I think Accrual is very intresting and very important aspect of Payroll.
I am writing this blog to share whatever understanding I have got after reading several materials.
Request all experts to add in what I have written and correct me if I am wrong.
What is Accrual?
Accrual is accounting concept which records expense when incurred and income when earned unlike cash based accounting.For example:Employee works for Dec 2013 but pay date is in Jan 2014.Still his/her salary should be recorded in 2013 financial book.
Accrual and Payroll
We can say that Accrual is nothing but adjustments made for posting when payroll period and posting dates are different.
Important Dates Related to Accrual
Posting date is defined for each payroll period via below path
IMG -> Payroll US -> Month end accruals -> Triggering Month End-> Accrual computation -> Maintain Posting Date
This date determines the final date of posings maintained for each company code and accounting period.It can be maintained via below path:
IMG->Payroll US-> Month end accruals-> Triggering Month End Accrual computation-> Define closing date
Latest Document Creation Date(LDCD)
Suppose W1 is payroll area with weekly payroll periods.Hence for employee in payroll area W1 payroll is run from Monday to Sunday. But checks for this needs to be mailed by thursday to make sure employee receives payment on time.In such case date falling on thursday can be declared as latest document creation date.
It can be defined for each payroll period via below path
IMG -> Payroll US -> Month end accruals -> Triggering Month End->Accrual computation -> Set latest earliest document creation date
Payroll period is generated for each payroll area which has for and in period dates.
IMG Path to generate payroll period is :
IMG -> Payroll US -> Basic Settings -> Payroll Organization-> Generate Payroll Period
Switch,Schema and function of Accrual
UAC0 is standard subschema which process accrual.
ACCMO is the switch which is set to ‘ON’ in rule UAC0 of the schema.
Then RT table is taken as input by function UACGF to process Accrual.
*Maintaining processing class 79 specification of wage type to make sure it is considered for accrual is another prerequsite.
Function UACGF checks current and subsequent payroll period and if two psoting period overlaps two posting periods, function calculates factors based on working days (A), calendar days (K) and working hours (S).
This factors are used to calculate Accrual based on actual values of RT for wage type.
Consider we are running payroll for 24th period of biweekly payroll area.
Please find screen shot of Payroll Period ,Posting Date and LDCD for 24th and 25th Period.
As we can see from above screen shots LDCD date of payroll period 24 is 28th november and posting date for period 24 is 29th november but payroll period 25 starts from 24th november.Since there is overlap between payroll period 25 and posting period of payroll period 24. Fucntion UACGF calculates factors for working days (A), calendar days (K) and working hours (S) for overlapping period and these factors are used to come up with final value of ACCR.
For ex of for wage type “TEST” 10 was the value. and factor caluclated by function is 0.5 then ACCR will have value 5 for TEST Wage type.
I have tried to explain Accrual in very simple words but its little more complex then what I have described above.
Please let me know your feedback and comments to add into the document.
Thanks & Regards,