Account Receivable Basics

SAP R/3 has a dedicated module FI-AR which is specialized to maintain the accounts receivable sub-ledger of the FI-GL General Ledger. The accounts receivable module stores its own master data, transaction data and has its own reporting system. One important point is that both the general ledger and the AR sub-ledger use the same chart of accounts. Similarly, the master records are also shared with GL. As a concept, every transaction creates an SAP document. Document data is immediately posted to the General Ledger. Business transaction recorded in this way automatically update the balance sheet and the profit and loss statement. This is one of the most unique features of an ERP like SAP.

SAP FI-AR keep a record of all customer transactions. The three most important functions which the AR module performs are

– collecting money from customers
– Processing of Cash Receipts
– Dunning for late paying customers

Many times users confuse the SD module with the FI-AR module. Both SD and AR share a lot of master records and are fully integrated at the software code level. In SAP, transaction data is stored centrally in the document database. All corresponding line items and details are stored in the respective subledgers. SAP automatically updates a subtotal of a balance sheet account for every business transaction and reconciles the account subtotals and the line items to ensure that the financial information is always correct and current.

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