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Before going to the next account, let’s analyze the Accounts Payable account closer. This account is special. Look at the Control data tab and note what the Reconciliation account is. What is this all about? This is how the accounts payable subsidiary ledger is set up. Since it is accounts payable, the subsidiary ledger will contain entries for each vendor for which we do business. In SAP terminology this is termed a reconciliation account, since the subsidiary ledger must reconcile with the general ledger control account. 1. 4 5001 Cost of Goods Sold: This is an income statement account (P & L).
Hence, it is a nominal account hat must be closed at the end of the fiscal period. 1. 5 11 15 Goods Arch/ Invoice Arch: This is an account you as a student have probably never encountered before. It is a suspense account, which is explained in more detail in the answer to the next question. 1. 6 Now lets analyze the Goods Arch/ Invoice Arch account closer. This account is necessary because of timing differences in the real world. This is what is termed a suspense account. Briefly explain how entries would be made to this account (I. E.
What transactions happen and how are they recorded? ) and why all transactions in the account should eventually be erode out. (If you don’t grasp this concept yet, you may wait to answer this part until you do some of the later transaction steps. ) This suspense account handles the timing differences between when the goods are received from the vendor and when the invoice is received for those goods. In theory the cost of the goods we receive should be the amount on the purchase order, but in actual fact, the true cost that is billed to us could be different for various reasons.
For example, not all the goods we ordered may end up being shipped to us, prices may have changed or other costs such as shipping ND taxes may be different than what we estimated on the purchase order. Because of these possible differences, we may not know the total cost of the transaction until the invoice arrives. However, since an ERP system is a real time system, we must record the receipt of the inventory immediately and cannot wait until the invoice arrives.
While the receipt of the goods prior to the receipt of the invoice is the most common situation, it is also possible to receive the invoice first. No matter which case it is, the suspense account allows us to handle these situations. So in the case of the receipt of the odds first, you would debit the goods inventory and credit the Goods Received/ Invoice Received account and then when the invoice arrives, you would debit the Goods Received/ Invoice Received account and credit Accounts Payable. Ultimately, all entries in this account should be zeroed out.
See addendum for additional information. 2. 1 What is the fiscal year variant for your company code (XX) and what does this mean from the point of view of the accounting system? K is the fiscal year variant. This is a calendar year with 4 special posting periods. The extra posting periods are another aspect that a real business situation demands. These periods are used when closing the books. This is useful in a typical business situation since closing is not a simple process and usually takes a series of steps. 2. 2 University of Colorado – Boulder would use fiscal year variant IV.
Explain why this is the fiscal year variant for the university. The University of Colorado – Boulder would use IV which is July to June 30 fiscal year with 4 special posting periods. 3. 1 What type of application control is used on the field “Base Unit of Measure’? (Pick from the list of controls on page 1 of this assignment. ) Validity Check – since only a fixed limited set of values are allowed. . 2 What type of application control is used on the field “Gross Weight”? Field Check – only numeric entries are allowed. 3. 3 How is the standard price used in the accounting system? Think about what you did in your cost/managerial accounting class. ) Standard prices allow us to set the expected value of the goods and from this we can then calculate variances such as price and quantity variances which allow us to do responsibility accounting. 4. 1 What did the system do as an application control? That is, how did the system know that this was wrong? The system contains a list of zip codes and amperes them to the city and the state. From this information, it knew that the entry was incorrect. This is a validity check. 4. 2 The “Race.
Account’ is a very important entry. Explain this entry. This links to the G. L. Control account which in the purchasing cycle is accounts payable. However, the system allows a company to set up multiple reconciliation accounts. For example, a company may want to separate the vendors by geographic region. This is easily done by having different AP control controls for different geographic regions. 4. 3 What is a tolerance group and how would it be used as an application intro? What type of application control is tolerance group? Tolerance group is a limit check.