Document Splitting in SAP FICO (S4 HANA Finance)

What is Document Splitting in SAP?

Document Splitting in SAP is the new functionality introduced in SAP ECC 6.0 New GL to create segment financial statements. However, now it is mandatory in SAP S/4HANA technology. It is used to allocate one expense line item into two segments in New General Ledger.

Here, you cover the SAP FI Document split and the Segment via “segment field” which is a standard field in the totals table in the New General Ledger “FAGLFLEXT.

Before we start ahead, I need to mention, that the functionality of Document Splitting in SAP FICO and S/4HANA Finance is the same. Hence, either if you are working on ECC technology or S/4HANA, its process will remain the same. So, let’s start the learning of Document splitting in SAP.

How to activate Document Splitting in SAP S/4HANA Finance?

• To activate document splitting in SAP, first, you need to enable Document splitting at the client level customizing.
• Then you can activate or deactivate the document splitting in each company code.
• Similarly, you can activate the “Inheritance” which provides the level of detail for a document split.
  • By activating inheritance you can create a customer invoice from a revenue line item.
  • As a result, the Business areas or segments populate automatically in the general ledger view. It shows the customer and tax line items.
  • Noteworthy, SAP recommends activating ‘Inheritance” with document splitting. Since it does not require the business to then create “rules” for a business process to ensure that account assignments are projected.

Read: SAP FICO Interview Questions Blog Series

Active and Passive Splitting in SAP New GL

Document splitting in SAP New GL is divided into two types. The Passive Split and the Active Split (rule-based) or Clearing Lines by the document.

Passive Splitting

With passive document splitting, the system inherits the account assignments of the items to clearing line items during the clearing of a document.

Active Splitting

Active splitting works on the principle of defining splitting rules. You configure splitting rules which the SAP system uses to make a document split.

Document splitting is one of the Key functionalities enabled in SAP New GL to help deliver segmented financial statements.

Get Details: SAP S4 HANA Finance Training

Document splitting under Profit Center Accounting

As per the New GL Profit Center Accounting (PCA), there are two entry-views. The Entry view and The General Ledger view.

You can find the SAP New GL document splitting under the General Ledger view.

Understand this with an example:-

Material purchased for two different profit centers under one invoice.

Entry View

Expenses A/c (Dr) Rs. 100 (Profit Center 1)

Expenses A/c (Dr) Rs.100 (Profit Center 2)

To Vendor A/c   (Cr)    Rs. 200

In General Ledger View

Expenses A/c (Dr) Rs.100 (Profit Center 1)

Expenses A/c (Dr) Rs.100 (Profit Center 2)

To Payable A/c (Cr) Rs.100 (Profit Centers 1)

To Payable A/c (Cr) Rs.100 (Profit Centers 2)

Benefits of Documents Splitting in SAP

1. If you see the general ledger view, you can find the object of document splitting. While, under the Business Area concept, you cannot find this facility.
2. Likewise, Document Splitting allows you to display documents using a differentiated representation. In the representation, line items are split according to the dimensions you choose. Thus, you can draw up complete financial statements with those dimensions at any time.
3. Furthermore, using the document splitting procedure, you can also create a segmented display of a (Partial) balance sheet. Either according to a set of legal requirements (For Example IAS) or according to areas of responsibility.
4. In addition, you can allocate additional costs to the controlling account assignment objects at the time of posting. Such as realized or evaluated exchange rate differences. This is to which the costs relate.
5. Subsequently, you can also capitalise on an asset at the time of posting.

Document Splitting Implementation

Consider the following points:

• Make settings in Customizing and other preparations for document splitting.
• Use the General Ledger Migration cockpit. (If you are already using new General Ledger Accounting in your production system and subsequently want to implement document splitting).

Document Splitting Integration

Document splitting affects subsequent processes, such as closing operations and processes in Controlling (CO).

Further, you can use the document splitting procedure in two situations. First, to split up line items for selected dimensions (such as receivables lines by profit center). Second, to effect a zero balance setting in the document for specified dimensions (such as segment).

Thus, it generates additional clearing lines in the document.

Document Splitting Process

To do the document splitting successfully, the system classifies the individual line items as well as the documents. This takes place using your settings in Customizing.

Moreover, the splitting rule selected for a document specifies the process and line items to split the document. It also depends on how the system classifies a document.

Although, SAP delivers a set of standard splitting rules. However, you can also define your own rules.

Passive document splitting

The system creates references to existing account assignments. You use these account assignments as the base for line items to split.

The system applies all account assignments that you define as document splitting characteristics in customizing.

If you have set zero Balance settings indicator for the document splitting characteristic, the system then creates any necessary clearing lines. This is to ensure that the characteristics produce a balance of zero in each document.

Active Document Splitting

If you split a document in this subfunction, the line items are split according to the settings in customizing. This is the classification of the document and the splitting rule assigned to the document.

Subsequent Process- You can also use CO account assignment relating to the costs for the clearing process. Such as while realizing the exchange rate differences, you can use CO account assignments to post the difference in the rates occurring in this subsequent process.

Closing Operation

You can perform closing operations according to the document splitting characteristics defined. An example of this is Foreign Currency Valuation.

Document Splitting Simulation

During document entry, you can simulate the postings you want to generate. From the simulation in the general ledger view, you can call the expert mode. Further, in the expert mode, you can obtain detailed information about the split document as well as about the document splitting rules applied.

Therefore, it allows you to view the customising settings for document splitting. These settings are specific to the business transaction. Thus they display the split Document.

You can display a document as follows:

1. In its original form in the entry view.
2. Split from the view of the ledger in the general ledger view and with the generated clearing lines.

Document Splitting Configuration in SAP

As an overview, I here mention the basic steps we follow to configure document splitting in the SAP system.

1. First, classify the General Ledger Account – As per the nature of the business transaction, we classify the GL considering the item categories.
2. In step 2, classify the Document types – Here we assign the “Business Transaction” and “Business Transaction Variant” to document types.
3. Next, Define a zero balance clearing account– This we need to do when the system is not able to balance out the transaction entry based on its own. I have explained below in detail with steps.
4. Defining Characteristics for GL– It is a mandatory step in document splitting configuration in SAP. I.e. defining characteristics of document splitting.
5. Modifying constants– In this step the constants are defined which helps to assign the default account assignment when is not able to derive from any of the sources.
6. Activating Document Splitting– Here comes the final action step. We activate the document splitting by selecting the check-box and choosing the relevant method.
   • Inheritance Settings – This is a part of Activating Document Splitting itself. Here you also apply some more settings such as Inheritance. This means inheriting account assignments from other line items to those who do not have them of their own.

How to define a zero balance clearing account in SAP

Sometimes when the system does not balance out the transaction entries on its own, then, we need to define the zero balance clearing account. This helps to generate and balance out financial entries not done on their own.

You should refer to the following path:-

SPRO => SAP Reference IMG => Financial Accounting (New) => General Ledger Accounting (New) =>  Business Transaction => Document Splitting => Define Zero Balance Clearing Account

Summary

In this blog, I tried to cover many aspects of Document Splitting in SAP. Though to understand the configuration of document splitting, the best way is to do it yourself in the system which gives you a stable knowledge of this process. A theoretical guide will help you conceptually, but these things are best understood in practical.

Document Splitting is an important part of GL Accounting and is very important for SAP S/4HANA Finance Consultants.

Being so important, employers usually put the topics of document splitting in SAP S4 HANA Finance or SAP FICO interviews.

Learn Document Splitting with: SAP S4 HANA Finance Training