Balance Sheet of SAP Business One

This is my first professional blog. After having a long experience in accounting and its computer implementations I have chosen accounting around ERP to start my blogging experience. So requesting valuable readings and comments as well.

SAP Business One

This blog is to highlight the two different kinds of Balance Sheets (B/S), one is in sole proprietorship business accounting and another one is in company accounting. Not only this functional matter, another goal here is to highlight the approach taken to represent the Balance Sheet in a popular and global ERP application, named SAP Business One or in short SAP B1 from SAP AG. For a brief description about SAP B1 you may refer to the post About SAP Business One.

Balance Sheet (B/S) as a part of final accounting of any business organization, always has been an important financial report. Apart from assets and liability components of a BS, the profit (or loss) or the retained earning is always a critical part to understand and include. Representation logic for Assets and Liabilities does not vary a lot with respect to sole proprietorship and company accounting, but the later part i.e. profit related components' representation varies a lot, and that is the focus area of this blog as well.

Balance-sheet of SAP Business One 

We know that the profit (or loss) is a result of Profit & Loss statement (P/L). The profit or loss goes to the Balance Sheet (B/S) and sums up with Capital or the Equity. This can be a fact for a sole proprietorship business, where the accounts are much simpler than a company accounting. But in company accounting profit is generally apportioned as dividend and retained earnings like components. So in company accounting case we generally can't find the profit or loss in B/S, as the calculations of the dividend and the retained earnings are done at P/L level. Dividend being an expenses type item in P/L, it reduces the amount of profit, and the reduced amount of the profit is also further apportioned into retained earnings. This retained earning is finally carry forwarded to B/S and added with capital to get the total capital and reserves at the liability side of B/S.

Now, after having a clear understanding as explained above, if we look into a Balance Sheet (B/S) of SAP Business One (SAP B1) then we can find that it is programmed in such a way that it will fit for both the sole proprietorship and company accounting. Hence, in SAP B1, if you need to get a B/S for a company then you need to take care of the proper journal entries to apportion the profit into dividends and retained earning components, as described above for company accounting. SAP B1 will not show the profit or loss components in B/S, if the mentioned distribution is done properly. On the other hand, if you want to show the profit or loss in B/S then you need not to do any entry as suggested for company accounting.

So, I wish a happy intelligent financial accounting to SAP Business One users, and happy implementation to the concerned consultants.

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Narottam Das