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Extension Ledger and Parallel Ledger difference in SAP

In SAP S/4HANA, there are two concepts related to multiple ledgers: Extension ledger and Parallel ledger. While they both involve the creation of additional ledgers, there are some key differences between them. Here's a breakdown of extension ledger and parallel ledger in SAP S/4HANA:

Extension Ledger:

  1. Purpose: The extension ledger is primarily used to fulfill specific statutory reporting requirements or to address legal obligations. It allows organizations to maintain additional ledgers alongside the standard/general ledger to meet diverse accounting regulations or reporting standards.

  2. Chart of Accounts: An extension ledger can have its own chart of accounts, which may differ from the chart of accounts used in the standard ledger. This flexibility enables customization to comply with specific statutory or local reporting requirements.

  3. Currency: Extension ledgers can have their own currency settings, independent of the standard ledger. This feature is particularly useful when reporting financial data in a different currency for specific legal or regulatory purposes.

  4. Reporting and Consolidation: The financial data maintained in the extension ledger can be used for specific statutory or group reporting purposes. Consolidation processes can include data from both the standard and extension ledgers to produce comprehensive financial statements.

Parallel Ledger:

  1. Purpose: A parallel ledger is typically used to support different accounting principles or valuation approaches within the organization. It allows the maintenance of multiple ledgers in parallel to fulfill various reporting or management requirements.

  2. Chart of Accounts: Parallel ledgers share the same chart of accounts as the standard ledger. This means that the same set of accounts is used across all parallel ledgers, allowing for consistency in financial data representation.

  3. Currency: Parallel ledgers can have their own currency settings, similar to extension ledgers. This provides the flexibility to report financial information in different currencies if required.

  4. Reporting and Analysis: Parallel ledgers enable organizations to perform parallel accounting and reporting, facilitating analysis and comparison of financial data based on different accounting principles or valuation methods. It helps in meeting specific internal reporting needs and supporting decision-making processes.

In summary, the key difference between extension ledgers and parallel ledgers lies in their purpose and configuration. Extension ledgers are primarily used for statutory reporting and can have their own chart of accounts and currency settings. On the other hand, parallel ledgers support different accounting principles or valuation approaches while sharing the same chart of accounts with the standard ledger. Both concepts provide flexibility in financial reporting and enable organizations to meet diverse accounting requirements in SAP S/4HANA.

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