Is it possible to have two Retained Earning accounts in sap s4hana? sap fico Interview question on retained earning account.

How Retained Earning account is used for year end balance carry forward in sap s4hana?

In order to understand the use of retained earning account, let's first understand what is meant by year end balance carry forward.

During the whole year, lot of transaction have been posted in sap. Let's suppose new year is starting, so now when we move from old year to new year what happens to our balance sheet and P&L statement?

Does balance sheet also starts from zero? Answer is No.
Balance sheet will not start from zero. If there was any customer receivable, it will not become zero just because new year started. If there was any vendor payable, it will not become zero just because new year started. If there were fixed assets, it will not become zero just because new year started. Whatever was balance sheet at last year ending will become balance sheet at new year starting. Custom receivable at last year ending will be come customer receivable at new year starting. Vendor payable at last year ending will become customer receivable at new year starting. Asset balances at last year ending will become asset balances at new year starting.

Now let's discuss what happens to P&L statement at start of new year. Does it become zero at start of new year? Answer is YES.
At the start of new year, there is no revenue in new year hence revenue starts from zero. There is no expenses at start of new year hence expenses starts from zero. So, entire P&L is zero at start of new year.
But in last year, there was revenue, there was expenses hence there was profit. After paying all the interest and debt, still company had net balance. This net balance is referred as retained earning. This is also referred as Reserves & Surplus in balance sheet. Every year end, surplus amount that company generated is added back to Retained earning/ Reserves & Surplus. This retained earning account is basically in balance sheet under non-current liability.

Transferring retained earning amount from P&L of old year (calculated from income & expenses) to Balance sheet of new year (non-current liability) is referred as year end balance carry forward.

Is it possible to have two retained earning account in sap s4hana?

Yes, it is possible to have multiple retained earning account in sap s4hana.
Retained earning account is under non-current liability in balance sheet.
Let's say your last year retained earning amount (calculated from income & expenses of last year) is 1 crore.
If you defined only one retained earning account (all income & expense GLs is mapped to this one single retained earning account). So when balance carry forward is done at year end, entire 1 crore amount will be transferred to this retained earning account.

Now let's imagine you used two retained earning account (some income & expense accounts are mapped to RE1 account and many other income & expense accounts mapped to RE2 account). So when balance carry forward is done at year end, 40 lakhs may be transferred to RE1 and 60L may be transferred to RE2. Ultimately non-currently liability is still 1 crore only. Only difference is instead of one single RE account, you used two RE account.
There is no business benefit of using multiple retained earning account in sap. Actually business will prefer to have one single retained earning account. There is no need to add another GL account without any benefit.

SAP FICO Interview questions related to retained earning account in sap

Is it possible to have two retained earning account in sap?
Yes, it is possible to have multiple retained earning account in sap but there is no business benefit of it.

Business has already run year end balance carry forward. But after that business posted some new transactions, these new balances also needs to be carried forward to new year. How to carry forward balances of new transactions to next year?
Year end balance carry forward program can be run any number of times. Even though it's already run, you can run it again and any new balances will be transferred to next year.

Business already executed year end carry forward program. But they realized that they forgot to execute assessment cycle (cost center allocation cycle) so business executed assessment cycle. Now they run year end balance carry forward program again. What will be the impact on retained earning amount due to allocation cycle?
There is no impact of assessment cycle on retained earning amount. Because assessment cycle only moves the existing cost from sender to receiver, it does not incur any new cost (primary cost). Hence retained earning amount which was before assessment cycle will be same even after assessment cycle. In simple words, moving cost from one object to another does not change the total cost hence does not change retained earning amount.

What is the T code to execute year end balance carry forward in sap s4hana?
T code for year end balance carry forward is FAGLGVTR.

FAGLGVTR is used for year end balance carry forward of GL accounts, what is the T code for carry forward of asset balances at year end?
T code FAGLGVTR transfer balances of General Ledger, Customers, Vendors as well as Assets. Earlier in SAP ECC, difference T codes like AJAB & AJRW was used but in S4HANA these T codes are obsolete, now FAGLGVTR is used.