G/L account determination in SAP Business One: where each posting gets its account, what the main documents post, and how to trace a wrong one

What G/L account determination is.

Every document in SAP Business One that carries a value creates a journal entry by itself. The user picks a customer, an item and a quantity; B1 picks the accounts. The defaults for those accounts are in one window, Administration > Setup > Financials > G/L Account Determination, with six tabs:

• Sales: the accounts receivable control accounts (domestic, foreign, EU), the revenue account and sales credit account, cash discount, down payment clearing, exchange rate differences, and the over- and underpayment accounts for incoming payments.
• Purchasing: the mirror image for vendors: accounts payable control accounts, the expense account and purchase credit account, bank transfer, cash discount, down payment clearing, and a variance account for A/P credit memos based on A/P invoices with a changed price or freight.
• General: accounts that belong to no single document, such as the rounding account, the reconciliation difference account, the period-end closing account and bank charges.
• Inventory: the accounts inventory postings use: inventory, cost of goods sold, allocation, variance, price difference, negative inventory adjustment, inventory offset increase and decrease, sales returns, goods clearing, G/L increase and decrease, WIP and more.
• Resources and WIP Mapping: accounts for resources in production and the mapping between work-in-process accounts. Only relevant if you use production.

Some of these accounts are final. Others, especially on the Inventory tab, are only the defaults that new warehouses, item groups and items copy. Which account a posting really uses depends on the next setting.

Where an item gets its accounts.

For item postings B1 first looks at the item. The field Set G/L Accounts By has three values:

• Warehouse: the accounts on the Accounting tab of Warehouses - Setup (Administration > Setup > Inventory > Warehouses). An item in warehouse 01 posts to the accounts of warehouse 01.
• Item Group: the accounts on the Accounting tab of Item Groups - Setup (Administration > Setup > Inventory > Item Groups).
• Item Level: accounts entered on the item itself, on the Inventory Data tab of the Item Master Data.

The company default is in Administration > System Initialization > General Settings, Inventory tab, Items subtab. It only applies to items you create after the change; existing items keep their own value. New warehouses and item groups take their accounts from the Inventory tab of G/L Account Determination, so changing that tab later does not touch the warehouses and groups that already exist.

The Accounting tab of a warehouse holds more than inventory accounts: it also has a revenues account and an expense account, so the source an item uses also decides where its sales revenue lands. The business partner side works differently: a customer or vendor posts to its control account, which comes from the Sales or Purchasing tab unless Permit Change of Control Accts is selected and the business partner has its own.

What the main documents post.

The examples assume a perpetual inventory system (Use Perpetual Inventory on the Basic Initialization tab of Company Details) and leave tax aside. The amounts follow the valuation method; see inventory valuation in SAP Business One.

• Delivery: debit cost of goods sold, credit inventory, for quantity times item cost. No customer and no revenue yet: the delivery only takes stock out at cost.
• A/R invoice based on a delivery: no inventory posting, because the delivery already made it. Debit the customer's control account, credit the revenue account, plus output tax. An A/R invoice without a delivery does both in one journal entry: cost of goods sold and inventory, and customer and revenue.
• Goods receipt PO: debit inventory, credit the allocation account, for quantity times the price on the document. The allocation account stands in for the vendor until the invoice arrives; its balance is the value of open goods receipt POs and goods returns. Freight on the receipt goes to the expense clearing account.
• A/P invoice based on a goods receipt PO: debit the allocation account, credit the vendor's control account, plus input tax. The allocation account is cleared. If the invoice price differs from the receipt, a moving average item revalues its stock and cost; when that stock is gone, the difference goes to the price difference account. For standard-price items differences from the standard go to the variance or price difference account. An A/P invoice without a goods receipt PO debits inventory directly against the vendor.

Two settings change this picture. With Use Purchase Accounts Posting System (not for the US and Canada) journal entries get extra rows for the purchase accounts. And items in a drop ship warehouse create no inventory value posting at all.

Advanced G/L account determination.

The standard model knows one source per item. When you need more, such as a different revenue account per country or per customer group, there is advanced G/L account determination. You switch it on with Enable Advanced G/L Account Determination on the Basic Initialization tab of Administration > System Initialization > Company Details. B1 then offers to migrate your current assignments into rules (only one user may be logged on), to preview those rules first, or to add only the functionality and leave the rules to you.

• Criteria: in the Determination Criteria window you activate what the rules may look at, such as item code, item group, warehouse, business partner code, group or type, ship-to country or state, federal tax ID, tax code and up to five user-defined fields. Their order is their priority.
• Rules: in the Advanced G/L Account Determination Rules window (the Advanced button in G/L Account Determination) each rule combines criteria values with accounts: the inventory accounts plus the revenue accounts of the Sales tab and the expense accounts of the Purchasing tab. Rules are kept per posting period and can have a date range.
• Fallback: when no rule matches, B1 posts to the account on the G/L Account Determination tab. A rule that uses business partner group never matches a goods receipt, which has no business partner.
• What disappears: the Accounting tabs of warehouses and item groups and the account columns on the item. Set G/L Accounts By is renamed Set Inv. Method By and no longer decides the accounts.

You can switch it off again at any time, but then B1 returns to the defaults of a new company: adjustments made before you activated it are not restored. Decide before go-live and keep it simple. SAP recommends leaving the Advanced Rule Type of items on General and using the warehouse and item group criteria in the rules instead.

Typical errors and how to trace them.

• The document will not add. A missing account stops the posting with an error message. Read which kind of account it means: You cannot add document; tax account is missing, for example, points to the tax account in Administration > Setup > Financials > Tax > Tax Groups, not to G/L Account Determination. For an item account, check Set G/L Accounts By on the item, then that warehouse, item group or item.
• The posting went to the wrong account. Use the journal entry preview in the toolbar before you add the document. Afterwards, open the journal entry (Financials > Journal Entry, or through the document) and work back: which item, which warehouse, which value of Set G/L Accounts By, which account in that source.
• The fix did not reach existing items. The default in General Settings and the accounts on the Inventory tab only reach new items, warehouses and item groups. Existing records keep what they have until you change them.
• The inventory accounts do not match the Inventory Audit Report. The inventory value is the balance of the inventory accounts plus the sales returns accounts. A manual journal entry on an inventory account breaks that link, and the Inventory tab itself warns that changing account assignments can cause erroneous inventory transactions.
• The allocation account keeps a balance. That balance is open goods receipt POs and goods returns. Look for receipts without an invoice; if one will never be invoiced, closing it posts against the goods clearing account.
• Revenue account linked to item does not match tax status. The item's warehouse points to a revenue account whose Tax Exempt setting does not fit the sales document. Check that account in the chart of accounts, or the revenue account on the warehouse.

Before you start: a checklist.

• Decide on perpetual inventory and on Manage Item Cost per Warehouse before the first inventory transaction; both lock after it.
• Choose one Set G/L Accounts By for the company and write down which items deliberately differ.
• Fill the Inventory tab completely before you create warehouses and item groups, so they copy the right defaults.
• Decide on advanced G/L account determination before go-live, not after.
• Post a delivery, a goods receipt PO and both invoices in a test company and compare each journal entry with what finance expects.
• Give the allocation, price difference and variance accounts an owner in finance who looks at their balance every month, and keep manual journal entries off the inventory accounts.

Why it matters for C_TB120.

C_TB120, SAP's certification exam for SAP Business One, covers implementation, financials and logistics, and G/L account determination sits exactly where the three meet. The exam asks scenario questions, and this subject lends itself to them: a goods receipt that posted to an unexpected inventory account, a revenue account that differs per item, an allocation account that does not clear. You answer those by knowing the chain: document, item, Set G/L Accounts By, source, account. Check the current topic list on SAP's certification page; it can change per exam version.

How KoonLearn approaches it.

KoonLearn, our training simulation for SAP Business One, puts account determination in the partner track, for consultants and sales people preparing for C_TB120. In chapter 01 Company setup you fill the Sales, Inventory and General tabs of G/L Account Determination and the inventory defaults in General Settings, and you find out why a new item posts to the wrong inventory account. Those settings really change the postings of the simulation's own accounting engine, and the journal entry preview shows which accounts a document will hit before you add it. Advanced G/L account determination comes up in exam-style questions, not as a window you set up.

Chapter 03 Purchasing, including its partner part with the Purchasing tab and a vendor on its own control account, is free without an account: start on learn.koonsystems.com. KoonLearn is exam preparation for C_TB120; it does not replace the official SAP training or the exam itself, and it is not affiliated with SAP SE.

Sources: SAP Business One 10.0 help documentation (G/L Account Determination and its tabs, Warehouses - Setup, Item Master Data, Company Details, system messages); SAP's guides How to Set Up a Perpetual Inventory System and How to Set Up Advanced G/L Account Determination; the KoonLearn chapter overview. SAP and SAP Business One are trademarks of SAP SE.