Fixed Assets entries - Public Sector

[Former Member]

Hello!

I'm trying to better understand how Fixed Assets entries work in SAP for Public Sector, according to the requirements of different basis of accounting, full and modified.

Traditionally, governmental funds don't report fixed assets but expensed them. Then these expenses are "converted" to fixed assets in the government-wide statement through the conversion entry.

Now, in SAP, the entries are recorded ONCE for both basis of accounting, full and modified. Then the Contra account is used to balance the Modified basis entry, but it should be "ignored" (not picked up) in the Trial Balance.

So, my question is: how to balance the Trial Balance if one entry is supposed to be one side entry? what account in the rest of the Trial Balance should the Contra account be added to in order to balance it?

Confusing?

Yes, as mud!

Thanks so much for any help.

Carol

[Former Member]

Sorry

We are confused also by your question.

Give us an example and we can try to help you

SAP uses normal accounting Debit and credit

[Former Member]

You link two depreciation areas to two ledgers in New GL (Book 1 is for modified accrual and Book 20 or 30 is for full accrual). When you make an aquisition, leading ledger (modified accrual) records it as DR Asset, CR Contra; full accrual ledger records it as DR Asset, CR Accounts Payable. When you run depreciation, leading ledger records it as DR Capital Expense 100% of the asset cost, CR Investment in GFA 100% of the asset cost; full accrual ledger records it as Dep Exp, CR Accum Dep. Your balance sheet for modified accrual is from the leading ledger and you group the Asset and the Contra account together and the total is zero. The Income Statement for modified accrual is also from the leading ledger and it shows capital expens and investment in GFA. Balance Sheet and Income Statement from the full accrual ledger is the regular stuff as private sectors.

Hope this helps

[Former Member · Accepted solution]

Some corrections. It should be like this:

You link two depreciation areas to two ledgers in New GL (Book 1 is for modified accrual and Book 20 or 30 is for full accrual). When you make an aquisition, leading ledger (modified accrual) records it as DR Asset, CR Accounts Payable; full accrual ledger records it as DR Asset, CR Contra. When you run depreciation, leading ledger records it as DR Capital Expense 100% of the asset cost, CR Investment in GFA 100% of the asset cost; full accrual ledger records it as Dep Exp, CR Accum Dep. Whatever posted to leading ledger will also be posted to that full accrual ledger. So, you will have

Trial Balance in leading ledger:

Asset

Investment in GFA

total is 0

Accounts Payable $X -

Capital Expense $X

Trial Balance in Full Accrual Ledger:

Asset $X

Contra $X-

Capital exp $X

Investment in AGF $X-

Total is $0

Asset $X

Accum Dep $Y-

Accounts Payable $X

Dep Exp $Y-

[Former Member]

Thank you very much. I still can't work out the entries for the Full Accrual. Following your entries:

Trial Balance in leading ledger:

Dr. Asset 100

Cr. Investment in GFA 100

total is 0

Dr. Capital Expense $100

Cr. Accounts Payable $100

It's all good up to here, but for Full accrual:

Trial Balance in Full Accrual Ledger:

1. Purchase:

Dr. Asset $100

Cr.Contra $100

2. Run depreciation:

Dr. Capital exp $20

Cr. Accum Deprec. $20

Total is $0????

Asset: $100

Accounts Payable (100)

Dep Exp 10

Accum Dep: (20)

How about the Contra of (100)?

I am told to "ignore" it as if it disappears from the planet by an eraser(!), but where do you add it back to balance the Trial Balance?

Thanks

Carol

[Former Member]

Hi Carol,

The key point is in New GL, all postings posted to the leading ledger will also be posted to the additional ledger. So in the additional ledger for full accrual you will have:

Dr Asset 100

Cr A/P 100

Dr Capital Exp 100

Cr Investment in GFA 100

and

Dr Asset (account for full accrual) 100

Cr Contra 100

Cr Accum Dep 20

Dr Dep Exp 20

Ttrial balance for full accrual:

Asset 100

A/P 100-

Accum Dep 20-

Dep Exp 20

You net the following:

Asset (account for full accrual) 100

Contra 100-

Capital Exp 100

Investment in GFA 100-

total is zero (you actually hide this group)

Regards,

Ming

[Former Member]

Hi Ji,

Thank you very much for your response. It solved a big issue for me: our consultants don't know what they're doing. This is what they told us:The fixed assets entries will be posted separately in 2 independent sets of books: 1 ledger for Modified basis and 1 ledger for Full basis. The entries for Modified basis stayed in the GL for Modified basis and the entries for the Full basis stayed in the GL for Full basis; not like you said the Modied entries will also be posted to the Full basis ledger. As a result, they told us to "ignore" the contra account because they couldn't explain how their entries balanced out. This is their flows:

Full basis entries;

Dr. Assets 100 (a)

Cr. Cash

Dr. Depreciation exp 20 (c)

Cr. Accumulated Depreciation 20 (d)

Then in GL ledger, not in AA, we need to book:

Dr. Fund Balance Unreserved 80

Cr. Investment in GFA 80

Modified entries:

Dr. Assets 100 (a)

Cr. Contra (b)

Dr. Depreciation exp 100 (c)

Cr. Accumulated Depreciation 100 (d)

Netting (a) with (d) results in 0 net book value for Assets. Depreciation expense is Capital expense of 100. So far so good; here's the problem: Contra account balance is just growing credit with no offsetting entries and should be "ignored" from the GL! Now, you understand why it raised my suspicion: since when accounting entries are one-sided entry and the other side should be "ignored" from the Trial Balance altogether?

Would you agree with me their entries don't make sense?

Thanks

Carol

[Former Member]

Hi Carol,

I agree with you. If this contra account has a balance and it can not be netted against any other account, it will have to be included in the the financial statement. But what is the nature of this account? asset? aquity? liability? It realy does not make any sense.

About two or three years ago, I attended SAP IS-PS workshop WUS920. It was based on 4.62. The instructor only brushed over the subject. I was totally confused. Came back and spent a lot of time over the slides and worked the whole thing out. I believe 6.0 based workshop is called WNAPSF. You might want to attend it. The slides you bring home can be very helpful. By the way, the transactions we discussed is only half of the story. I am sure you would also want to know how NewGL handles asset retirement with or without revenue and year-end carry forward for modified and full accrual. Believe me, it is tricky.

Regards,

Ming

[Former Member]

Hi Ming,

Unfotunately, I never had a proper training with SAP. I only learned SAP through "SAP expert concultants", and they either didn't explain the business transactions of fixed assets like you did. I don't think they understood any thing but T-code for processing say, adding assets. But they were unable to even tell me when they do a ABCXYZ T-code, what GL accounts are debited and credited. So, they came up with this explanation about "contra" account to "ignore in GL as if it doesn't exist!"

By the way, is there a Trial Balance in SAP? Our 6-figures consultants told us SAP doesn't have a Trial Balance because of all those accounts "to be ignored": contra, statistical, and budget entries all are one-sided entries and to be ignored in GL.

Don't make any sense to me, just based on my knowledge of accounting principle, SAP or not!

Thanks for the feedback.

Carol

[Former Member]

Hi Carol,

SAP has sample financial statements based on commomly accepted accounting princibles (GAAP, etc.). I do not believe there is a delivered GASB 34 B/S and Statement of Activities. I heared 6.0 Enhancement Packege 4 (sorry, I have to use the jargon) includes more US Public Sector stuff. Enhancement Packege 4 is still at the ramp-up (sorry, another jargon) stage. When I get a chance, I will do some research on it and let you know my findings. This is also for my own benifit. We need to make a decision on whether to apply enhancement pack 3 or beeing a ramp-up customer of enhancement pack 4.

Regards,

Ming

[Former Member]

Hi Ming,

I have been trying to piece together our FI-AA entries for the last few weeks and am now pretty comfortable with the acquisition side, but I am having a hard time figuring out the retirement side. It appears the Contra Asset on the Full Accrual side is not Debited when a retirement is recorded, which then places the Full Accrual Asset and the Contra Asset out of balance from each other. Is this appropriate? I was noticing that now the Loss account on the Full Accrual side is (or should) make up the difference between the Asset and Contra Asset but I was not sure this was the proper way to look at this. Additionally, I am having some difficulty distinguishing the differences in the accounting entries when an asset has prior and current year expenditures that are to be retired. Did you get a chance to finish looking into the retirement/closing piece you referenced in your last discussion? I would love some feedback as your answers were the most helpful information I have found.

Thank you!

-Amber

[Former Member]

Hi Amber,

No it does not debit Aasset Contra. It is supposed to debit Investment in GFA.

I will TRY to answer your other questions later.

Regards,

Ming

[Former Member]

Hi Amber,

My earlier answer was not correct. I lookd it up in my old SAP training manual plus some correction documentations SAP gave us. Here is how it works:

Some key points:

- Leading ledger -> Depreciation Area 1 ->Modified Accrual

- Non-Leading Ledger -> Depreciation Area 20 -> Full Accrual

- Postings on leading ledger also apears on non-leading ledger

- Capital Outlay -> Carried forward to Fund Balance (retained earninga account) at yearend

- Dep Expence -> Carried forward to Net Assets - Dep (retained earning account) at yearend

Scenario: At the end of 1st year, APC= $200, depreciation expense = $40; asset retires in 2nd year.

At the beginning of 2nd year

Leading Ledger - Modified Accrual - Balance Sheet

1. Assets

- Cash $200-

2. Fund Aquity

- Fund Bal - Cap Outlay $ 200

3 Net Zero

- Assets $200

- IGFA $200-

- capital Outlay 0

Non-Leading Ledger - Full Accrual - Balance Sheet

1. Assets

- Cash $200-

- Area 1 Assets $200

- Accum Dep $40-

Total $40-

2. Net Assets

2.1 Invested in Capital Assets

- Fund Bal - Cap Outlay $200

- IGFA $200-

- Capital Outlay 0

- Area 20 Contra $200-

Sub-tot $200-

2.2 Unrestricted Net Assets

- Net Asset - Dep $40

- Area 20 Assets $200

- Dep Exp 0

Sub-tot $240

Total $40

I will do the asset retirment in my next post. This is getting too long

Regards,

Ming

[Former Member]

Hi Amber,

Continue of the discussiion. Same scenario: retiring asset in 2nd year.

Leading Ledger

DR IGFA $200

CR Area 1 Assets $200

Non-Leading Ledger

DR Accum Dep $40

DR Gain/Loss $160

CR Area 20 Asset $200

Leading Ledger - Modified Accrual Balance Sheet

1. Assets

- Cash $200-

2. Fund Aquity

- Fund Bal - Cap Outlay $200

- Capital Outlay 0

3. Net Zero

- Area 1 Assets 0

- IGFA 0

Non-leading Ledger - Full Accrual Balance Sheet

1. Assets

- Cash $200-

- Area 1 Assets 0

- Accum Dep 0

Total $200-

2. Net assets

2.1 Invested in Capital Assets

- Fund Bal - Captl Outlay $200

-IGFA 0

Capital Outlay 0

Area 20 Contra $200-

Sub-tot 0

2.2 Unrestricted Net Assets

-Net Assets - Dep $40

- Area 20 Assets 0

-Dep Exp 0

Gain/Loss $160

Sub-tot $200

Total $200

Please let me know if you have other scenarios that you want to discuss.

Regards,

Ming

[Former Member]

Thanks so much for your detailed response. I guess I just have one more question... when you initially load your beginning balances into SAP during conversion, which equity accounts do you hit and what are the offsets? During conversion the below entries were made but it seems that we are missing something on the equity side to make this balance with the example you gave me above. I really appreciate your help!

Dr. Assets (mod) $100

Cr. IGFA $100

Dr. Assets (full) $100

Cr. Contra $100

Dr. Inv in CA $100

Cr. Acc Depr $100

[Former Member]

Hi Amber,

For your question regarding initial upload / data conversion, my 'bible' did not mention anything. I'll think about it and let you know whatever I can figure out.

I don't quite understand the 3 debits and credits you mentioned. In what senario do they occure? I mean, are they aquisition, cary forward or retirment?

Also, below is some SAP documentation regarding multiple bases fund accounting for GASB. Looks somewhat esoteric to me. I will ponder on it when I have time.

http://sap70help.saccounty.net/helpdata/EN/ab/af3f3adb7fd940e10000000a11402f/frameset.htm

Regards,

Ming