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Integrated Business Processes with ERP Systems Ch 4, Exam #1 - BSIS 301
Terms in this set (106)
the unit within an enterprise that performs strategic activities related to purchasing for one or more plants
Enterprise-level purchasing organization
AKA cross-company code; the most centralized model
Company-level purchasing organization
AKA cross-plant model; a single purchasing organization is responsible for multiple plants in one company code
Plant-level purchasing organization
AKA plant-specific; each plant has its own purchasing organization
an individual or a group of individuals who are responsible for purchasing activities for a material or a group of materials.
a formal communication to a vendor that represents a commitment to purchase the indicated materials under the stated terms
the currency that the materials will be priced in, such as U.S. dollars
identifies the general ledger accounts associated with the material
identifies the method that is used to value the materials
goods receipt processing time
the amount of time required to receive materials from a vendor and place them into storage
specify how much over delivery and under delivery the ordering party will accept
Vendor master data
include the data needed to conduct business with a vendor and to execute transactions related to the purchasing process
include the vendor's name, address, and communication information such as phone and fax numbers
include tax-related data, bank data and payment terms and methods
include various terms related to determining prices, creating and communicating purchase orders, verifying invoices and other steps involved in executing purchases with the vendor.
Purchasing info records
an intersection or a combination of material and vendor data
determine which process steps and data are needed when a company purchases materials or services
purchase under this pays the vendor only when it uses or sells the materials
Third party order
refers to items that the vendor ships directly to a customer
under this arrangement, a company sent materials to a vendor, who uses them to create semi-finished products
the process whereby an organization uses the same procurement process to obtain materials from another plant within the same organization
raw materials acquired for later use in the production process and trading goods for subsequent sales to customers
the process whereby the system determines which general ledger accounts to use in a given situation
materials that are acquired to be consumed by or used within the organization
Account assignment object
identifies the bearer of the cost of the purchase and is the entity for which the materials were purchased
account assignment category
determines the specific accounting data needed
stock or inventory of materials is classified into different ___________ or statuses that determine the usability of materials
materials that can be used in any manner that management feels will benefit the enterprise
can be withdrawn only for sampling or for scrap
Stock in transit
when materials are being moved from one plant to another they are classified as __________
a process step that results in a change in stock results in a _______________
records the receipt of materials into storage, which results in an increase in inventory quantity
when materials are removed from storage, in which case inventory is reduced
used by an enterprise to change a material's status or type
records data related to a goods movement, such as the receipt of goods from a vendor
required by every goods movement
when the company selects a vendor from a list of potential supplies
Outline purchase agreements
longer-term agreements between an organization and a vendor regarding the supply of materials or the performance of services within a specified period according to predefined terms and conditions
AKA Packing list; identifies the materials included in the delivery and the purchase order
goods receipt document
where the relevant data from the purchase order, such as material data and quantities are automatically copied into
when a company receives a vendor invoice, it verifies that the invoice is accurate before it makes payment
the most common method of invoice verification; between the purchase order, the goods receipt or delivery document and the invoice
Describe the functional organizational structure.
The functional structure of an organization is division of organizations into functions, which is called departments.
Every department is accountable for a set of activities which are closely related with each other.
The following are some of the typical departments of the modern organization:
Sales and marketing
Research and Development
Finance and Accounting
Why do you think this structure is so widely used?
The main reason for widely using functional stucture is the responsibility is allocated for every department. Thus, not a specific person or department is responsible for a function.
People in every department should have specialized knowledge and skills.
Sometimes, many departments are in charge for a function and it is called cross-functional.
EX: Warehouse and human resources department team up to do a function.
A What is the silo effect?
B Why does it exist?
C What problems does it create?
D How can an organization reduce or eliminate the silo effect?
A The functional structure of an organization is division of organizations into functions, which is also called as departments. The people working in each department perform their steps without knowing the previous steps done by a department and the further steps which will be done by another department. Thus, a department does a part of a process without considering the consequences of components in the project and this is called silo effect.
B Every department is accountable for a set of activities, which are closely related with each other. As the departments are isolated, each department is focused only on its objectives the silo effect exists.
C Information is not shared between the departments. Each department has a narrow focus only their allocated task. So, they do not have the view of the large process.
D Silo effect can be reduced by having the view of the business across each boundaries of the function. View on the expected output of every end-to-end process.
What is a business process? Why is adopting a process view of organizations essential to becoming a successful manager?
Is a set of activities that produces a required output. Every activity or step of each functional area also called department and it is triggered by an event. Sales, accounting, warehouses are examples of the functional areas. EX: Customer order is validated by the sales department. Payment and invoice are handled by the account department.
View of the process is very important to become a successful manager. Because of the following reasons: It prevents the manager from the "silo effect". To meet the customer satisfaction and also the company satisfaction, clear understanding of the process is required. Therefore, the business process and the essential of process view are discussed.
Briefly describe the key business processes included in this chapter in terms of their key steps.
Organizations use many processes to accomplish their business objectives; mainly the organizations use three processes to construct and deliver products and services.
The three processes are "buy", "make", and "sell".
Buy = Procurement Process
Make = Production Process
Sell = Fulfillment Process
Refers to the process of purchasing or buying of the required materials, which are used by the organization to make products.
Refers to the process of creating the products within the organization.
In the production process, the required materials are manufactured internally (within the organization).
In the procurement process, the required materials are obtained externally (that is, buy products from out of the organization).
Refers to the process of steps included in selling and delivering the products to the customers of the organization.
Explain the interrelationships among the key processes included in this chapter. Why are these interrelationships important?
Understanding the interrelationships between the processes helps to know about the working procedure or each process. For Example, the "asset manager or customer service" process is closely integrated with "production (make)" and "fulfillment (sell)" processes.
Imporatance of interrelationships:
Helps to provide quality products
Helps to maintain product equipment
Helps to know about the repairs of sold products
Helps to provide fulfillment to customers.
Describe client-server and services-oriented architectures. What are the advantages and disadvantages of each architecture?
What is an enterprise system application suite? Describe the capabilities of the individual components of the application suite.
An application suite is the collection of inter and intra company enterprise resource planning (ERP) systems.
In an application suite, the inter-company systems are SCM and SRM.
SCM connects one company with the other company to supply the required materials to the company to make the product.
SRM plays a role to maintain the relationship with all the supplies in the businesses.
In sales and manufacturing processes, the CRM offers the company with the facilities to manage the marketing, sales and servicing the customer and this accomplishes the ERP process.
The PLM provides the capabilities for the companies to manage the research process, design and product management.
Discuss the three types of data in an enterprise system and how they are related.
The transaction data is the mixture of organizational data, master data, and situational data. Situational data is the data, which includes the data related to the task being executed such as who, when, and where.
See 3 types below
Organizational Data: depicts about the enterprise structure. There are some examples, which explains the organizaiton structure of enterprise are listed below:
Region of Sales
Additionally, some of the examples of organizational data are listed below:
It is data that describes about the entities related with different processes. EX: selling a product to the customer is the representation of master data.
Customers (who buys the product)
Vendors (who sells the product)
Is the result of master data, which includes the execution of processes in the context of organizational levels. Thus, the transaction data is the reflection of executing process steps or transactions.
Quantity of Items
Explain the relationship among client, company code, and plant in SAP ERP. What are these organizational levels typically used to represent?
In SAP (Systems, Applications and Products) ERP (Enterprise Resource Planning), there are three types of data such as organizational data, master data, and transaction data.
Organizational data indicates the business structure, It contains the three organizational data elements such as:
Client: is the highest level org. data in SAP ERP / It indicates the business or enterprise, which contains many company codes.
Company Code: is the middle org. data for financial accounting in SAP ERP. It indicates the companies, which work under the high level such as enterprise or business. Each and every company within business or enterprise is referred as a company code and it belongs to a single client. It maintains the financial statements for legal reports.
Plant: is the lowest level of organizational data in SAP ERP. It performs the various functions such as creating the product and services, storing the materials for distribution, carrying out the production planning, and performing the services. It belongs to only one company code.
Why is material master one of the most complex types of data in an ERP system? Provide some examples of data typically included in a material master.
The material master is used for numerous processes and each and every process uses the materials in different manner. Each process needs the material data that may or may not be necessary to other processes.
Procurement process denotes the purchasing or buying the required materials.
Production process denotes the process of making the products.
Fulfillment process denotes the process of steps included in product sells and deliveries.
It is numerous processes so it must be huge data. to control these data by grouping the material master into different categories or views, each and every category is related to one or more processes.
The main view of material master data is Basic data such as material number, description, and weight, which is related to almost all processes, but other views are related to certain processes.
EX data in Material master:
Financial Accounting data
Warehouse management data
MRP (material resource planning) data
What are material types? Identify the four common material types in SAP ERP, and provide an example of each.
DEF: categories of materials that are based on how they are used in the firm's operations are referred as material types.
4 most common types of material types:
Raw materials: are procured from external source and used into production process. Since, it is not sold to any end-users, because it is related to procurement and production process for fulfillment process. EX for GBI products: wheels, tubes, frames, and so on.
Semi-finished goods: are manufactured in-house from external source (That is, raw materials) and used into production process. EX: raw materials of wheels, tubes, and frames are used to create the wheel assemblies.
Finished goods: are produced by production process from external sources (That is, raw materials and semifinished goods). Since, it is not procured but data of finished goods associated to fulfillment and production process. EX: luxurious bycycle from GBI products, which is produced from raw materials such as frames and semifinished goods such as wheel assemblies.
Trading Goods: are procured from external source and it is resold to customers. That is, it is like the raw materials to purchase and unlike the raw materials to resell. EX: simply purchasing the helmet from dealer and reselling them to its customers.
What are material groups? How are they different from material types?
DEF: Materials with equivalent characteristics are called as material group. Material groups are differentiated on their type. EX: all the cars can be included in material group called as automobile.
Materials are differentiated into different types depending on the way they are utilized in the company's operation and they are referred as material types. EX: in an automobile industry, the commonly used material types are raw materials, finished goods, semi-finished goods, and spare parts. Whereas, in an automobile industry, the commonly used material groups are types of vehicles they are manufacturing such as a car or a truck.
How are transaction data created in an ERP system?
DEF: Combinations of organizational, master, and situational data are commonly called as transaction data. Transaction data is the data that is specific to the task, which is going to be executed.
Transaction data can be created in the ERP system using several types of documents. Invoice, purchase orders, delivery list.
Explain the document concept in SAP ERP. What are the functions of the four types of documents in SAP ERP?
Transaction data can be created in the ERP system using several types of documents. These document are created during the process execution or once the process if complete. The documents, which are created while process execution, are transaction documents.
Function of transaction document:
Purchase orders are used to be in touch with vendor. Packing list comes with the shipment sent by the vendor. Invoice is payment request for shipped materials.
Function of financial accounting FI documents: are created once the company receives payment for the materials supplied to the customer.
Function of Controlling documents CO: the evidence for financial transaction occurred is recorded in the controlling documents.
Function of Material documents: the material movements in the company are recorded in the material documents.
Discuss the typical structure of documents in SAP ERP.
"Header" Section: The top part of a document is referred as "header" section. The "header" section contains purchase order number, data, and payment terms. The data entered in the "header" section are relevant to the entire document.
Line Section: refers to the center part of the document, which refers the entries of the table in a document. The line section contains the quantity, price, and description of each item. A document sometimes can have multiple line items.
What are the reporting options available in SAP ERP? How do they differ from one another?
How do they differ from the reporting options available in SAP BW?
In SAP ERP, there are two reportin option; they are,
List of data (work lists and online lists). Documents and analytics (analytics in SAP ERP and analytics in SAP BW (Business Warehouse)). The SAP ERP provides the above reports through information systems by using either standard or user-defined information stuctures.
Differ from one another:
The SAP BW system receives data from the SAP ERP system, other SAP systems like CRM and SRM, and other non-SAP systems. The SAP BW system is a special system from other; the data receives from other systems are stored into the SAP BW database.
Difference among reporting options in SAP ERP and SAP BW:
The SAP ERP system is used to execute process steps, but SAP BW is used to process huge amount of data to provide powerful analytics. The SAP BW system is not a real-time or online system like OLAP (online analytic process) in SAP ERP. The SAP BW data are does not appended to transactions; hence most current data are is not available.
Explain the difference between financial accounting and management accounting.
Purpose: Legal reporting (financial statments), tracking financial impact of processes, communicate with investors
Content: Defined by laws and regulations
Purpose: Managing the firm with regard to costs and revenues
Content: Defined by management needs
Briefly describe the key processes in financial accounting.
General Ledge accounting: the financial impacts that happened in the process of business are recorded by general ledger accounting. It has the most of the data needed when building the reports.
Asset Accounting: is used to record assets of the company like machinery, building, and equipment. The record maintains the details of purchasing, using and disposing of the assets of the company.
Bank Ledger Accounting: is used to record and maintain the transactions related to the bank.
Accounts Payable Accounting: It is related with the procurement process. The accounting manages the amount owed to the vendors for material or service.
Accounts Receivables Accounting: It is related with the fulfillment process. The amount owed by the customers for goods and services are managed by the accounts receivable accounting and the accounting includes the tax and charge.
Explain the key organizational data in financial accounting and the relationships between them.
Client: is the highest level of organizational data.
Company Code: is the middle-level organizational data.
Business area is the internal division of the enterprise.
What are charts of accounts and the general ledger? How are they related?
Chart of Accounts: contains the accounts list of a company, which are to be included in the general ledger. The following are types of COA.
Operative or operational COA: records the financial impacts that happened due to the everyday transactions in the business. It is optional for the enterprise.
Country-specific COA: contains alternative accounts. It is mapped from the operational COA accounts and created by the companies, when there is a need of requirements of the country specific reporting. It is optional for the enterprise.
Group COA: has group accounts of the enterprise. It generates the financial reports for every company and also for the enterprise by consolidating all the financial reports in the enterprise. This consolidated report is a must for the enterprise.
General Ledger Accounts: records the financial impacts that happened in business. It is an instantiation of the COA. The details of the ledger is available in the general ledger and it can include part or all the COA accounts. At the organization level the general ledger account is segmented. The following are segments of COA account: COA or client segment; company code segment. The details of assets, liabilities, and equity are stored in the balance sheet. Revenue expenses details are stored in profit and loss account.
Relationship between COA and General Ledger: Balance sheet and profit and loss account are included in the COA segments and they are stored and sorted in the general ledger account. That is, the relation between COA and general ledger is the COA is just blueprint, when opening the business. It lists the account of balance sheet and profit and loss account. However, the general ledger account is the last entry of the business which includes all transactions.
What are subsidiary ledgers and reconciliation accounts?
How are they related?
Subsidiary Ledgers: general ledger does not maintain all financial data. Because, sometimes all the financial data are not required to be maintained in general ledger. But, they need to be maintained separately and its is called subsidiary ledger or sub ledger. EX: the customer accounts and vendor accounts.
Reconciliation Accounts: a special account in general ledger. It consolidates the related data from subsidiary ledger. EX: for the customer accounts, accounts receivable is reconciliation account. For the vendor, accounts payable is reconciliation account.
Subsidiary ledger accounts is not part of general ledger, but it should be reflected in general ledger. It can be done by posting the data present in subsidiary ledger account to reconciliation accounts.
What is an accounting document?
Financial Accounting document records the financial impact that happened in the process of business. This report shared legally with investors. It consists of header and an item or detail section:
Number of the document
Type of the document
Code of the company
What role does the accounting document serve?
FI document is required to know the financial situation and business result.
It maintains the transactions which are related to bank.
It manages the amount owed to the vendors for a material or for a service.
it manages the amount owed by the customers for goods or for a service, which also includes the tax and charge.
The record maintains the details of purchasing, using and disposing or the assets.
Explain parallel accounting.
Why do organizations maintain multiple ledgers?
More ledgers can be implemented in parallel and it is known as parallel accounting.
Leading ledger: for all the companies in an enterprise, a set of accounting principles are implemented and the principles are consolidated in a ledger which is called the leading ledger. Consolidates financial statement for the enterprise. International financial reporting standard is a global standard, which is adopted by many countries.
Non-leading ledger: for every company, the enterprise defined an accounting principles based on the company's local accounting practices and it is know as non-leading ledger. The accounting structure of many companies are consolidated to get the financial statemtn of the enterprise. Let the enterprise contains two companies namely, company X and company Y and standard followed by company X is be "XYZ" and the standard followed by company Y be "ABC".
The non-leading ledger generates financial statement based for every company on its separate standard. The leading ledger generates consolidated financial statement for the whole enterprise.
What is the purpose of cost objects?
Provide several examples of cost objects.
Management Accounting deals with managing and allocating costs. The org. is separated into cost centers to allot and track the cost. The collection of cost centers are linked with the location to incur the cost at the location for instance plants. It can be linked with a department to incur the cost at the department for instance marketing or with an individual. The cost incurred in a process is allocated and tracked by the order such as sales order, purchase order, and production order.
Therefor, the cost center and orders are the cost object and its purpose is to allot and track the cost.
Explain the three transaction types in asset accounting.
Acquisition: the assets can be attained internally or externally.
Retirement: after finishing the useful life, the asset value is disposed of or it is retired.
Depreciation: the asset value decrease or lost and it is recorded as depreciation.
See Chegg for more examples. Ch 3 - 13RQ
What are depreciation areas?
Why do firms maintain different depreciation areas?
The asset value decrease or lost and it is recorded as depreciation. Depreciation areas is a method, which is used simultaneously along with the assumptions to depreciate the asset value. Different depreciation areas maintain different calculation and it varies across countries. The following are some of the common depreciation areas in the US: Book depreciation, tax depreciation, cost accounting depreciation.
Different depreciation areas are maintained to satisfy the various requirements as follows:
Filing the returns from income tax
To generate the financial statement
Allocating the cost to a cost center by using the asset value.
Explain the key organizational levels relevant to the purchasing process.
Explain the differences between the various types of purchasing organizations. Under what conditions is each type appropriate?
Explain the data in the material master that are relevant to the purchasing process.
Explain the data in the vendor master that are relevant to the purchasing process.
What are purchasing info records? What is their role in the purchasing process?
What are conditions used for?
Explain the relationship between organizational levels and master data in purchasing.
What are item categories in purchasing? Explain how each of the following item categories impacts the purchasing process: consignment process, third-party item, subcontracting item.
What is the role of account assignment categories in purchasing?
How is account determination different when purchasing stock items and consumable items?
What are the stock types or statuses based on the usability of materials? What is the significance of these statuses?
Explain the four goods movements discussed in this chapter. How are goods movements related to movement types?
What is a material document? List some key data included in a material document.
Briefly describe the steps in the procurement process explained in this chapter. What are some possible variations to this process?
Explain the different steps in the procurement process in terms of their triggers, required data, tasks completed, and outcomes.
Which steps in the procurement process have an impact on financial accounting? Explain these impacts.
During which steps in the procurement process are material documents created. Why?
What is meant by source of supply determination? What are the different ways of identifying a source of supply?
What are the different paths from a purchase requisition to a purchase order? What determines which path is selected?
Figure 4-21 illustrates the different purchase order processing options. Explain this figure.
A purchase requisition can result in multiple purchase orders, and multiple requisitions can be combined into one purchase order. Explain the circumstances when these two scenarios are possible. Provide examples.
What is a delivery document? What is the significance of a delivery document in purchasing?
Explain the outcomes of the goods receipt step of the procurement process.
Explain the outcomes of the invoice verification step of the procurement process.
What is a three-way match? What is its purpose? What documents are involved in a three-way match?
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