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Rebate Agreement (Accounting Entries Confusion)

former_member301027
Participant
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Dear Gurus,

Please clear my understanding regarding rebate agreement processing.

1. the system books accruals at the time of invoice. (this step is clear to me).

Lets assume system books the provision/accruals $1000 against an invoice.

2. partial settlement, system create credit memo request and than credit memo, to pay the accrual amount to the customer. (this step is clear to me).

lets say system create $1000 credit memo as its already accrued for the customer, system make the accounting entries accordingly.

3. what is the difference in the condition record column of rebate agreement column1 "Rate" and column 2 "Accrual".

But when I go for final settlement I get confuse: !!!!

a. why final settlement is there.

b. why this process reverse all the financial entries created in above scenario 2.

c. when accruals are booked and paid through credit memo tan why we use final settlement, and I confuse till we create final settlement before that

rebate agreement will remain open.

Looking for the gurus feedback in this regard.

Regards,

Imran khan

Accepted Solutions (0)

Answers (1)

Answers (1)

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Hi Imran

I will try to answer your questions.

The rate (amount) column of the rebate condition is the amount or percentage that will actually be paid to the rebate recipient. The accruals field is the amount or percentage that your company want to reserve or accrue against the exposure. These are often the same but there are many reasons why they would not be the same. For example if scales are included in the agreement these are only ever included in the final settlement so a customer might want to accrue an average percentage somewhere in the middle of the scale, or other business reasons.

In rebate processing you have the option to generate partial payments throughout the period of the

agreement, these can be set to reverse accruals (VB(2) or not. If you do not want to reverse accruals for each partial payment you will need to do it with a final settlement. The final settlement is the mechanism to generate the final payment to the customer and it reverses any open accruals on the account and also sets the closed status on the agreement.

So in the rebate process, periodic or partial payments are optional, but the settlement is not, it is the step that completely and correctly closes the financial arrangement at the end of the period, clears the accruals completes the customer payment and closes the agreement.

Hope it helps you further
Kind regards
Brian

former_member301027
Participant
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Thanks Brian for this explanation, rate and accruals scenario is now clear for me.

"But as per your 2nd paragraph "In rebate agreement you have the option to generate partial payment ................................................ close status on the agreement".

In partial settlement at the time of credit memo system generate accounting entries, and in final settlement system again create financial entries and reverse the old one.

but if you directly create final settlement system create financial entries only once.

how would you explain this, is it ok.

Appreciate if you explain with any value starting from provision/accruals books at the time of invoice.

Thanks again for this favor.

regards,

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Hi Imran

When you have a rebate agreement the system will post a provision against the rebate recipient and the accruals account for every billing document posted (that falls within the validity). So you post for example $1000 against both accounts, in total across several billing documents. The individual postings and totals are held in the S136 and S060 tables for the agreement condition.


If you create and post a partial payment of $600 S136 and S060 tables are reduced accordingly.
So for your final settlement here the system would generate a payment value and an accrual reversal value of 400. There would never be any duplicate posting made in FI.

In a case where you had made partial payments totalling the $1000 actually posted in the billing documents you final settlement would be generated with a value of 0.00 on both lines. Net effect nothing is changed in FI only the rebate agreement status is set to closed. The same thing if no partial payment had been created and you delete the rebate agreement you would get a 0.00 value final settlement.

Hope it helps
Kind regards

Brian

former_member301027
Participant
0 Kudos

Thanks Brian,

I will get back to you on this by checking my accounting entries.

Regards,

Imran khan