Lesson 2 of 5
G/L account types
7 min
Every G/L account in SAP S/4HANA has a G/L account type, set at chart of accounts level. The type decides how the account behaves at year end and whether it is relevant to controlling. Since the Universal Journal merged cost elements into G/L accounts, the type also replaces the separate cost element master data that controllers maintained in ECC.
| Account type | Used for | Controlling | Year end |
|---|---|---|---|
| Balance sheet account | Assets, liabilities, equity | Not a cost element | Balance carried forward to the same account |
| Cash account | Bank and cash G/L accounts used for bank reconciliation | Not a cost element | Balance carried forward |
| Nonoperating expense or income | Income statement items outside the core business, posted in finance only | Not relevant to controlling | Closed to retained earnings |
| Primary costs or revenue | Operating expenses and revenues from external business | Cost element: needs a controlling account assignment | Closed to retained earnings |
| Secondary costs | Internal allocations, activity charges and settlements in controlling | Cost element used only by controlling processes | Closed to retained earnings |
Primary and secondary cost accounts
A primary cost or revenue account records value that comes from outside the company: wages, rent, purchased services, sales revenue. Because it is relevant to controlling, every posting to it needs a controlling object, such as a cost center, internal order, project or a market segment for margin analysis. Posting rent without a cost center will fail unless a default assignment exists.
A secondary cost account records value moving inside the company: an IT cost center charging its costs to production, an activity allocation of machine hours, or settlement of an internal order. These postings are generated by controlling processes such as assessment, activity allocation and settlement. Users do not normally post to secondary cost accounts in journal entries.
Cost element categories
For primary and secondary cost accounts you also choose a cost element category, which tells controlling how the account may be used. Typical examples for primary accounts are primary costs or cost-reducing revenues, revenues, and sales deductions. Secondary categories include internal settlement, overhead rates, assessment and internal activity allocation. The category is set in the controlling area data of the G/L account, so the same account can carry a category per controlling area, for Contoso just A000.
| Contoso account (illustrative) | Account type | Cost element category |
|---|---|---|
| Finished goods inventory | Balance sheet | None |
| Bank, main operating account | Cash account | None |
| Interest income on deposits | Nonoperating expense or income | None |
| Office rent | Primary costs or revenue | Primary costs |
| Domestic revenue, alternators | Primary costs or revenue | Revenues |
| IT services allocation | Secondary costs | Assessment |
| Machine hours allocation | Secondary costs | Internal activity allocation |
Examples of account types and categories at Contoso.
- Does the balance carry forward to next year?Yes → balance sheet account (cash account if it is a bank account for reconciliation) · No → continue
- Is it relevant to cost or margin analysis in controlling?No → nonoperating expense or income · Yes → continue
- Does the value come from outside the company?Yes → primary costs or revenue · No → secondary costs (internal allocation or settlement)
- Primary or secondary chosen?Then choose the cost element category in controlling area A000
A secondary cost posting in practice
At month end, Contoso's IT cost center has collected 60,000 USD of primary costs: salaries, software licenses and hardware leases, each posted to primary cost accounts. An assessment cycle then charges those costs to the production, sales and administration cost centers by headcount. The assessment posts to a secondary cost account: credit IT, debit each receiver. The G/L shows no change to total expenses, because the money only moved between cost centers, but the cost center reports now show each department's share. That is the job of secondary cost accounts: carry internal movements visibly, without inflating the external cost picture.
Account groups
Each account also has an account group, which controls the number range the account number must fall within and, in classic configuration, which fields are visible when maintaining the master record. Account groups keep the chart orderly: balance sheet accounts in one range, expenses in another.
What would you do?
A new expense account for "consulting fees" is created as a primary cost account. The first test posting fails with a message asking for an account assignment. The requester asks to change the account type to nonoperating so the error goes away. What should the finance key user do?
- G/L account types: balance sheet, cash, nonoperating, primary costs or revenue, secondary costs.
- Primary cost accounts need a controlling account assignment when posted.
- Secondary cost accounts carry internal allocations and settlements generated by controlling.
- Cost element categories set how controlling may use an account.
- Account groups control number ranges and maintenance fields.
Check your understanding · not graded
Lesson check
1. Which account type is used for internal allocations in controlling?
2. What does a posting to a primary cost account require?
3. Which type would suit investment income at a manufacturer?
4. What does the account group control?