hi guys welcome back hope we are doing good you must have checked many openings in different job portals related to record to report or r2r profile so today we are going to explore different components of record to report in this series I'm going to prepare many videos related to record report different components what are the different profiles will be there so that it will be help you for your interview preparation point of view now let's start from the beginning have you ever wondered how business track their financial performance how they are going to ncor accurate reporting what are the different components are there right how this record report is going to help the business how it is very crucial because particularly when you are working on your statut reports r2r process is very very important okay so let's understand what is this r2r r2r is an essential Financial process in sap or any other Erp because in every ARP will find this business process is there so it is going to help the organization to collect the process and Financial Rel related data so it is basically we can say data related to your statutory reporting or your external reporting so that it is going to help us or the business that it uh accurate financial statements means your pnl and balance sheet can be prepared as per the different statutory Norms as per the different uh you can say as for the legal process as per the different Accounting Standards so this process is going to help you so if we'll see the different components of of your r2r different steps are related to r2r so the first point is it is related to your transaction recording means whenever any transaction will be posted in the system how system is going to how the process is going to capture the business transaction so when I'm saying it's business transactions it can be anything in detail I will going to explain that so first one is your transaction recording second one is your reconciliation adjustments so it is going to help us to uh do the complete reconciliations third one will be your financial closing perform all the period and activities fourth one will be your financial reporting generating reports for your decision- making purpose now first we will start with transaction recording or why r2r is important from the transaction point of view transaction recording point of view a well structured r2r process or record report process ensure that transparency accuracy and compliance of help uh complain so that the business can make informed decisions or business can take the uh informed decisions means accurately how we can collect the data or how we can report the data so in this video we are going to break down each step so that how this artwork in sap system or any Erp system is going to help the business or the best practices for smooth Financial closing process so in this category first point we are going to take that is transaction recording or or this we I can say this is the foundation of your record to report process everything in the record to report is going to start with transaction recording so this is where all the financial activities when I'm saying transactions it can be anything it may be related to sales it may be related to purchase any expense any Revenue anything whatever the transactions or data will be entered in the system that we are going to capture with this particular business process or r2r so what we are going to record in the system example a customer invoice we are going to post from the SD point of view or from the sales point of view so in that case it a integration between our sales department with finance department so that means the sales process will be initiated in the sales department but the customer receivable or customer due items will be analyzed in your finance department particularly accounts receivable now this accounts receivable may be part of your order to cash process but the connection between your GL and subledger that is part of your r2r or that is part of your accounts receivable similarly when a vendor invoice will be posted in the system maybe this process is related to P2P but the end part the payable part accounts payable that is related to your r2r so particularly when we are going to draft a connection between your subledger and Ledger that is part of your account that is part of your record to report similarly any payroll expenses related to employees will be posted anything related to asset will be posted it may be asset acquisition asset disposal means retirement or anything related to your bank bank reconciliations bank transactions or reconciliation so everything all type of transactions we are going to record under this r2r next question how transaction will flow into sap system so if I'm the user so what I'm going to do or what what I'm doing here so that system is going to capture the transaction every business event or every transaction will be recorded as one Journal ENT so being accounting profession we are professionals we are very much aware about the joural entry means it's a bookkeeping or some data entry will be there in the sap system in the form of your GL General liser accounting for example I'm going to record some expenditure entry expenses posting so that is nothing but your GL so once the transaction will be posted so something you are going to debit or couple of entries will be debited and your bank account is going to credit or your payable is going to credit so when you are going to to record that transaction so that time system is going to capture this trans this data and it will flow to your reporting point of view so the entries will flow into subledgers also sometimes always entries are not will be posted with GL so GL means for example let's say salary salary debit and your bank credit in this case both your debit and credit are your uh GL so here Subler is not involved but let's say we are going to post some transactions related to suppliers or customers so in that case Subler will be involved so your customers your suppliers asset these are your suers and its corresponding reconciliation accounts are a GL so we have many customers are there we have many suppliers are there but in balance sheet you are going to show that this is our accounts payable trade receivable accounts payable so that is nothing but your consolidation of multiple transactions related to your receivable payable or related to your APC account that is your asset so not only that GL transactions will be entered in the system subledger transactions also will be entered in the system so that is another form where we are going to capture the uh data in the system transaction must be posted with correct respective cost object so when I'm saying cost object because the data entry will be posted through the finance But ultimately those data will be used in our management accounting point of view so we have two systems one is your fi that is your finance and another one is your management accounting in management accounting we have not going to post any transactions but ultimately when you are going to pay the salary so salary expenditure will be debit but it related to a particular cost center for example HR so that's why I'm saying transaction must be posted with the correct cost center if you're using profit Center then profit Center or anything related to taxes involved here tax details also should be there so from various sources we are going to collect the data related to your transactions so the first one completed that is this is how the transactions will be Rec recorded in the system basically different users they are going to plug the data or they are going to fit the data in the system now once the data is posted then the next activity will be our reconciliation and adjustments why it is required for accuracy in the financial data for the so we have to make sure that the accuracy will be maintained in our financial data reporting so once the transactions are recorded in the system then the next critical step is reconciliation and adjustment this process sure that Finance data is correct consistent and free from errors before we are going to move to the next phase that is our closing activities so that is very very important so when we are going to do any type of transactions related to customers so that means reconciliation is required reconciliation between your customers with your accounts receivable in simple language if you're trying to understand now collection is part of your order to cast process o2c process but the reconciliation between your subledger and Ledger is part of your record to report so two teams are involved here so in simple language if will try to understand what is reconciliation so reconciliation is the process of verifying the balance in different Financial accounts that is going to match with your expected values so it is going to ensure that all transactions are correctly recorded and it is classified because in balance sheet you are not going to show all your customer receivable items whatever due I mean whatever received already if any down payment so all these things we are not going to show in the balance sheet when balance sheet we are going to show the consolidate balance related to your receivables or payables or your asset so that is why a detail subledger and Ledger uh GL reconcilation is required so what are the different types of reconciliations you will find here in uh sap system so one will be your GL reconcilation each point in upcoming videos I'm going to add practically so that it will help you this is just overview video so General leiser reconcilation will be there which is going to confirm that GL balance is going to match with your suger accounts payable reconciliation accounts receivable reconciliation asset reconciliation you have let's say hundreds of machinary accounts machinary are there are which is different type of assets which you have created under your plant and machineries but when you are going to prepare your balance sheet you are not going to show all individual machine one machine two all this in system in in your FSB or in balance sheet you are going to show that our plant and machiner total value and your accumulated depreciation in this way you are going to report so that is why reconciliation is very very important and particularly as I said suger reconciliation which is receivable I mean customers suppliers and your asset another form of reconciliation will be there that is your bank reconciliation bank reconciliation means matching your bank statement with recorded transactions because whenever we are posting the transactions in our sap system bank is also recording in the transaction in their system so periodically maybe in every week or 15 days or monthly we are going to have the bank statement so we have to ensure that whatever data is recorded by Bank it is exactly same whatever we have in sap if any mismatches there then we have to find out the reconciliation part I already prepared one video you can check that if you want to see uh the bank reconcilation the detail process but bank reconciliation is required periodically need to be performed by the r2r team just to ensure that that the reconciliation between two books of accounts means Bank book books of account as well as our sap related transactions another category of reconciliation will be your inter company reconciliation aligning the transaction between different because when entity having different type of company codes are there within the same group group then you will find different interc company transactions will be there so that reconciliation is also highly required similarly tax reconcilation also will be there we have to make sure that Accurate Tax reporting will be required because tax is very important for your compliance point of view so that is also required then uh various type of adjustments also we are going to do here under your r2r process so once the reconciliations are completed then the next activity we are going to do that is adjustments so adjustments is required for the rectification of correct and those are involved in the statutary audit or anyone having background of CF form so you must have a good understanding on all these areas so there are lot of adjustments we books of accounts adjustment will be required after completing the final accounts or after completing the closing activities related to particular Financial year so this is nothing but your error analysis to correct all the errors as for the various type of accounting standards always you will find various type of adjustments will be there so what are the different adjustments you will find in the sap system so one is your acurel and deferral recognizing expense or Revenue in the correct period that for that purpose accural referral entries will be there I already prepared a detail video on Acura referral you may refer that one I will add in the I button another adjustment is is required that is your foreign currency reevaluations adjustment of your foreign currency balance to reflect as for the market rate because when we are posting a transaction that rate that day rate is different whereas in month end when we are going to do the valuations so that rate will be different so that's why today we posted transaction that rate is different right buying rate will be different or selling rate will be different whereas in month end when we are going to do the GL balance valuations or our open item valuations means customer vendor open item so that time different definitely the adjustment is required so for that purpose also very important we have to do the adjustment and it is also key area related to your record to report process when you the company will hire you so uh it's not like you are going to handle everything but you don't know in which area they are going to place you so that that is why you should be knowledge on end to end record to report process because r2r is a very good process always you will find good number of openings as well as you will find more package compared to your P2P and o2c and the best preference you will find someone having audit experience companies you prefer to hire the uh in r2r process right coming to the next point that is posting the journal entries how we are going to handle this various type of adjustment entri so one is we can post through manual transactions it may be through fb50 or f-02 I already prepared video for that you may check that so for in that way we can do okay now coming to the next one that is uh we have completed transaction we have completed reconciliation and adjustment now coming to the financial closing so coming Financial closing is required for preparing the fsv the accurate financial reporting nothing but your income statement p and the land balance sheet so once the transactions are recorded and reconciled then the next uh next step or the team is going to involve in the uh in r2r process that is related to financial closing or closing activities need to be completed this is very crucial step where all the accounting activities need to be finalized just to ensure that accurate finances statement that is your income statement and balance it for a uh requirement it may be internal or it may be external now internal means you are going to have P Bal P balance she related to profits Center it is internal or it may be at a entity level that is your external reporting whatever the reason this activity will be there closing activities will be there so what are the various type of closings available and what is financial closing Financial closing you can say it is very commonly known as your period end process when I'm saying period end it may be year end or it may be month end where the business is going to finalize their finan Sals means their transactions for a time period so it may be monthly if it that means it is internal closing it may be quarterly or it may be annually annual closing is nothing but your external closing so it it is highly required that we have to ensure that all the financial data is accurate and it should be complete before generating the report so that's why closing will be must closing activities will be must and as I said there are different type of closings will be available it may be month end or it may be year end so month end activities is going to or it ensure that all our financial transactions are posted before a particular month complete quarter and closing also need to be performed before uh a particular quarter and year and closing is required before finalizing our statements means before preparing your Pendle and balance sheet in all type of closing this r2r team is involved so what are the key activities are involved in the financial closing in our sap system one is your finalizing suers means your customer closing supplier closing asset right so we have to ensure that for example let's take accounts payable so we have to ensure our R2 team is going to ensure that your accounts payable or AP and accounts receivable are closed properly okay collection payment is part of your P2P o2c or P2P respectively but it's closing is part of your r2r similarly if you'll take the asset example so asset team or r2r team who is involved in asset accounting it's their responsibility they have to make sure that that depreciation should be periodically need to be posted right so depreciation posting means if it is monthly posting then depreciation Al also should be transferred to your management accounting so that it will be included in your cost of production so that is also very very important one closing activities another example is your acral deferral that is also closing activities your cost allocations it is not directly financal closings but it is management closing but that is also part of your r2r particularly cost calculation profitability analysis is co team or your management accounting team is involved but the overhead management overhead allocations so for example let's say we have recorded cost with cost center and cost we are going to transfer to multiple cost centers so that is part of your cost allocations or that is part of your r2r you may check this video you will get more clarity on this one so that is also part of your r2r so we have to make sure that before preparing the trial Valance we have to make sure that the r2r closing activities need to be completed so then the next activity will be your preparation of your balance and all the compliance reports like your tax report your IFRS Gap all these things so in this video I have just touched multiple things overview point of view so you got some idea that what exactly will be there in r2r in next video so we are going to start with practical so that once you will uh practice those things in the system you will get more clarity see soon thank you