Accrual Postings in the Year-End Closing with SAP S/4HANA – Clearly Explained

At the start of a new fiscal year, many companies begin their year-end closing activities. A central topic in this process is accrual postings. They ensure that expenses and revenues are recognized in the correct period – regardless of when invoices arrive or payments are made.

This article is aimed at beginners and learners. It explains the fundamentals in plain terms and provides practical guidance on how accruals are handled in SAP S/4HANA – particularly using Accrual Management.

1. Why Are Accruals Necessary?

Nearly all accounting standards follow the matching principle:

Expenses and revenues must be assigned to the period in which they were economically incurred.

In practice, however:

the delivery of a service
the receipt of an invoice
the payment

often do not fall in the same period. Without accruals, the P&L, balance sheet and Controlling would be materially incorrect.

Important:
Accruals are not just an annual exercise – they are done on a period-by-period basis (e.g., monthly). This period-accurate assignment is especially critical for Controlling (CO).

2. Overview of Accrual Types

There are two fundamental types:

Anticipatory accruals (Accrued expenses / Accrued revenues)
Transitory accruals (Prepaid expenses / Deferred revenues)

The distinction is accounting-driven – SAP simply maps this logic.

3. Anticipatory Accruals

3.1 Definition

Anticipatory accruals relate to expenses or revenues:

that have already been economically incurred
but for which no invoice has yet been received

The expense or revenue is therefore recognized in advance.

Typical offsetting accounts are:

Accrued liabilities (Other payables)
Accrued receivables (Other receivables)

3.2 Examples of Anticipatory Accruals

Example 1: Monthly electricity costs without an invoice

Electricity consumed in January
Invoice arrives in February
The expense belongs in January

Accrual posting at month-end:

Electricity expense to Accrued liabilities

This accrual can be made for any period, not just at year-end.

Example 2: Interest income without a settlement

Interest accrues monthly
Settlement is made quarterly

Accrual posting per period:

Accrued receivables to Interest income

3.3 Handling in SAP S/4HANA (Anticipatory)

Anticipatory accruals in SAP are not automated – they are handled:

manually
or using recurring entries

Recurring Entry Document

The user creates a recurring entry document
It is executed regularly via the recurring entry program
The accrual is thus posted periodically (e.g., monthly)

Important:
SAP does not technically distinguish anticipatory accruals from regular G/L postings. The accounting responsibility lies entirely with the user.

4. Transitory Accruals

4.1 Definition

Transitory accruals relate to transactions where:

an invoice has already been posted or a payment has been made
but the expense or revenue fully or partially belongs to future periods

Typical balance sheet items are:

Prepaid expenses (active deferrals / ARAP)
Deferred revenues (passive deferrals / PRAP)

4.2 Examples of Transitory Accruals

Example 1: Prepaid rent

Rent invoice for January through March
Invoice is posted in January
The expense may only be recognized proportionally each month

The split is done on a period-accurate basis, not just annually.

Example 2: Maintenance contract (revenue)

Customer pays in January for one year of maintenance
Revenue may be recognized monthly

5. Transitory Accruals in SAP S/4HANA

For transitory accruals, SAP S/4HANA provides Accrual Management.

5.1 Accrual Engine – The Technical Foundation

The Accrual Engine is the technical backbone for:

Distributing amounts across periods
Generating automatic follow-up period postings
Presenting accruals in a traceable manner

It does not calculate independently – it works based on the parameters defined by the user.

5.2 Accrual Management – The Business Process

Accrual Management covers the complete accrual process.

Step 1: Post the invoice

The invoice is first posted as usual, e.g.:

Expense to Vendor

Step 2: Create the accrual object (manually by the user)

The user manually creates an accrual object
They define, among other things:
- The accrual period
- Distribution logic (e.g., linear)
- Affected accounts

SAP supports this by calculating amounts based on the parameters entered.

Step 3: Automatic opening posting

When the accrual object is saved, SAP automatically generates the opening posting, e.g.:

Prepaid expenses to Expense

Step 4: Periodic release

In each period, the automatic release posting is made:

Expense to Prepaid expenses

These postings are period-accurate and therefore correct for both FI and CO.

Step 5: Managing the accrual object

An accrual object is not static:

Early termination is possible
Remaining balance is automatically posted to the expense or revenue account
Changes are traceable in an audit-compliant manner

6. Important Clarifications

Accruals are not an SAP topic – they are an accounting topic
SAP only automates what has been correctly defined from an accounting perspective
Period-accurate accruals are mandatory for Controlling
Accrual Management requires:
- clean Customizing
- trained users
- well-defined processes

Without proper training, the system is often misused or not used at all.

7. Conclusion

Accrual postings are among the most important topics in year-end closing – and among the most frequently misunderstood.

Anticipatory: economically incurred, no invoice yet → manual / recurring entry
Transitory: invoice exists, expense or revenue is spread across periods → Accrual Management

Those who understand the accounting logic will also understand SAP S/4HANA –
and avoid mistakes in closing, reporting, and Controlling.

SAP Training for Confident Results in Practice and Closing

You have just learned how accruals work in SAP S/4HANA – technically and from an accounting perspective. But do you want to not just understand these topics, but apply them with confidence?

As an SAP trainer and lecturer for financial accounting and Controlling, I have been helping end users, beginners, and project teams turn knowledge into real competence for many years – both in the SAP system and in real business contexts.

What I offer

Hands-on SAP S/4HANA training for Financial Accounting (FI) and Controlling (CO)
Year-end closing training including accrual postings and Accrual Management
Preparation for SAP certifications and Performance-Based Assessments
Corporate training & workshops onsite at your company or remote
Individual coaching for end users, key users, or project teams

Why it is worth it

You learn in a live system, not just theoretically
You get practical examples and exercises
You save time in day-to-day operations
You increase confidence in closing processes and Controlling

👉 Ready for the next step?
Let us figure out together which training or format is the right fit for you or your team.

Request training now