Ledgers and Accounting Principles in SAP S/4HANA

SAP recommends using separate ledgers for each accounting principle.

For example:

One ledger assigned to US GAAP
Another ledger assigned to local accounting principles
Additional ledgers for other reporting standards, if required

These different accounting standards must be properly represented in the SAP system.

Purpose of Ledgers in SAP HANA

Ledgers in SAP HANA are designed to map parallel accounting business transactions in General Ledger Accounting.
They provide the flexibility to maintain multiple parallel ledgers, each aligned with a specific accounting principle.

This approach allows organizations to:

Record the same business transaction under different accounting rules
Maintain legal, group, and management reporting in parallel
Avoid duplicate postings across separate systems

Why Parallel Accounting Is Required

In recent years, financial reporting requirements have increased significantly.
Organizations are primarily responsible for meeting statutory and legal reporting requirements, such as:

IFRS
US GAAP
Local GAAP
IAS

By mapping accounting principles to different ledgers, SAP enables organizations to generate financial statements that comply with multiple accounting standards from the same system.

Parallel Ledgers in SAP

Parallel ledgers are maintained in General Ledger Accounting to represent multiple accounting principles.

Typical design approach:

Leading Ledger
- Usually represents IFRS
- Used at the group level
- Integrated with all standard FI and CO postings
Extension (or Non-Leading) Ledger
- Represents local accounting standards (Local GAAP)
- Used for country-specific or statutory reporting
- Stores only delta postings where accounting treatment differs

This structure ensures consistency while allowing flexibility for local compliance.

Data Storage in SAP ECC vs SAP S/4HANA

SAP provides standard tables for saving and analyzing financial values.

In SAP ECC

FAGLFLEXT
- Total table for General Ledger Accounting
- Stores summarized ledger data

In SAP S/4HANA

ACDOCA
- Universal Journal line item table
- Stores all FI, CO, AA, and ML postings in a single table
- Eliminates the need for separate totals tables

This universal data model simplifies reporting, improves performance, and enables real-time financial analytics.

Ledgers in SAP S/4HANA – Structured Overview

SAP S/4HANA supports parallel accounting through different types of ledgers, enabling organizations to comply with multiple accounting principles such as IFRS, US GAAP, and Local GAAP.

SAP S/4HANA features two types of ledgers in the system:

1. Standard Ledgers

1.1 Leading Ledger

The Leading Ledger is the primary ledger in SAP S/4HANA.

Key Points:

Represented as 0L in SAP S/4HANA
Mandatory and active by default
Minimum requirement in every S/4HANA system
Stores accounting documents from a group reporting perspective
Typically configured for global accounting standards (e.g., IFRS)
All general ledger postings are automatically posted to the Leading Ledger
Integrated with all company codes
Shares the same fiscal year variant as the company code

1.2 Non-Leading Ledger (Standard Parallel Ledger)

A Non-Leading Ledger is a parallel ledger used to meet local accounting principles.

Purpose:

Supports local statutory reporting
Enables parallel accounting alongside the Leading Ledger

Key Points:

Must be activated manually based on business requirements
Can be assigned to specific company codes
Can have a different fiscal year variant
- Example:
  - Global reporting: January–December
  - India local reporting: April–March
Used for accounting principles different from the Leading Ledger
When relevant, transactions are recorded in both Leading and Non-Leading Ledgers
Local-specific adjustments (e.g., depreciation differences) can be posted directly to the Non-Leading Ledger

2. Extended Ledger (Non-Standard Ledger)

An Extended Ledger is a non-standard ledger introduced for advanced parallel accounting scenarios.

Purpose of Extended Ledger

Used to create parallel ledgers outside standard ledger framework
Designed to work based on an underlying ledger

Key Characteristics

An Extended Ledger is derived from an underlying ledger
Postings made in the underlying ledger are applicable to the Extended Ledger
Records relating to the Leading Ledger (0L) in ACDOCA are not transferred to the Extended Ledger
Mainly used for:
- Special reporting
- Simulations
- Scenario-based financial analysis

What is a Ledger in SAP S/4HANA?

A Ledger in SAP represents an accounting book that records financial transactions based on a specific accounting principle.

Examples of accounting principles:

IFRS
US GAAP
Local GAAP

SAP S/4HANA uses the Ledger Approach for parallel accounting, which allows:

Recording the same business transaction
Reporting under multiple accounting standards
Using a single system and a single data source

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Practical Business Example

Imagine a multinational organization:

Headquarters
- Reports under IFRS
- Uses the Leading Ledger (0L)
Indian subsidiary
- Reports under Indian GAAP
- Uses a Non-Leading Ledger (e.g., N1)

When a transaction is posted:

It is recorded in both ledgers if required
Local accounting adjustments are posted only to the Non-Leading Ledger

Data Storage in SAP S/4HANA

All ledger postings are stored in the Universal Journal table – ACDOCA
ACDOCA stores:
- FI postings
- CO postings
- Asset Accounting
- Material Ledger
Enables real-time reporting and eliminates reconciliation between FI and CO

Summary

SAP S/4HANA supports parallel accounting using ledgers
Leading Ledger (0L) is mandatory and used for group reporting
Non-Leading Ledgers support local statutory requirements
Extended Ledgers provide advanced flexibility based on underlying ledgers
All financial data is stored centrally in ACDOCA

This ledger framework enables organizations to meet global and local financial reporting requirements efficiently within SAP S/4HANA.

Defining Accounting Principles in SAP S/4HANA

Accounting principle configuration is part of Parallel Accounting in the SAP S/4HANA system.
The accounting principles defined in this activity make it possible for the system to perform multiple accounting treatments in a single posting, such as:

Valuations
Closing preparations

These treatments are carried out according to:

IAS / US GAAP for group reporting
Other accounting principles for local reporting

⚠️ Important Warning

Do not delete the accounting principles that you have defined.
Accounting principles are closely linked with other accounting functions such as:

Currency valuation
Closing activities
Ledger-based reporting

Deleting them may cause inconsistencies in the system.

Purpose of This Configuration Activity

In this activity, you will:

Define Accounting Principles
Assign the defined accounting principles to appropriate ledger groups

This setup enables parallel accounting in SAP S/4HANA.

IMG Navigation Path

IMG → Financial Accounting → Financial Accounting Global Settings → Ledgers → Parallel Accounting → Define Accounting Principles

This path takes you to the screen where accounting principles are maintained.

Accounting Principles in SAP S/4HANA

The system displays a list of accounting principles already represented (Figure 17-1).
This is the screen where you can define accounting principles such as:

GAPP
IFRS
IAS
Other local accounting standards

SAP provides several standard accounting principles in the system, so in many cases you do not need to create them again.

However, in this activity, accounting principles are created for local reporting purposes.

Defining Your Accounting Principles

On the accounting principle definition screen (Figure 17-2), specify the required settings.

Update the Following Fields

Field	Description
Accounting Principle	Enter a key for your accounting principle. In this activity, CA0L is used for the leading ledger and CALA for the local accounting standard.
Name of Accounting Principle	Enter a meaningful description for the accounting principle.

After entering the required details, save your accounting principle.

⚠️ Important Note on Accounting Principle Keys

You cannot reuse an accounting principle key that has already been assigned to a ledger group.
For example, if keys like C10, C20, C30 are already used, they cannot be used again.
Always choose unique and unused keys when defining accounting principles.

Ledger Group in SAP S/4HANA

A Ledger Group is a logical grouping of one or more ledgers in SAP S/4HANA.
It is used to simplify and control G/L accounting postings and functions in the system.

The main purpose of a ledger group is to allow the system to post accounting entries only to specific ledgers that belong to the defined group.

Why Ledger Groups Are Important

Ledger Groups are important because they allow you to:

Control which ledgers a posting should update
Perform ledger-specific postings (for example, only local GAAP or only IFRS)
Support parallel accounting requirements
Simplify posting logic during:
- Valuation
- Closing activities
- Adjustments
- Reporting

By specifying a ledger group during posting or configuration, the system ensures that entries are posted only to the ledgers belonging to that group.

Assigning Accounting Principles to Ledger Groups

Accounting Principles are assigned to Ledger Groups so that the system knows which accounting principle applies to which ledger(s).

IMG Navigation Path


SPRO → IMG  
→ Financial Accounting  
→ Financial Accounting Global Settings  
→ Ledgers  
→ Ledger  
→ Define Ledger Group

Define Ledger Group

On the Define Ledger Group screen:

Click New Entries (top left of the screen).
The New Entries: Overview of Added Entries screen appears.

Maintain the Following Fields

Field	Description
Ledger Group	Enter a unique key for the ledger group
Description	Enter a meaningful description

Example Used

Ledger Group	Description
LO	Leading Ledger Group
OS	Local Accounting Standard

0L is used as the Leading Ledger Group
SO is used for Local Accounting Standard

Save your entries.

Relationship Between Ledger Groups and Accounting Principles

Once Ledger Groups are defined:

Accounting Principles created earlier are assigned to these Ledger Groups
This assignment tells SAP:
- Which accounting principle applies
- Which ledger(s) should be updated during postings

In simple terms:

Accounting Principle → Ledger Group → Ledger(s)

This linkage ensures correct financial postings according to:

IFRS
Local GAAP
Other accounting standards

Key Concept Summary

Ledger Group groups multiple ledgers together
It controls ledger-specific postings
It is mandatory for parallel accounting
Accounting Principles must be assigned to Ledger Groups
Posting with a ledger group updates only those ledgers

Assigning Accounting Principles to Ledger Groups in SAP S/4HANA

After defining Accounting Principles and Ledger Groups, the next important step in Parallel Accounting is to assign Accounting Principles to Ledger Groups.
This assignment tells the system which accounting principle should be applied to which ledger group during postings and reporting.

IMG Navigation Path


SPRO → IMG  
→ Financial Accounting  
→ Financial Accounting Global Settings  
→ Ledgers  
→ Parallel Accounting  
→ Assign Accounting Principle to Ledger Groups

Assign Accounting Principle to Ledger Groups

When you access this activity, the Assignment of Accounting Principle to Target Ledger Group screen is displayed.

Steps to Perform the Assignment

Click New Entries at the top left of the screen.
The New Entries: Overview of Added Entries screen appears (Figure 17-4).
In this screen, assign the Accounting Principle to the appropriate Target Ledger Group.

Example Assignment Used

Accounting Principle	Description	Target Ledger Group
ABLL	Leading Ledger Accounting Principle	LO
ABEL	Local Accounting Standard	OS

Explanation

ABLL is used as the Leading Ledger Accounting Principle and is assigned to the Leading Ledger Group (LO).
ABEL is used for the Local Accounting Standard and is assigned to the Non-Leading Ledger Group (OS).

Use the search help (match code) to select:

Accounting Principles
Target Ledger Groups

Save your work.

Why This Assignment Is Important

This configuration ensures that:

The system applies the correct accounting principle during postings
Financial transactions are posted to the appropriate ledgers
Parallel accounting requirements (Group vs Local reporting) are fulfilled correctly

In simple terms:

Accounting Principle determines “how” accounting is done
Ledger Group determines “where” postings are stored

Next Step

After assigning Accounting Principles to Ledger Groups, the next activity in Parallel Accounting configuration is:

Define Settings for Ledgers and Currency Types

This step controls:

Currency handling
Ledger-specific reporting

Defining Ledger Settings for Ledgers and Currency Types in SAP S/4HANA

After defining Accounting Principles and assigning them to Ledger Groups, the next step in Parallel Accounting configuration is to define Ledger Settings for Ledgers and Currency Types.

This step determines how ledgers behave in the system, whether they are Leading, Standard, or Extension ledgers, and how they support different accounting principles.

IMG Navigation Path


SPRO → IMG  
→ Financial Accounting  
→ Financial Accounting Global Settings  
→ Ledgers  
→ Ledger  
→ Define Settings for Ledgers and Currency Types

Define Settings for Ledgers

When you execute this activity, the Change View “Ledger”: Overview screen is displayed.

Steps to Configure Ledgers

In the Dialog Structure on the left side of the screen, click on the Ledger folder.
Click New Entries at the top left of the screen.
The New Entries: Overview of Added Entries screen is displayed (Figure 17-5).
This is the screen where you customize ledgers for accounting principles.

Fields to Maintain in Ledger Settings

1. Ledger

Enter the ledger key in this field.
You can also use the search help (match code) to select an existing ledger group key.

2. Ledger Name

Enter the description of the ledger.

Examples:

LO – Leading Ledger
OS – Local GAAP

This helps clearly identify the purpose of each ledger.

3. Leading

Tick this checkbox only for the Leading Ledger.

The ledger marked as Leading is used by the system as the default ledger
Only one ledger can be defined as the leading ledger
In SAP S/4HANA, the leading ledger is normally LO

4. Ledger Type

Using the dropdown arrow, specify the Ledger Type.

There are two types available:

a) Standard Ledger

Holds the contents of journal entries relating to business transactions
Stores actual postings created during financial transactions
Used for both leading and non-leading standard ledgers

b) Extension Ledger

New concept in SAP S/4HANA
Previously referred to as Appendix Ledger in earlier versions
Used to avoid duplication of journal entries
Postings from the underlying standard ledger are valid automatically
Only adjustment postings are stored separately in the extension ledger
Mainly used when minimum adjustments are required at period end

Important Concept

The ledger that is activated as Leading will be used by the system as the primary ledger
Extension Ledgers are dependent on a base (underlying) ledger
Extension Ledgers help optimize system performance and simplify parallel accounting

Save Ledger Settings

After maintaining all required fields:

Click Save
Your ledger specifications are now active in the system

Define Settings for Ledgers and Currency Types

SAP S/4HANA comes with a list of currency types that supplement the standard SAP currency types such as:

Document Currency – 00
Company Code Currency – 10
Controlling Area Currency – 20
Group Currency – 30
and others

The system also gives you the flexibility to create your own currency types if required. However, in most business scenarios, the standard currency types delivered by SAP are sufficient.

SAP S/4HANA allows you to use up to 10 parallel currencies per ledger.
The purpose of this concept is to allow organizations to manage, check, and monitor balances and line items in multiple currencies based on business and reporting requirements.

Important Note
The minimum requirement in SAP S/4HANA is that all company codes must be assigned to at least one leading ledger.
Two leading ledgers are represented in SAP S/4HANA.

IMG Navigation Path


Financial Accounting  
→ Financial Accounting Global Settings  
→ Ledgers  
→ Ledger  
→ Define Settings for Ledgers and Currency Types

The Change View “Ledger”: Overview screen is displayed (Figure 17-6).

Figure 17-6. The initial screen for defining company code settings for ledger

Company Code Settings for Ledger

In this activity:

Double-click Company Code Settings for the Ledger in the Dialog Structure on the left side of the screen.
The Determine Work Area: Entry dialog box pops up.
Enter your leading ledger key (01) in the Ledger field.
Click Enter (green circle button).
The Consistency Check: Display Messages screen appears with warnings.
- Ignore the warnings and close the screen.
The Change View “Company Code Settings for Ledger”: Overview screen is displayed with a list of company codes.

Maintain Ledger Settings for a Company Code

Use the Position button or the scroll bar to select your company code (C100).
Click Details at the top left of the screen.
The Change View “Company Code Settings for Ledger”: Details screen is displayed (Figure 17-7).

Figure 17-7. The screen where you define settings for ledgers

System Defaulted Fields

The system automatically defaults:

Fiscal Year Variant
Posting Period Variant
Company Code Currency Type – 10

Maintain Required Fields

Enter your Accounting Principle key (60) in the Accounting Principle field.
If you activate Parallel Accounting Using G/L Accounts by ticking the checkbox, the system allows additional data when assigning more than one accounting principle to a combination of ledger and company code.
You can assign up to 8 freely defined currencies.
- Click the “+” (plus) icon at the bottom right of the screen to extend the currency section.

Note
The global currency type is automatically defaulted if you have already:

Defined a Controlling Area

Assigned the company code to the Controlling Area

Tip
Do not save your work yet.

Assign Accounting Principles for Ledger and Company Code

The next step is to define the Accounting Principle for Ledger and Company Code.

In the Dialog Structure on the left pane, double-click Accounting Principles for Ledger and Company Code
(last item under Company Code Settings for the Ledger).
The screen is displayed.
Click New Entries at the top left.
The New Entries: Overview of Added Entries screen is displayed (Figure 17-8).

Figure 17-8. Assigning accounting principles for ledger and company code

Use the search help to select the required accounting principle.
Assign your company code.
Press Enter for the system to validate the entry.
Click Save.

Consistency Check

The Consistency Check: Display Messages screen appears with warnings (Figure 17-9).
Ignore the warnings.
Click Continue (green tick button).

Save your settings.

This completes the configuration activity.