Accounting in ERP FICO

Instructor: Tom MatysDPR105: Mgmt Info SystemsText: Concepts in ERP

Two Types

• Financial Accounting– External Reporting

• Managerial Accounting – Cost Accounting / CO Module– Understanding what things cost?

Financial Accounting

• Balance Sheet

• Income Statement

• Transactional data is used

• Integration: SD / MM / PP / CO

Financial Accounting: Balance Sheet

External Reporting

Assets – Liability = Equity

Assets: owned

Liabilities: owed

Equity: ownership stake

A centralized module keeps the books

Financial Accoutning

• Assets –What the firm owns, in various

levels of liquidity:• Cash• Receivables• Inventory• Plant & Equipment• Real Estate

Financial Accounting

• Liabilities–What the firm owes

• Payables—payment for materials/services received on credit

• Bank loans

Financial Accounting: Income Statement

• Profit & Loss Statement– Cost of Sales– Profit or Loss

Management Gauging Success

profits: good

losses: badRevenues and Expenses

Managerial Accounting

• Internally focuses on a companies costs and profitability.

• Helps management to determine profitability of a region, product, or marketing campaign.

• Managers control the flexible configurations based on needs.

Managerial Accounting

• Unlike an un-integrated system, ERP automates the transference of costs

–Assembly line to warehouse• MM Module automates

General Ledger Accounts

Like an Automated ERP Checkbook that depends upon system integration: SD creates Accounts Receivable MM creates Accounts Payable FI coordinates the SD and MM paid and

owed transactionsCO is important as it tracks the individual

costs for profit analysis

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Controlling (CO)

CO

FI

ControllingInternal AccountingCost AccountingManagerial AccountingManagement Accounting

Flexible – Non-standard

Financial AccountingExternal AccountingFinancial StatementsLegal Requirements

Standard

Reconciliation Accounts

• Reconciliation account–Accounts receivable, Accounts payable,

Assets • When you post to an account in the sub-

ledger, the system automatically posts to the corresponding reconciliation account

• The general ledger is automatically updated

Account Determination

• When you enter a goods movement (inventory receipt, inventory withdrawal, variances, etc.), you do not have to enter G/L accounts since R/3 automatically determines the correct accounts.

• Automatic Account Determination is set in Customizing (IMG)

• Uses Chart of Accounts

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Cost Centers• Cost centers are used to track WHERE costs

occur in the organization. As costs are incurred, they are assigned or posted to the appropriate cost center.

• The posting and assignment of costs to cost centers is a critical step in using the CO module.

• Cost centers are organized in a Standard Hierarchy.

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Cost Center Standard Hierarchy

• The cost center standard hierarchy organizes cost centers and provides the ability to organize reports at different levels in the organization:

FS-CC-## (Standard Hierarchy)

##HQ (Cost Center Group / Hierarchy Area)

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

##MFG (Cost Center Group / Hierarchy Area)

MFG Cost CentersP010 – ProductionP020 – WarehouseP030 – Receiving

FS-CC-## (Standard Hierarchy)

##HQ (Cost Center Group / Hierarchy Area)

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

##MFG (Cost Center Group / Hierarchy Area)

MFG Cost CentersP010 – ProductionP020 – WarehouseP030 – Receiving

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Cost Allocation

• Frequently, costs like rent, computer expense, utilities, etc. have to be allocated to cost centers to provide accurate cost reporting.

• Costs can be allocated using a statistical key figure, which defines some measurable value related to the cost center, like square footage, head count, CPU hours, etc.

• Costs can also be distributed using fixed percentages.

Questions?

?………Lab 4: Accounting in ERP