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TRADITIONAL BOOKS OF ACCOUNTS

• General Ledger - Transactions details and summary of required


nomenclature for periods.
• Sub ledgers - Transaction details and summary for Suppliers,
Customers and Assets.
• Listings of classified transaction types : -
1. Cash Book -
A). Receipts by cash, cheques,direct credits by banks or other
instruments including Bills of Exchange.
(.i) From Customers
(.ii) From Others
B).Payments by cash - Managed by Imprest
C).Payments through bank accounts ( Cheques,direct debits by
banks and other instruments including Bills of Exchange.)
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

2. Purchases and Purchase Returns


(.i) Purchase Register - to account for Invoices/Debit notes
from suppliers of goods and services
(ii) Credit Notes for adjustments/reversals for above and
others
3. Sales and Sales Returns
(.i) Sales Register - to account for Invoices / Debit notes on
Customers for sale of goods and services.
(ii) Credit Notes for adjustments/reversals for above and
others
4. Payroll
(.i) Gross earnings and deduction as transactions.
(ii) Employee wise transactions and summaries - sub ledgers
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

5. General Journal Vouchers - Accounting entries for adjustments,


corrections and transfers between
accounts and Opening / Closing
entries.
Basic requirements for Final Accounts and Audit

• Listings of Documents
• General Ledger
• Analysis of General ledger accounts
• General ledger Trial Balance
• Summarisation of General ledger trial balance into groups for
presentation
• Listings of Suppliers, Customers and Employee account balances
and analysis.
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

Cash
Purchases Sales
Book

Payroll Journal
General Ledger
Account balances
&
Transactions
Accounts Accounts
Payable Receivable

Sub ledger Acct..


balances
Fixed Employee
Assets Subledger
G.L.Trial Balance
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

BALANCE SHEET
• Share Capital - Account Balances as per General Ledger.
Share holders details are in external system
• Reserves - Account Balances as per General Ledger
• Loans - Account Balances as per General Ledger.
Details are maintained as transactions.
• Fixed Assets - Control Account in General ledger
External system for details.
• Investments - External system for details.
• Net Current Assets
Current Assets : --
Inventories - Account Balances as per General Ledger
Quantitative Information in external system
Valuation separate external process.
Receivables - Control Account in General ledger
External system for details and analysis.
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

Current Assets :- Continued ……

Other Receivables - Account balances from G.Ledger


External system for details.
Cash & Bank Balances - Account balances from G.Ledger
Deposits - Account balances from G.Ledger

Less : Current liabilities and Provisions : -

Acceptances - General ledger account balance


- External system for analysis
Sundry Creditors - General ledger account balance
- External system for analysis
Other Payables - General ledger account balance
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

Current liabilities and Provisions : - Continued……

Provisions - General ledger account balances.

• Miscellaneous Expenditure - General ledger account balances


( to the extent not written off or adjusted)

PROFIT AND LOSS ACCOUNT

• Sales and Other Income - General ledger account balances.


- Transaction details based on GL.
- Quantity information is in other
systems.
- Sales related analysis handled
manually or using other systems.
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

PROFIT AND LOSS ACCOUNT :- Continued…….

• Materials - Derived by the method of OP.Stock ( + )


Purchases ( - ) Closing Stock
- Op. Stock and Purchases are based on GL
account balances.
- Stock is valuated based on physically
verified balances.
- Quantitative analysis of materials are
separately handled in external or same
or external system that is independent of
General ledger system.
- External values for Closing stock is
incorporated for Balance Sheet and
Profit and Loss account purposes.
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..

PROFIT AND LOSS ACCOUNT :- Continued…….

• Excise Duty - General ledger account balances.


• Personnel - General ledger account balances.
• Interest,Commitment - General ledger account balances.
and Finance Charges
• Depreciation - General ledger account balances.
- Details maintained in separate or
external system that is independent.
• Other Expenses - General ledger account balances
- Indirect Material consumptions are
derived as in the case of Direct
Materials and accounted in G.Ledger
as accounting transactions.
- Quantitative details are maintained in
separate system.
BUSINESS PROCESSES IN ERP

Accounts Statements and MIS

Administration
Sales and Distribution

Supplies Manufacturing Distribution

Mfg. Support Services

Other Common services


BUSINESS PROCESSES - Salient features in traditional method

• Opening Stock maintained in GL


Purchase Quantity • Quantity details kept separately.
Order Records • Purchase Accounts in Gen.Ledger
for Stock • GR valuation carried out externally.
Accruals made or not made in GL.
• Per piece working for Materials.
Goods
• No accounting entries for issues
Receipt
General • Invoice verification separate process
Ledger Accruals cleared or Purchase debit as
the case may be.
Quality • Subledger for Creditors - separately
Mngmnt maintained or in stand alone system.
Sub Generally batch process.
ledger • Payments handled by independent
Invoice Posting
Booking process in General Ledger.and update
by batch process for subledger.
BUSINESS PROCESSES - Salient features in traditional method
EXCISE
Transaction posting
Manual or Batch Modvat
Credit • Modvat availing as separate process
on GR
• Accounting entries manual or batch
• Manual entries for reversals
Reversal
General • Part I Register -Manual or separate
on QM
Ledger
system.
• Part II Register -Manual or separate
RG23 A
Manual or External

Part I
details Part I system
• Manual process for Invoice
verification
Part II RG 23A
details Part II
BUSINESS PROCESSES IN ERP SCENARIO- MATERIAL ACCOUNTING : -
• Automatic Quantity and value
MRP 1 updation.
Requisitions
• Per piece rate automatic.
LOGISTICS - PURCHASING & MATERIAL

Purchase Contracts • Stocks in real time.


& Orders • All Vendor/Material related data
updation on line.
• Excise Modvat on Receipts.
Goods Receipts

Excise GP verification
Modvat Credit Material Accounting
&
Quality Management
Financial Accounts

Invoice Verification

Payment Process • G.Ledger posting automatic.


• Sub ledger posting automatic
Direct transactions • Available for payments at once
& Clearing
• Reports upto last entry available
Reports
BUSINESS PROCESSES - Traditional Manufacturing
Stores

Issued for • No accounting entry for Goods issue


Production • Valuation of materials at WAR
• Considered for valuation of WIP.
Routine : - • Production declaration separate process
Work Center or manual process.
Timings • Calculation of Fin./S.Fin.Goods based
Mfg.
Cost Center : - on standard or WAR working outside the
Operations
Labour Rate system.
Machine Hr. • Fin./S.Fin.Goods inventory in separate
Rate system or manual and not part of GL,.
• The entire product costing is either manual
Fin./S.Finished . or done in separate system
Goods
BUSINESS PROCESSES - Traditional - Costing

Aggregates and components

General Ledger Bills of


Transactions Material

Product Costing
Per piece rate
Cost Ledger Process of Material

Routine Labour &


Work Centre Mach.hour Product
Cost Center Rates Cost
BUSINESS PROCESSES IN ERP - Manufacturing / Product Costing
Stores • Transfer to WIP with or
without accounting entry.
• Inventory qty.& value in WIP
Issue to WIP • Work center for operations
timing for cost calculation.
• Cost center provides for labour
and machine hour rates
Routine : - Per Bills of Material
• Backflushing on production
Work Center declaration.
Timings • New inventory is created in the
Cost Center : - Conversion
system for production at material
Labour Rate cost plus cost of conversion.
Machine Hr.Rate • Consumption of components
takes place automatically.
• All accounting/costing entries are
Fin. S.Finished posted automatically.
Products Financial Accounting
Controlling
Material Accounting
BUSINESS PROCESSES - Traditional - Sales and Distribution
• Sales orders manual or outside system
Customer • No accounting entry for Delivery.
• Inventory adjustment carried out in
external system.
• General ledger transaction for Billing,
Sales Order either manual or batch process.
• Accounts Receivable in stand alone
system.
• Sub ledger posting either manual or
Delivery batch.

Manual or batch posting


G.ledger
G.Ledger
Account balances
Billing

Customer Account
Sub ledger balances and details
BUSINESS PROCESSES IN ERP - Sales & Distribution
Customer • Sales Order Processing as integrated process
• Material Accounts updation on delivery
• GL Accounting entry for cost of goods sold
on delivery
Sales Order • GL and Accounts Receivable updation as
automatic process.
• Controlling module posting for Profit center
Automatic Postings

and Profitability Analysis automatic


• Related reports can be generated upto last
Delivery transaction.

Material Accounting
Financial Accounting
Controlling
Billing Sales Accounting
SAP IMPLEMENTATION - Financial Accounts :

FI applications are configured for a particular country and currency.


SAP provides for standard country specific Chart of Accounts. There
is one commonly used International chart of accounts is available in
SAP. This was found not suitable for M&M requirements and hence
M&M Chart, modified to include sub-codes as part of the main code,
was configured in the system.

SAP FI - Financial Accounting Components -


• FI-GL General Ledger
• FI-AR Accounts Receivable
• FI-AP Accounts Payable
• FI-AA Asset Accounting
• FI-LC Consolidation
SAP IMPLEMENTATION - Financial Accounts :

Organization Structure -
M&M adopted the strategy of distributed data base to overcome the
problem of dependency between locations as unreliable connectivity
can disrupt business flows in integrated system. As a result each of
the sites have separate clients and company codes as given below :

Client 401 Client 225 Client 730


Nashik Marketing Nagpur

Chart of Accounts Chart of Accounts Chart of Accounts

Co Code Co Code Co Code Co Code Co Code Co Code


54 44 54 44 54 44
SAP IMPLEMENTATION - Financial Accounts :

Document control :-
• Transactions can be posted only if the debits and credits of
documents are equal.
• Documents in overview format , termed as header data
include organizational data and full identification of the
document.
• The details of transactions with reference to the header
data are captured in multiple lines
• The transactions are validated on entry into the system as
per conditions defined.
• The system is configured to the business processes and
the path identified by users.
Structure of a Document Document Header

Document date Doc. type


Posting dateCurrency
Doc. number

Line Item 1

Posting key 01
Account Customer (A/R)
Amount 1,100

Line item 2
Posting key 50
Account Sales Revenue
Amount 1,000

Line item 3
osting key 50
Account tax
Amount 100
Balance = 0
SAP IMPLEMENTATION - Financial Accounts :

Document types and Document Number Ranges :-

• Transactions of similar nature are identified by use of two


digit characters.
• Document types are defined for a Client.
• Document types are linked to unique sequence number range
defined in the system as per configuration.
• Document Number ranges are defined for Company Codes
within a client.
• Document Number is of ten digits and can be either internally
generated or captured as external numbers from other systems,
or entered manually.
• Document number ranges can be set for different years and
enables simultaneous postings to two years.
SAP IMPLEMENTATION - Financial Accounts

PAY ROLL and Employee related transactions :

• Pay roll is part of Human Resources in SAP which is


not being implemented.
• Employee related payments, receipts and subledgers
are also part of HR in SAP.
• To meet our requirements of employee related payments,
receipts and sub-ledgers, new payroll system under
implementation provides for data entry screens and other
features.
• The transactions created in Payroll system can be captured
in SAP through interface programs.
SAP IMPLEMENTATION - Financial Accounts :

General Ledger

The main menu provides for the following functions : -


• Document Entry
• Document
• Account
• Master Records
• Periodic processing
• Environment
SAP IMPLEMENTATION - Financial Accounts :
General Ledger
Document Entry - Consists of options as given below :
• GL Acount posting
• Park Document
• Post with clearing
• Incoming Payment
• Outgoing Payment
• Valuate Foreign Currency
• Reference Documents :-
Account assignment model
Recurring document
Sample document
SAP IMPLEMENTATION - Financial Accounts :
General Ledger
Document -
This option enables maintenance of certain fields configured
as changeable to the posted documents
Facities given are -
• Change - To change header as well as details - Header text
in header and text and allocation fields in line
items are allowed for changes.
• Change line items
• Display
• Display changes
• Reset cleared items
• Reverse
Continued in next slide …..
SAP IMPLEMENTATION - Financial Accounts :
General Ledger
Document - Continued
• Parked documents -
Post/delete
Change
Display
Change header
Display changes
Release
• Reference documents - Options are :-
Recurring documents Change
Sample documents Dispaly
Display changes
Delete
SAP IMPLEMENTATION - Financial Accounts :

General Ledger
Account : (General Ledger Account)

• Display Balances - Option allows selection of desired account


for view. Opening balance, for the month debit total /credit total and
net balance for the month and cumulative upto the month are
displayed on screen
• Display line items - Item wise details are displayed on screen
• Change line items - Authorized persons are allowed to change
text and allocation fields.
• Clear - Balance sheet accounts if they are defned as Open Item
managed , will allow matching by selection relevant debits and
credits.
Master Records - General Information
Master Record
create, change, display

G/L Accounts

c
e
in Chart of Accts n
t
r
in Company Code a
l
l
y

Master Rec. Changes


SAP IMPLEMENTATION - Financial Accounts :
General Ledger

Master Records :
• General Ledger Account codes and other details are
maintained in Chart of Accounts.
• Accounts are defined as Balance sheet or Income &
Expenditure types
• General accounts can be defined to display line item
details.
• Balance sheet accounts for which sub-ledgers are
required are deifined as Reconciliation accounts -
(AccountsPayable/Accounts Receivable)

Continued in next slide ………….


SAP IMPLEMENTATION - Financial Accounts :
General Ledger

Master Records : - Continued


Maintenance Options :
• Create
• Change
• Display
• Block / Unblock
• Mark for deletion
• Display Changes
ACCOUNTS PAYABLE :

Vendor Accounts :

• Vendor Accounts are posted in real time as and when


transactions take place.
• Non SAP data can be transferred either by interfaces or
manually entered.
• Vendor Accounts can be displayed for monthly totals
• Vendor Accounts display can be made for individual
line items.
• Clearing options allow matching of debits and credits.
• Open items and cleared items can be displayed separately
on the screen with separate totals.
Working of Semifinshed and Finished product cost
300 Nos. Cost
X of Intermediary product 150 Nos. Y Cost of Finished Goods
Raw Mat 1200 A 261081 3000 D 236512
Raw Mat 300 B 315517 3000 E 177663
Raw Mat 1800 C 164143 3000 F 235988
740741 650163
X 614153
LABOUR 300000 LABOUR 120000
OVERHEAD 180000 OV.HEAD 100000
1220741 1484316

O.STOCK 100 417000 O.STOCK 10 77770


PRDUCTION 300 1220741 PRDUCTION 150 1484316
400 1637741 160 1562086
4094.35 9763.04
TRADITIONAL TRIAL BALANCE
Description of Account Debit Credit
Inventory -Raw Material 526000
Inventory- S.Fin. 417000
Inventory- Fin. 77700
Debtors 300000
Capital 1920700
Purchases 1475500
Overhead 700000
Bank 224500
Sales 1800000
Total 3720700 3720700
INTEGRATED JOURNAL ENTRIES IN ERP
Raw Mat Consumed 740741
Raw Mat Inventory -740741
(Consumed for S.Fin. Compnts)
S Fin Comp. Inventory 1220741
Factory Output -1220741
(Accounted for S.Fin production)
S Fin Comp. Consumed 614153
Raw Mat. Consumed 650163
S.Fin. Inventory -614153
Raw Material Inventory -650163
(Consumed for Finished Goods)
Finished Goods Inventory 1484316
Factory Output -1484316
Accounted F. Goods Inventory)
Cost of Fin Goods sold 1464390
Finished Goods Inventory -1464390
(Delivery of Fin. goods inventory)
Debtors 1800000
Sales -1800000
(Accounting for sales)
TRIAL BALANCE IN SAP FORMAT

OP STK -Raw Material 526000


OP STK - S.Fin. 417000
OP STK - Fin.Goods 77700
OP STK Offsett 1020700
Debtors 300000
Capital 1920700
Purchases 1475500
Purchases Offsetting A/c 1475500
Overhead 700000
Bank 224500
Sales 1800000
CL STK - Raw Mat 610596
CL STK - Semi Fin 1023588
CL STK - Fin. Goods 97626
Raw Materials Cons. 1390904

Semi Fin Comp. Con 614153


Factory Output 2705131
Cost of Goods sold 1464390
Varaiance 74

8922031 8922031
Materials Consumed schedule in Schedule VI Format
Materials :
Op.stk of S.Fin 417000
Op.stk of Fin. 77700 494700
Less:Cl Stk of S. Fin 1023588
Cl Stk of Fin 97626 1121214
(Increase)/Decrease in Stock -626514
Op Stk RM 526000
Purchases 1475500
2001500
Less: Cl Stk RM 610596 1390904
Materials Consumed 764390

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