time intervals (time slots) during which the review and approval of accrual amounts for a given period can be performed in the Accrual Engine.
For each period, you define a separate time slot for review and approval. This results in an additional key date field called Last Day of Period.
In this step, you configure the currency types and ledgers for accrual item types. This is maintained via transaction ACEIMG or by following IMG path Accruals Management • Basic Settings • Accrual Item Types • Assign Currency Types to Accrual Item Types. The system provides three options for determining how accrual amounts are handled for the additional currencies in the GL.
By default, the Accrual Engine calculates accrual amounts in the transaction currency (currency type 00). For all other currency types, the system performs a currency conversion. If you use additional currencies in the Accrual Engine (transaction currency 00), you must specify how the system handles them.
The available options are:
Figure 2.12: “Currency Handling”—By Accrual Engine
Figure 2.13: “Currency Handling”—Calculated by General Ledger (by Curr. Conversion)
Example—missing currency type configuration
Consider an example: for accrual item type COSTS and ledger group , you have not created an entry for currency type 10 and the leading ledger 0L in the customizing settings for the accrual item type. As a result, the system calculates the accrual amounts in currency type 10 by converting the accrual amounts from the transaction currency.
Figure 2.14: “Currency Handling”—None (Amount Always Zero)
Accrual methods define the calculation rules that the Accrual Engine uses to calculate accrual amounts. They also define the algorithm for calculating periodic amounts. In this activity, you define the accrual methods that control how amounts should be accrued for example, straight-line or declining balance accruals. You need to assign a class to each accrual method that specifies how the system calculates accruals. The class you use for an accrual method must have a defined interface. You can use class CL_ACE_CFG_METHOD_LINEAR_P1 as a template (see Figure 2.15).
Figure 2.15: “Accrual Methods: Overview” screen
The key steps to perform are as follows:
1. Enter a key with two or more digits in the Accr Meth (accrual method) field.
2. In the ABAP Class for Accrual Calc. field, enter the function module for your accrual method.
3. In the Accrual Method Text field, enter a description for your accrual method.
4. Save the accrual method by pressing the Save button at the bottom-right corner of the screen.
To execute the prepaid insurance expense example outlined in Section 1.2.1, which involves a linear reduction of a prepaid expense over the contract term, set the Accr/Defrl Meth… (accrual/deferral method) field to LINEAR. This value will be assigned to the corresponding accrual object, as shown in Figure 2.16.
Figure 2.16: Assigning the accrual method to an accrual object
A posting schema defines how the Accrual Engine structures the accounting document that is created during accrual posting. It determines the line items to be generated, the symbolic GL accounts to be used, and the line item types assigned to those posting lines. For example, standard schemas such as SAP_ACE_PP are used for periodic accrual postings, while other schemas can be assigned for opening or final postings depending on the Accrual Engine transaction type.
In this customizing activity, you can display the posting schemas delivered by SAP or create your own. Access them via transaction ACEIMG or via IMG path Accruals Management • Accrual Postings • Define Posting Schema. As part of the posting schema, the first element you define is the Symbolic Account, which represents an account that is independent of the chart of accounts (see Figure 2.17). During posting, the system derives the appropriate account from the symbolic account using account determination.
Figure 2.17: Posting schema symbolic accounts
Posting Schema defines which line items a posting can contain, and each line item corresponds to a separate posting schema item (see Figure 2.18).
Figure 2.18: “Posting Schema” screen
Posting Schema Items are the individual line definitions within a posting schema (see Figure 2.19).
Figure 2.19: “Posting Schema Items”
Each item tells the Accrual Engine which accounting line should be generated when an accrual posting is created. In SAP terminology, a posting schema item typically defines the line item type, the symbolic GL account, and the way that line contributes to the journal entry. For example, a periodic accrual posting schema such as SAP_ACE_PP includes the line items needed to post the periodic accrual amount, including the required accrual line item type used by the Accrual Engine for periodic postings. The symbolic GL accounts assigned in the posting schema are derived through account determination so that the final accounting document posts to the correct operational GL accounts.
You can think of it this way: the posting schema defines the overall accounting structure, while the posting schema items define each individual debit or credit line that the system creates. These items allow SAP to support both standard two-line accrual postings and more complex postings with multiple line items when additional accounting split or business requirements apply.
Assigning accrual item types to the posting schema is a key configuration step in Accruals Management. This determines how accruals are posted and managed based on the business scenario and accounting requirements. The Accrual Item Type field defines the nature of the accrual (e.g., provisions or prepaid expenses), while Posting Schema defines which accounts the system uses and how the system posts accruals (see Figure 2.20).
Figure 2.20: “Assignment of Accrual Item Types to Posting Schema”
In this customizing activity, you carry out the following tasks:
The Accrual Engine can perform the following postings:
Example—utilization posting
Consider this example: accruals of $1,000 have been posted. A supplier invoice with a net amount of $300 is then posted. The P& L-relevant invoice line item references this accrual object. This invoice posting triggers a utilization posting, which credits the P& L account and debits the accrual account by $300.
In this step, you define the GL accounts to which accrual entries must be posted, as shown in Table 1.2.
| Posting schema | Symbolic account | Subledger-specific line item type | GL accounts |
|---|---|---|---|
| SAP_ACE_IP | INC_ACCR_ACCNT | 9001 | 125100 |
| SAP_ACE_IP | INC_OFFSTNG_ACCNT | 9053 | 111000 |
| SAP_ACE_PP | PER_ACCR_ACCNT | 9003 | 125100 |
| SAP_ACE_PP | PER_OFFSTNG_ACCNT | 9053 | 530070 |
Table 2.1: Account determination for manual accruals
To comply with the accrual object accounting treatment specified in Section 1.2.1, we configure the corresponding account determination settings, as illustrated in Figure 2.21.
Figure 2.21: “Account Determination for Manual Accruals”
The initial posting that established the prepaid expense was completed using the symbolic accounts INC_ACCR_ACCNT and INC_OFFSTNG_ACCNT, which are mapped to the posting schema SAP_ACE_IP.
The initial journal entry is as follows:
Dr Prepaid Insurance (Asset) GL - 125100 $36,000 Cr Bank/Cash GL - 111000 Listing $36,000
Periodic recognition of the monthly expense (January 31 and each subsequent month-end) is completed using symbolic accounts PER_ACCR_ACCNT and PER_OFFSTNG_ACCNT, which are mapped to posting schema SAP_ACE_PP.
The monthly journal entry is as follows:
Dr Insurance Expense (P& L) GL - 530070 $3,000 Cr Prepaid Insurance (Asset) GL - 125100 $3,000
The second type of accruals that can be managed in SAP S/4HANA are Purchase Order Accruals. Their underlying purchase order data can be transferred to the Accrual Engine automatically, either through online or offline processes. Once the transfer occurs, the purchase orders are converted into accrual objects in the Accrual Engine, and the accruals are automatically calculated, proposed, and posted.
Before we delve into the concept of Purchase Order Accruals, it is important to understand their necessity. These accruals are primarily required in situations where there is a timing discrepancy between the receipt of goods or services and the corresponding posting of expenses. By recording an accrual entry, expenses are recognized in the period in which the goods or services are received. This practice ensures that the financial statements accurately reflect the company’s liabilities at the end of each reporting period. The Purchase Order Accruals functionality, which was introduced as part of SAP S/4HANA’s Accruals Management in the 1809 release, uses the Accrual Engine to calculate and post accruals automatically in the GL based on purchase order data. The solution was designed to address a long-standing challenge in financial closing, ensuring expenses are recorded in the correct accounting period for unreceived or unbilled purchases, which previously required time-consuming manual calculations and journal entries.
In essence, Purchase Order Accruals creates accrual objects for purchase orders and derives periodic accrual amounts from the difference between planned costs (from the purchase order) and actual costs (from any receipts or invoices to date). At each period-end, the system can automatically post adjusting journal entries (debits to the expense and credits to an accrued liability) to recognize expenses that have been incurred (e.g., goods delivered or services provided) but not yet recorded via the usual invoice receipt (IR) processes. These accrual postings are subsequently reversed or adjusted when the actual supplier invoice or GR is recorded. This correctly aligns costs with the period to which they belong and ensures compliance with accounting standards for period-end cutoffs.
Key capabilities of Purchase Order Accruals in SAP S/4HANA include automatic calculation of accrual amounts from purchase order data, support for complex accrual calculation methods (e.g., delivery schedules and linear cost distributions), parallel ledger postings for multiple accounting standards, and an optional workflow-driven review and approval process before posting accruals. The end result is a faster, more accurate financial close with reduced manual effort and improved financial statement accuracy, as expenses and liabilities are properly matched to the period of consumption or delivery.
In Section 3.1, we begin with an overview of some common purchase order-based accrual examples. Section 3.2 provides a detailed explanation of the Purchase Order Accruals functionality in SAP S/4HANA. Section 3.3 discusses use cases and industry scenarios where purchase order-based accruals are particularly beneficial. Section 3.4 delves into accounting entries and GL integration, illustrating how the accruals are posted and reversed. Section 3.5 compares online and offline methods of transferring and updating accrual data, explaining the technical and business implications of each option. Section 3.6 describes the review and approval workflow for accrual objects, including the configuration of approval processes, the roles involved, and best practices.
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