Midterms Duration: Week 1 & 2

INTRODUCTION

Welcome to the short term of the school year 2020-2021; you are enrolled in the subject
Accounting Information System with SAP Integration. I am Marife de la Paz Tibule, a teacher for
this subject. I am interested in using, exploring computers in connection to several business
transactions. I am not a graduate of computer-related courses, but the university hired me to
teach computer subjects because of industry exposure and several training pieces. I am a
graduate of Bachelor of Science in Commerce major in Banking and Finance in this institution
and Bachelor of Laws at the University of Cagayan Valley. I am expecting that you will also enjoy
learning and exploring the computer, particularly its role in the business industry. In case you
have some questions regarding the topics, learning tasks or anything regarding this subject I am
always willing to help and guide you, so please do not hesitate to ask for assistance. It is
challenging that we cannot meet face to face by now, but I believe that through the guided
activities, we can achieve the expected learning outcomes at the end of the short term.

USL expects you to do the following:

1. Email your output in my email address [email protected].

2. Contact me at my Mobile # 09088105088 for any query that you want to make about your
lessons or procedures in school.
3. Comply with all requirements on time.

Attached to this first week module is the following:

1. Attached to this first & second week module is the following:

2. Grading System
3. The USL Vision-Mission and Values
4. Program Outcomes
5. Course Learning Outcomes

Grading System
1
 REQUIREMENTS Midterm Finals

Learning Tasks 20% 20%

Quizzes 25% 25%

Participation 5% 5%

Major Exam 50% 50%

The Vision, Mission, Educational Philosophy, and Core Values of the University

University of Saint Louis is a Catholic institution of higher learning. The CICM-RP Province as one
effective means of evangelization to be fully integrated with the church’s educational vision founded
it. It is, therefore essential that USL must address to the apostolic commitment and priorities of the
RP-CICM province in its educational apostolate.

• Vision
USL is a global learning community recognized for science and technology across all
disciplines, strong research, and responsive community engagement grounded on the CICM
mission and identity for a distinctive student experience.

• Mission
USL sustains a Catholic academic community that nurtures persons for community, church
and society anchored on CICM’s Missio et Excellentia.

• Educational Philosophy and Core Values

The University of Saint Louis upholds the philosophy that education is for building of self
and persons for the Church and the Society. Wisdom builds. To these ends, the following
are University of Saint Louis’s core values integral in the formation of every member of the
Louisian community.

a. Christian Living. We are witnesses to the Gospel values as taught and lived by Christ
thus making God’s love known and experienced by all.

b. Excellence. We seek and maintain uncompromising standard of quality in teaching,

learning, service, and stewardship of school resources.

c. Professional Responsibility. We are committed to efficiently and responsibly apply

the learned principles, values and skills in the chosen field of discipline, taking We
are committed to efficiently and responsibly apply the learned principles, values
and skills in the chosen field of discipline, taking initiative and command
2
 responsibility in one’s professional advancement.

d. Social Awareness and Involvement. We engage ourselves with society by listening to

the prevailing issues and concerns in the society, thereby initiating and participating
in constructive and relevant social activities for the promotion of justice, peace and
integrity of creation and for people’s wellness and development consistent with the
CICM charism.

e. Innovation, Creativity and Agility. We keep ourselves relevant and responsive to the
changing needs of our stakeholders by being flexible, solution oriented, and having
cutting-edge decisions and practices.

PROGRAM LEARNING OUTCOMES:

Code Program Learning Outcome

ACO 01 Exercise high personal, moral and ethical standards by living the gospel values every day in
personal and professional life.

ACO 02 Demonstrate managerial and leadership skills in administration and supervision of accounting
firms or organizations while recognizing cultural diversity.

ACO 03 Employ technology as a business tool in capturing financial and non-financial information,
generating reports and making decisions.

ACO 04 Resolve business issues and problems, with global and strategic perspective using knowledge
and technical proficiency in the areas of financial accounting and reporting, cost accounting
and management accounting and control, taxation, and accounting information systems.

ACO 05 Contribute in the advancement of research, education and practice to bridge the gap of
undergraduate preparation and practice.

ACO 06 Demonstrate communication skills to develop informative, explanatory and persuasive

presentations to a variety of audiences using oral and written communication and language,
quantitative and technological literacy.

ACO 07 Work effectively with interdependence and versatility with high regard of a professional
accountant’s legal and moral duty.

ACO 08 Work actively and voluntarily in pursuit of personal and professional development.

ACO 09 Demonstrate an attitude of self-less service through engagement to various community

developments and environmental sustainability activities.

3
 ACO 10 Integrate personal, professional and community values in a decision-making context as a
member of an organization. Demonstrate social responsibility within organizational contexts
and the social role and impacts of organizations.

ACO 11 Conduct accountancy research through independent studies of relevant literature and
appropriate use of accounting theory and methodologies

CLO Code Course Learning Outcomes

Demonstrate understanding on how Information Technology tools aid in various
CLO1
business endeavors.
Exhibit knowledge and skills in using appropriate an Information System,
CLO2
relevant to user-defined business processes.
Analyze various user requirements and develop technological solutions that
CLO3 cater to these needs.

For two weeks of this grading period, the following shall be your guide for the different lessons and
tasks that you need to accomplish. Be patient, read it carefully before proceeding to the tasks
expected of you. GOOD LUCK!

Content I. Introduction to Fundamentals of Accounting

A. Brief History of Accounting
B. Types of Business Organizations
C. Hybrid Business
D. Double Entry Bookkeeping
Basic Accounting Principles
A. Computerized Accounting System
B. Special Features of Computerized Accounting
C. Advantages of Computerized Accounting
SAP Cloud Platform
A. Overview
B. Capabilities and User Experience
C. Benefits
Learning Outcomes • Know where to apply SAP in business
• Know the importance and relevance of
SAP in Accounting

4
 • Know the new SAP on cloud
performance
• Understand the difference between
on premise and on cloud SAP
experience
• List the benefits of Cloud computing

LEARNING CONTENT:

Accounting is a systematic process of identifying, recording, measuring, classifying, verifying,

summarizing, interpreting and communicating financial information. It provides feedback to
management regarding the financial results and status of an organization. It may be handled by a
bookkeeper or an accountant at small firms or by sizable finance departments.
Brief History of Accounting
Luca Pacioli, a Franciscan friar in Medieval Venice, wrote the ―Summa de arithmetica, geometria,
proportioni et proportionalità‖ in 1494. In it, he detailed a system of financial recordkeeping in which
every debit (Latin for ―he owes‖) was matched to a credit (―he trusts‖). In his system, Pacioli
included asset, liability, capital, income, and expense accounts: exactly those categories you would find
on your own balance sheet and income statement. Although he is not credited with having invented
the system (that designation goes to the Venetian merchants who used it), he is nonetheless known as
the ―Father of Accounting‖ for having put it to paper. Although modern accounting revolves around
double-entry bookkeeping, accounting as a technical craft existed long before Pacioli. Financial records
of goods sold and money exchanged stretch back to ancient Mesopotamia, Assyria, Babylon, and
Sumeria, where it likely functioned as an expedient to taxation and the operation of temples. There is
even record of a state official in Egypt holding the title of―comptroller.
Types of Business Organizations
A business entity is an organization that uses economic resources or inputs to provide goods or
services to customers in exchange for money or other goods and services. Business organizations come
in different types and different forms of ownership.
Three major types of businesses:
1. Service Business
A service type of business provides intangible products (no physical form). Service type firms offers
professional skills, expertise, advice, and other similar products.
Examples: salon, repair shops, schools, banks, accounting and law firms
2. Merchandising Business
This type of business buys products at wholesale price and sells the same at retail price. They are
known as “buy and sell” businesses. They make profit by selling the products at prices higher than their
5
purchase costs. A merchandising business sells a product without changing its form.
Examples: grocery stores, convenience stores, distributors, and other resellers
3. Manufacturing Business
Unlike a merchandising business, a manufacturing business buys products with the intention of using
them as materials in making a new product. Thus, there is a transformation of the products purchased.
A manufacturing business combines raw materials, labor, and factory overhead in its production
process. The manufactured goods will then be sold to customers.
Examples: furniture shops, gardenia, car dealers
Hybrid Business
Hybrid businesses are companies that may be classified in more than one type of business. A
restaurant, for example, combines ingredients in making a fine meal (manufacturing), sells a cold
bottle of wine (merchandising), and fills customer orders (service). Nonetheless, these companies may
be classified according to their major business interest. In that case, restaurants are more of the
service type – they provide dining services.
Double Entry Bookkeeping
Double entry is the fundamental concept underlying present-day bookkeeping and accounting.
Double-entry accounting is based on the fact that every financial transaction has equal and opposite
effects in at least two different accounts. in which each entry is recorded to maintain the relationship.
The fundamental concept of double entry derives from the use of debit and credit to record business
transactions. The total debits always equal the total credits. Customarily, in bookkeeping and
accounting, the asset, expense and loss accounts are listed on the left side of a bookkeeping sheet, and
the liability, equity, revenue and gain accounts are listed on the right side, with the two sides
maintaining the same total balance. A debit to one or more accounts must be accompanied by a credit
to at least one account, equally increasing or decreasing the balance on each side. Other times, a debit
to either side is balanced out by an equal credit to the same side.
Basic Accounting Principles
A number of basic accounting principles have been developed through common usage. They form the
basis upon which modern accounting is based. The best-known of these principles are as follows:
1. Accrual principle. This is the concept that accounting transactions should be recorded in the
accounting periods when they actually occur, rather than in the periods when there are cash flows
associated with them. This is the foundation of the accrual basis of accounting. It is important for the
construction of financial statements that show what actually happened in an accounting period, rather
than being artificially delayed or accelerated by the associated cash flows.
2. Conservatism principle. This is the concept that you should record expenses and liabilities as soon as
possible, but to record revenues and assets only when you are sure that they will occur. This
introduces a conservative slant to the financial statements that may yield lower reported profits, since
revenue and asset recognition may be delayed for some time. Conversely, this principle tends to
encourage the recordation of losses earlier, rather than later.
3. Cost principle. This is the concept that a business should only record its assets, liabilities, and equity
investments at their original purchase costs. This principle is becoming less valid, as a host of
accounting standards are heading in the direction of adjusting assets and liabilities to their fair values.

6
4. Economic entity principle. This is the concept that the transactions of a business should be kept
separate from those of its owners and other businesses. This prevents intermingling of assets and
liabilities among multiple entities, which can cause considerable difficulties when t he financial
statements of a fledgling business are first audited.
5. Full disclosure principle. This is the concept that you should include in or alongside the financial
statements of a business all of the information that may impact a reader's understanding of those
financial statements. The accounting standards have greatly amplified upon this concept in specifying
an enormous number of informational disclosures.
6. Going concern principle. This is the concept that a business will remain in operation for the
foreseeable future. This means that you would be justified in def erring the recognition of some
expenses, such as depreciation, until later periods. Otherwise, you would have to recognize all
expenses at once and not defer any of them.
7. Matching principle. This is the concept that, when you record revenue, you should record all related
expenses at the same time. Thus, you charge inventory to the cost of goods sold at the same time that
you record revenue from the sale of those inventory items. This is a cornerstone of the accrual basis of
accounting. The cash basis of accounting does not use the matching the principle.
8. Materiality principle. This is the concept that you should record a transaction in the accounting
records if not doing so might have altered the decision making process of someone reading the
company's financial statements. This is quite a vague concept that is difficult to quantify, which has led
some of the more picayune controllers to record even the smallest transactions.
9. Monetary unit principle. This is the concept that a business should only record transactions that can
be stated in terms of a unit of currency. Thus, it is easy enough to record the purchase of a fixed asset,
since it was bought for a specific price, whereas the value of the quality control system of a business is
not recorded. This concept keeps a business from engaging in an excessive level of estimation in
deriving the value of its assets and liabilities.
10. Time period principle. This is the concept that a business should report the results of its operations
over a standard period of time. This may qualify as the most glaringly obvious of all accounting
principles, but is intended to create a standard set of comparable periods, which is useful for trend
analysis.
Computerized Accounting System
While some firms still do their bookkeeping by hand, most firms generally have too many transactions
to sustain a manual accounting system. The more complicated the financial activities of your business
are, the more likely it is that you'll need a computerized accounting system to ensure effective
financial reporting. Computerized accounting systems are software programs that are stored on a
company's computer, network server, or remotely accessed via the Internet.
Computerized accounting systems allow you to set up income and expense accounts, such as rental or
sales income, salaries, advertising expenses, and material costs. They also can be used to manage bank
accounts, pay bills, and prepare budgets. Depending upon the program, some accounting systems also
allow you to prepare tax documents, handle payroll, and manage project costing. You can generally
customize the software to meet the needs of your business. It's important to make sure that your staff
are trained and understand how to use the system correctly so that your company can successfully use
your accounting program.

7
Special Features of Computerized Accounting
1. It leads to quick preparation of accounts and makes the accounting statements and records available
on time.
2. It ensures control over accounting work and records.
3. Errors and mistakes would be at minimum in computerized accounting.
4. Maintenance of uniform accounting statements and records is possible.
5. Easy access and reference of accounting information is possible.
6. Flexibility in maintaining accounts is possible.
7. It involves less clerical work and is very neat and more accurate.
8. It adapts to the current and future needs of the business.
9. It generates real-time comprehensive MIS reports and ensures access to complete and critical
information instantly.
Advantages of Computerized Accounting
1. Better quality work
The accounts prepared with the use of computers are usually uniform, neat, accurate, and more
legible than manual job.
2. Lower Operating Costs
Computer is a labor and time saving devise. Hence, the volume of job handled with the help of
computers results in economy and lower operating costs.
3. Improved Efficiency
Computer brings speed and accuracy in preparing the records and accounts and thus, increases the
efficiency of employees.
4. Facilitates Better Control
From the management point of view, greater control is possible and more information may be
available with the use of computer in accounting. It ensures efficient performance in accounting work.
5. Greater Accuracy
Computerized accounting ensures accuracy in accounting records and statements. It prevents clerical
errors and omissions.
6. Relieve Monotony
Computerized accounting reduces the monotony of doing repetitive accounting jobs, which are
tiresome and time consuming.
7. Facilitates Standardization
Computerized accounting facilitates standardization of accounting routines and procedures. Therefore,
standardization in accounting is ensured.
8. Minimizing Mathematical Errors
While doing mathematics with computers, errors are virtually eliminated unless the data is entered
improperly in the first instance.

Accounting Information System (AIS)

• subsystem of management information system

• Collects and processes transaction data
8
 • Communicates financial information to decision makers
• Includes each of the steps in the accounting cycle
AIS - a subset of an organizations Management Information Systems that provides: accounting and
financial information other information obtained in the routine processing of accounting transactions.
Accounting Information System consist of the following:

1. People
2. Procedures
3. Data
4. Software
5. Information technology
Accounting Information System

Roles of Accountant in AIS

• User
• Manager
• Consultant
• Evaluator
• Provider of accounting and tax services
Basic Concepts of AIS
Computerized
• Works are done with the help of software
• Large Business organizations use this
• Chances of mistakes are less
Manual
• Generally used in small organizations
• Works are done manually
• More chances of doing mistakes
Basic Functions of AIS
• It collects and stores data about activities and transactions
• It processes data into information that is useful for making decisions
• It provides adequate controls to safeguard the organization’s assets
9
 a. Ensurethattheinformationisreliable.
b. Ensure that business activities are performed efficiently.
c. Safeguard organizational assets.
Basic Functions The data processing cycle consist of four steps

• Data input
• Data storage
• Data processing
• Information output

The information an AIS provides falls into two main categories

• Financial Statements
• Managerial Reports
Subsystems in the AIS

Provide Factors influencing design of the AIS

The Accounting Process

Benefits of AIS

10
 a. Businesses use accounting information systems to make their accounting activities easier,
quicker, and more accurate
b. Allows to save time of employees and avoid mistake
c. Implementation of such system requires investment and time to be spent on the
implementation, however future benefits are much higher that the expenses incurred.
d. Helps the company forecast sales, profits, loss
e. Make it easier to compile financial data for use in taxes, payroll, and other bookkeeping
requirements

Overview
Cloud computing represents a new way to deploy computing technology to give users the ability
to access, work on, share, and store information using the internet. The ideal way to describe Cloud
Computing would be to term it as 'Everything as a Service' (abbreviated as XaaS). The cloud itself is a
complex network of data centers, each composed of thousands of computers working together that can
perform and achieve the functions of a software on a personal or business computer units by providing
users access to a vast number of applications, platforms and services delivered over the Internet.

Types of Cloud Deployment

PRIVATE CLOUD
Private Cloud, also known as Internal Cloud, is a cloud based infrastructure operated exclusively
for a single organization with all data protected behind an internal firewall. This is usually physically
located at the company's on-site data center or can also be managed and hosted by a third-party provider.

PUBLIC CLOUD
Public Cloud, also known as External Cloud, is available to the public where data are created and
stored on third-party servers. Service infrastructure belongs to service providers that manage them and
administer pool resources. The need for user companies to buy and maintain their own hardware is
eliminated. It is based on a shared cost model for all the users or in the form of a licensing policy such as
pay per use.

11
HYBRID CLOUD
Hybrid Cloud encompasses the best features of the above-mentioned cloud computing
deployment models. It allows companies to mix and match the facets of public and private cloud that best
suit their requirements.

Huawei Cloud Platform

Huawei Cloud is the chosen partner of Fasttrack IT Academy for the deployment of SAP Business
One on Cloud to our university and collegiate partners. Huawei Cloud now distills 30+ years of
accumulated technology, innovation, and expertise in the ICT infrastructure field to offer customers
everything as a service. You can grow your enterprise in the best environment with stable, secure, and
ever-improving Huawei Cloud services and affordable, inclusive AI. It provides a powerful computing
platform and easy-to-use development platform to support Huawei's full-stack, all-scenario AI strategy.

By the end of 2019, Huawei Cloud had launched 200+ cloud services and 190+ solutions. News
agencies, social media platforms, law enforcement, automobile manufacturers, gene sequencing
organizations, financial institutions, and a long list of other industry customers are all benefiting in
significant ways from Huawei Cloud. 3,500 applications were added to the Huawei Cloud marketplace
with offerings from more than 10,000 business partners.

12
Capabilities and User Experience
Key Features of Cloud Computing
The characteristics of Cloud Computing express its significance in the current business market. It has
already been proven that Cloud Computing is a model for enabling universal, convenient and on-demand
network access. Below are the key features of Cloud Computing:
• Agility -helps in rapid and inexpensive re-provisioning of resources

• Location Independence - resources can be accessed anywhere (except on

limitations set by company's internal control)

• Multi-Tenacity - resources are shared amongst a large pool of users

• Reliability - dependable accessibility of resources and computation

• Scalability - dynamic provisioning of data helps in avoiding various bottleneck scenarios

• Ease of Maintenance - users (companies/organizations) have less work in terms

of resource upgrades and management, handled by service providers of cloud
computing

13
Introduction to SAP
SAP (stands for Systems,
Applications and Products in data
processing) is a European multinational
software corporation founded in 1972,
headquartered in Walldorf, Baden-
Wurttemberg, Germany with regional
offices in 180 countries.

It is founded by five IBM engineers namely Hasso Plattner, Klaus Tschira, Claus Wellenreuther,
Dietmar Hopp and Hans-Werner Hector.

SAP is
considered as one
of the world’s
largest business software company:
• Commands 67% share of the Business Software Market
• 12 Million Users. 95,000 Installations in more than 130 countries
• 1,500 Partners. 25+ Industry Solutions. 60,000 employees
It is the recognized leader in providing collaborative business solutions for all types of industries and for
every major market globally.
Some of SAP users in the Philippines and worldwide:

14
SAP Business One
SAP Business One is an ERP (Enterprise Resource Planning) Solution. It is arranged into 15 functional
modules, automating the major functions in a business organization. This system prides itself on having
the following characteristics:
• Integrated
• Real-time
• Flexible
• Easy to use

15
Benefits
SAP Business One: On Premise vs. On Cloud
Fasttrack IT Academy formerly offers SAP Business One – On premise with our university and
collegiate partners. To be able to provide our partners with the most recent business solution trends in
the industry, we have decided to open the doors on the latest cloud computing developments, thus
offering SAP Business One on Cloud. The following are the differences between SAP Business on Premise
and SAP Business on Cloud:
Measures On Premise On Cloud
On premise installation of SAP
Deployment Through the internet
Business One
Accounting Localized / Independent Branch Accounting
Limited (within the premises of the
Accessibility Remote access through the internet
installation)
Data Storage Hardware Cloud Server

16
 GETTING STARTED

At the end of this chapter, students will be able to:

1. Log-in to SAP Business One

2. Identify the parts of the user interface and other basic
navigation tools of the system
Basic Navigation
Log-in to SAP Business One
1. Accessing SAP Business One on Cloud is done using web browsers. Open any web
browser (e.g. Google Chrome, Mozilla Firefox, Microsoft Edge,etc)

2. Input on the address bar of the web browser the URL provided by your instructor.

3. Press Enter.
4. You will be directed to the SAP Business One log-in page.

5. Select the company that will be provided by your instructor.

6. Log-in using the User ID and Password provided below, depending on the branch
17
 assigned to you:
Branch User ID Password Branch User ID Password Branch User ID Password
Branch 1 Branch 18 Branch 35
Branch 2 Branch 19 Branch 36
Branch 3 Branch 20 Branch 37
Branch 4 Branch 21 Branch 38
Branch 5 Branch 22 Branch 39
Branch 6 Branch 23 Branch 40
Branch 7 Branch 24 Branch 41
Branch 8 Branch 25 Branch 42
Branch 9 Branch 26 Branch 43
Branch 10 Branch 27 Branch 44
Branch 11 Branch 28 Branch 45
Branch 12 Branch 29 Branch 46
Branch 13 Branch 30 Branch 47
Branch 14 Branch 31 Branch 48
Branch 15 Branch 32 Branch 49
Branch 16 Branch 33 Branch 50
Branch 17 Branch 34

User Interface
Menu Bar and Tool Bar
The SAP Business One menu bar displays at the top of the screen. The menu bar contains the Windows
standard menu (File, Edit, Wwindow, Help) as well as generic SAP Business One functions.

The toolbar displays under the menu bar. The toolbar is a collection of icon buttons that grant you easy
access to commonly-used functions. The functions represented by the buttons are also available in the
menu bar.

18
Modules Menu
Navigation in SAP Business One is done using the Modules Menu. It arranges the functions of the
individual applications in a tree structure.
The Modules Menu contains a list of all modules with their related options. The menu option includes:
• Are arranged in the same order as the menus in the Main Menu
• Cannot be modified
• May be inactive for unauthorized users

User and Password Maintenance

The users of SAP Business One are defined in the User-Setup window.
To change the name of the user:

1. Go to the tool bar and click (My Personal Settings). User Set-up window will appear.
2. Change the name on the User Name field with your own name.
3. Personalize your password by clicking beside the Password field.
4. Input the old password, then input your personalize password on Password field
and Confirm field.
5. Click OK.
6. Click Update.

19
Branch Name Setting
1. Go to Administration > Setup > Financials > Branches
2. Branches Setup window will open. Look for the branch assigned to you then
change the Branch Name and Branch Name (Foreign) with your own name.
3. Update.

20
Basic Customization
To set how certain parameters are displayed in SAP Business One on Cloud:
1. Go to Administration>System Initialization>General Setting
2. On the Display tab, choose the
following settings: Language:
English (United States)
Time Format: 12H
Date Format: MM/DD/YYYY
3. Click UPDATE to save the settings. Click OK to exit the window.

*Note: Font Size and Font Style is predefined on SAP Business One on Cloud and
cannot be changed. If you want to increase the font size, directly increase zoom %
of the browser that you are using.

Accounting is a systematic process of identifying, recording, measuring, classifying,

verifying, summarizing, interpreting and communicating financial information. It provides feedback
to management regarding the financial results and status of an organization. It may be handled by
a bookkeeper or an accountant at small firms or by sizable finance departments.

Brief History of Accounting

Luca Pacioli, a Franciscan f r i a r i n M e d i e v a l V e n i c e , wrote the
―Summa de arithmetica, geometria, proportioni et proportionalità‖ in 1494. In it, he detailed a
system of financial recordkeeping in which every debit (Latin for ―he owes‖) was matched to a
credit (―he trusts‖). In his system, Pacioli included asset, liability, capital, income, and expense
accounts: exactly those categories you would find on your own balance sheet and income
statement. Although he is not credited with having invented the system (that designation goes to
the Venetian merchants who used it), he is nonetheless known as the ―Father of Accounting‖
for having put it to paper. Although modern accounting revolves around double-entry

1
bookkeeping, accounting as a technical craft existed long before Pacioli. Financial records of goods
sold and money exchanged stretch back to ancient Mesopotamia, Assyria, Babylon, and Sumeria,
where it likely functioned as an expedient to taxation and the operation of temples. There is even
record of a state official in Egypt holding the title of―comptroller.

Types of Business Organizations

A business entity is an organization that uses economic resources or inputs to provide
goods or services to customers in exchange for money or other goods and services. Business
organizations come in different types and different forms of ownership.
Three major types of businesses:
1. Service Business
A service type of business provides intangible products (no physical form). Service type
firms offers professional skills, expertise, advice, and other similar products.
Examples: salon, repair shops, schools, banks, accounting and law firms

2. Merchandising Business
This type of business buys products at wholesale price and sells the same at retail price.
They are known as “buy and sell” businesses. They make profit by selling the products at
prices higher than their purchase costs. A merchandising business sells a product without
changing its form.
Examples: grocery stores, convenience stores, distributors, and other
resellers

3. Manufacturing Business
Unlike a merchandising business, a manufacturing business buys products with the
intention of using them as materials in making a new product. Thus, there is a
transformation of the products purchased. A manufacturing business combines raw
materials, labor, and factory overhead in its production process. The manufactured goods
will then be sold to customers.
Examples: furniture shops, gardenia, car dealers

Hybrid Business
Hybrid businesses are companies that may be classified in more than one type of business.
A restaurant, for example, combines ingredients in making a fine meal (manufacturing), sells a
cold bottle of wine (merchandising), and fills customer orders (service). Nonetheless, these
companies may be classified according to their major business interest. In that case, restaurants
are more of the service type
– they provide dining services.

Double Entry Bookkeeping

Double entry is the fundamental concept underlying present-day bookkeeping and
accounting. Double-entry accounting is based on the fact that every financial transaction has equal

2
and opposite effects in at least two different accounts. in which each entry is recorded to
maintain the relationship.
The fundamental concept of double entry derives from the use of debit and credit to
record business transactions. The total debits always equal the total credits. Customarily, in
bookkeeping and accounting, the asset, expense and loss accounts are listed on the left side of a
bookkeeping sheet, and the liability, equity, revenue and gain accounts are listed on the right side,
with the two sides maintaining the same total balance. A debit to one or more accounts must be
accompanied by a credit to at least one account, equally increasing or decreasing the balance on
each side. Other times, a debit to either side is balanced out by an equal credit to the same side.

Basic Accounting Principles

A number of basic accounting principles have been developed through common usage.
They form the basis upon which modern accounting is based. The best-known of these principles
are as follows:
1. Accrual principle. This is the concept that accounting transactions should
be recorded in the accounting periods when they actually occur, rather
than in the periods when there are cash flows associated with them. This
is the foundation of the accrual basis of accounting. It is important for
the construction of financial statements that show what actually happened
in an accounting period, rather than being artificially delayed or accelerated
by the associated cash flows.
2. Conservatism principle. This is the concept that you should record
expenses and liabilities as soon as possible, but to record revenues and
assets only when you are sure that they will occur. This introduces a
conservative slant to the financial statements that may yield lower
reported profits, since revenue and asset recognition may be delayed for
some time. Conversely, this principle tends to encourage the recordation
of losses earlier, rather than later.
3. Cost principle. This is the concept that a business should only record its
assets, liabilities, and equity investments at their original purchase costs.
This principle is becoming less valid, as a host of accounting standards are
heading in the direction of adjusting assets and liabilities to their fair
values.
4. Economic entity principle. This is the concept that the transactions of a
business should be kept separate from those of its owners and other
businesses. This prevents intermingling of assets and liabilities among
multiple entities, which can cause considerable difficulties when the
financial statements of a fledgling business are first audited.
5. Full disclosure principle. This is the concept that you should include in or

3
 alongside the financial statements of a business all of the information that
may impact a reader's understanding of those financial statements. The
accounting standards have greatly amplified upon this concept in
specifying an enormous number of informational disclosures.
6. Going concern principle. This is the concept that a business will remain in
operation for the foreseeable future. This means that you would be
justified in deferring the recognition of some expenses, such as
depreciation, until later periods. Otherwise, you would have to recognize
all expenses at once and not defer any of them.
7. Matching principle. This is the concept that, when you record revenue, you
should record all related expenses at the same time. Thus, you charge
inventory to the cost of goods sold at the same time that you record
revenue from the sale of those inventory items. This is a cornerstone of the
accrual basis of accounting. The cash basis of accounting does not use the
matching the principle.
8. Materiality principle. This is the concept that you should record a
transaction in the accounting records if not doing so might have altered the
decision making process of someone reading the company's financial
statements. This is quite a vague concept that is difficult to quantify, which
has led some of the more picayune controllers to record even the smallest
transactions.
9. Monetary unit principle. This is the concept that a business should only
record transactions that can be stated in terms of a unit of currency. Thus,
it is easy enough to record the purchase of a fixed asset, since it was bought
for a specific price, whereas the value of the quality control system of a
business is not recorded. This concept keeps a business from engaging in
an excessive level of estimation in deriving the value of its assets and
liabilities.
10. Time period principle. This is the concept that a business should report
the results of its operations over a standard period of time. This may
qualify as the most glaringly obvious of all accounting principles, but is
intended to create a standard set of comparable periods, which is useful
for trend analysis.

Computerized Accounting System

While some firms still do their bookkeeping by hand, most firms generally have too many
transactions to sustain a manual accounting system. The more complicated the financial activities

4
of your business are, the more likely it is that you'll need a computerized accounting system to
ensure effective financial reporting. Computerized accounting systems are software programs
that are stored on a company's computer, network server, or remotely accessed via the Internet.

Computerized accounting systems allow you to set up income and expense accounts, such
as rental or sales income, salaries, advertising expenses, and material costs. They also can be used
to manage bank accounts, pay bills, and prepare budgets. Depending upon the program, some
accounting systems also allow you to prepare tax documents, handle payroll, and manage project
costing. You can generally
customize the software to meet the needs of your business. It's important to make sure that your
staff are trained and understand how to use the system correctly so that your company can
successfully use your accounting program.

Special Features of Computerized Accounting

1. It leads to quick preparation of accounts and makes the accounting
statements and records available on time.
2. It ensures control over accounting work and records.
3. Errors and mistakes would be at minimum in computerized accounting.
4. Maintenance of uniform accounting statements and records is possible.
5. Easy access and reference of accounting information is possible.
6. Flexibility in maintaining accounts is possible.
7. It involves less clerical work and is very neat and more accurate.
8. It adapts to the current and future needs of the business.
9. It generates real-time comprehensive MIS reports and ensures access to
complete and critical information instantly

Advantages of Computerized Accounting

1. Better quality work
The accounts prepared with the use of computers are usually uniform, neat, accurate, and
more legible than manual job.
2. Lower Operating Costs
Computer is a labor and time saving devise. Hence, the volume of job handled with the
help of computers results in economy and lower operating costs.
3. Improved Efficiency
Computer brings speed and accuracy in preparing the records and accounts and thus,
increases the efficiency of employees.
4. Facilitates Better Control
From the management point of view, greater control is possible and more information
may be available with the use of computer in accounting. It ensures efficient performance
in accounting work.
5. Greater Accuracy
Computerized accounting ensures accuracy in accounting records and statements. It

5
 prevents clerical errors and omissions.
6. Relieve Monotony
Computerized accounting reduces the monotony of doing repetitive accounting jobs,
which are tiresome and time consuming.
7. Facilitates Standardization
Computerized accounting facilitates standardization of accounting routines and
procedures. Therefore, standardization in accounting is ensured.
8. Minimizing Mathematical Errors

While doing mathematics with computers, errors are virtually eliminated unless the data
is entered improperly in the first instance.

Accounting and SAP Business One

SAP software can help you become a best-run business – in fact it's the choice of
more than 80,000 small businesses and midsize companies.

SAP software is:

• Affordable for small businesses and midsize companies

Every business is unique, which is why we offer a complete portfolio of business
management and business intelligence solutions designed to fit the way you do business
– and your budget.
• Designed with your company in mind
SAP solutions for small and midsize companies are designed to be complete – offering the
breadth and depth of functionality you need to run your business; easy to use – enabling
quick adoption with little training; and flexible – they can scale and adapt as you grow your
business. Every solution we offer is based on best practices learned from more than 35
years of SAP's experience working with best-run companies.

6
Midterms Duration: Week 3

LEARNING CONTENT:

SAP Business One tracks business activities using documents such as purchase orders, invoices,
production orders, sales orders, and so on. Each of these documents is constructed from smaller
reusable chunks of data called master data. Creating documents from master data increases
productivity, ensures data consistency, and reduces errors.

Master data refers to the key information that describes your customers, vendors, and leads as
well as items that your company buys and sells.

It is easy to look up business partner and item information while you are entering sales and
purchasing documents. A selection list icon is available in the business partner and item number fields
in marketing documents. Use the selection list icon to make a selection list appear. You can scroll
through the list or use characters with wildcards to search.

1
Types of Master Data
Most software systems have lists of data that are shared and used by several of the applications
that make up the system. For example, a typical ERP system as a minimum will have a Customer Master,
an Item Master, and an Account Master. This master data is often one of the key assets of a company.

Both Financial Accounting and Purchasing use vendor master data. General data and data
relevant to both departments is stored in shared master records to avoid duplication.

Searching the Master Data List

One can show all the inventory items inside the master data list by placing an asterisk (*) in the
item number or description field. The same procedure applies for business partner master data, you can
just type asterisk (*) in the BP Code field.

However, you can do a wild card search by placing the asterisk (*) before, after or in the middle
of the word that you want to search. The list would show all items that contains the particular string that
you used.

You could also find specific information by typing in the word or number that you are looking for
in the particular field.

2
Business Partner Master Data
Each customer, vendor, or interested party is entered in the system as a master record. Use the Business
Partner Master Data to record and retrieve business partner (customers, vendors, and leads) information
and schedule business partner activities.

Business partner information typically includes:

• Company details, including addresses and telephone numbers

• Business partner contact persons, including telephone numbers and E-mail addresses
• Logistic details
• Tax information
• Accounting information
• Details of payment terms

The information you enter in a master record for a customer or a vendor in the system is applied
automatically when you process your business transactions, for example, the terms of payment that you
define for a customer. These then form the basis of the orders and invoices for this customer. You can
also use the data to analyze your business partner relationships in detail.

3
How to Create a Business Partner Master Data
1. Go to Modules Menu > Business Partners > Business Partners Master Data.

Business Partner Master Data window will open

2. Business Partner Master Data window will open. Switch to find mode by clicking the
(Add) in the tool bar or simple press Ctrl + A in your keyboard.

3. On the Business Partner Master Data header, input the following

information: Code : V1000
BP Type (Dropdown list): Vendor
Name : 1128 Appliance Center
Alias Name : Branch 1 (or the branch assigned to you)
Group : Appliance

Note: If Business Partner Group is not available as an option on the list, click Define
New.

4. You can input additional information on the General tab, Contact Persons,
Addresses, Payment Terms, etc.
4
 5. Click Add.

Item Master Data

SAP Business One, therefore, provides optimum support for your business processes. In Sales, it
helps you create orders, delivery notes, and outgoing invoices because prices, sales units and gross profit
calculate automatically. Using the item data in the system, you can optimize stockholding. You have
complete control over stock quantities at all times and can also analyze the financial aspects of
stockholding at the same time. The system allows you to control production based on the items that are
used for production and based on the finished product and any by-products created.

Use the general area to maintain general item information relevant for all types of items. The Item
Master Data consists of the general area and seven tabs. Each tab enables you to manage sales and
purchase items, warehouse items, and planning data for MRP and Production.

How to Create an Item Master Data

1. Go to Modules Menu > Inventory > Item Master Data
2. Item Master Data window will open. Switch to find mode by clicking the (Add) in
the tool bar or simple press Ctrl + A in your keyboard.
3. Input on the following
information: Item No: A1000
Description: Linens
Item Group: Consumables
Unit Price: 60
4. Go to Inventory Data Tab
5. Input the following information:
Warehouse Code 01
Warehouse Name : General Warehouse
6. Click Add.

5
EXPENDITURE CYCLE

Overview

Procurement management is a core functionality of the SAP® Business One application that
enables you to automate and standardize your core procurement activities. It provides support for
purchasing planning, vendor selection, purchase order management, and vendor invoice payment. And it
lets you do all these rapidly, with the necessary integration across business functions in accounting and
warehouse management to drive success.

With SAP® Business One, you gain a detailed view of your vendors and support for an integrated,
centralized vendor data repository so you can make more effective purchasing decisions, identify
opportunities for cost savings, and better manage supplier relationships.

You can manage and maintain supplier related activities with SAP® Business One, including issuing
purchase orders, updating inventory quantities, calculating the landed cost value of imported items,
delivering goods, and handling returns and credits.

PURCHASING DOCUMENTS

Purchase Order
The purchase order is a document used to request items or services from a vendor at an agreed
upon price. When you enter a purchase order in SAP Business One, no value-based changes are posted in

6
 the accounting system. However, the order quantities are listed in inventory management. You can view
the ordered quantities in various reports and windows, such as the Inventory Status report and the Item
Master Data window. This information is important for optimizing ordering transactions and stockholding.

How to Create a Purchase Order

1. Go to Modules Menu > Purchasing A/P > Purchase Order. Purchase Order window will open.
2. Input the following information on the Purchase Order
header: Vendor : V10000 (Acme Associates)
Delivery Date : <date today>
3. Input the following information on the
Contents tab Item/Service Type :
Item
Item No : A00001
Quantity 5
4. Add.
5. Click the Last Data Record button on the Tool bar . Take note of the document number.

Goods Receipt PO
You create this document when you receive goods from the vendor. When you create a goods
receipt PO, SAP Business One receives the goods into the warehouse, updates the quantities, and creates
an accounting journal if you manage the perpetual inventory.

How to Create a Goods Receipt PO

1. Go to Modules Menu > Purchasing A/P > Goods Receipt PO
2. Input the vendor on the purchase order that you are receiving. In this case,
V10000 (Acme Associates.
3. Click ‘Copy From’ on the lower right side corner of the Goods Receipt PO window.
4. Choose Purchase Orders.
5. To accurately select the Purchase Order, refer to the Document number of the previously
created purchase order.
6. Click Choose.
7. Click Add on the Good Receipts PO window.

A/P Invoices
The A/P invoice is a request for payment. It also records the cost in the profit and loss statement.
You can create an A/P invoice from multiple purchase orders and goods receipt POs. You cannot change
it since it is the legal accounting document that generates entries in the general ledger.

When you receive an A/P invoice, SAP Business One posts the related accounts for the vendor in

7
 the accounting system. If no delivery for a purchase order precedes the A/P invoice, and if you are
purchasing items managed in the warehouse, the stocks are increased when the you post the invoice.

How to Create an A/P Invoice

Aside from the ‘Copy From’ function that we have used in the previous document, we can also use the
‘Copy to’ function in linking the Purchasing Documents.

1. Select the Goods Receipt PO window then click Last Data Record on the tool bar.
2. The last added Goods Receipt PO will be shown. On the lower right corner of the
Goods Receipt PO window, click Copy to.
3. Select A/P Invoice. A/P invoice window will open (with all the contents copied
from Goods Receipt PO).
4. Click Add

Outgoing Payments
After the A/P Invoice has been sent to the Vendor, it’s time to actually pay the money owed for
the goods and/or services rendered. This is done through the Banking Module. To go to the forms to
process outgoing payments, using the main menu, go to Banking > Outgoing Payments > Outgoing
Payments. Note that this is a different module than the previous three documents entirely.

How to Create Outgoing Payments

1. Go to Modules Menu > Banking > Outgoing Payments > Outgoing Payments.
2. Choose Vendor that you are going pay. In this case, V10000 (Acme Associates).
3. On the ‘Selected column’, check the invoice to be paid.
4. Click Payment Means on the tool bar.
5. Select the Payment Means (there are 4 options – Check, Bank Transfer, Credit
Card, Cash), in this case, choose cash.
6. Choose G/L Account 160000 Petty Cash.
7. On the Total field, right click, select Copy Balance Due.
8. Click OK.
9. On the Outgoing Payments window, click Add.

8
Linking Purchasing Documents

SAP Business One enables you to create target documents directly from base documents. For
example, you can create a Goods Receipt directly from the Purchase Order (and vice versa). In that case,
all the data that you entered in the sales order is automatically copied to the delivery.

Linking documents is important, as it establishes the connections between documents (by

extension, the procurement process) to form a paper trail. This trail will then allow all concerned in the
organization to track the progress of each given step. To see the document trail of a particular Purchasing
Document, right click on the document and choose relationship map.

How to view Relationship Map

1. Open a purchasing document. (Purchase Order, Goods Receipt PO, A/P Invoice)
2. Click Last Data Record, or other tools in the tool bar (First Data Record, Previous
Record, Next Record) to view the document you want to view.
3. Right click on the purchasing document and choose Relationship Map.

9
REVENUE CYCLE

Overview

The sales process in SAP Business One begins with Sales Order. The sales order affects the amount of stock
committed to a customer and, therefore, the available stock quantity.

The delivery reduces the stock committed and the in-stock quantities. The delivery affects the general
ledger, if SAP Business One manages the perpetual inventory. In this case, the delivery will reduce stock
valuation and post a cost of sale.

The A/R invoice is created. It is the only mandatory document in the sales process. It is possible to create
an invoice without first creating a delivery, a sales order, or a sales quotation. If the A/R invoice is created
without reference to the delivery, it will also reduce the quantity in stock.

It records the revenue and tax and updates the customers’ accounts with a new outstanding balance.

Incoming payments are the last step in the basic sales process, even though they are a function in
Banking. Posting an incoming payment receives the payment from the customer.

Additionally, it is possible to credit a customer for damaged goods. The returns document is be used to
credit the customer if the goods were delivered but no A/R invoice was issued. Use the A/R credit memo
to credit a customer after an A/R invoice was already issued. For legal reasons, you cannot change or
delete deliveries and A/R invoices that have been already entered in SAP Business One. To correct these,
use the clearing document, the returns.

10
11
Leads and Customers

12
 Sales Documents

Sales Order
The sales order is a commitment from a customer or lead to buy a product or service. The
document serves as a foundation for planning production or purchase orders. Creating sales orders does
not post value-related changes in the accounting system. However, if the sales order is created for items,
the ordered quantities are listed in Inventory Management as reserved for the customer. You can view
the ordered quantities in various reports, such as the Inventory Status report, as well as other windows in
SAP Business One.

This information is important for: Optimizing ordering transactions and stockholding and ensuring
that customer requirements are dealt with quickly and satisfactorily.

How to Create a Sales Order

1. Go to Modules Menu > Sales A/R > Sales Order. Sales Order window will open.
2. Input the following information on the Sales Order header:
Customer: C20000 (Norm Thompson)
Delivery Date: <date today>
3. Input the following information on the Contents tab
Item/Service Type: Item
Item No: A00001
Quantity: 3
4. Add.
5. Click the Last Data Record button on the Tool bar . Take note of the document number.

Delivery
The Delivery is a legally binding document indicating that the shipment of goods or the
delivery of services has occurred. Without this document, goods can be delivered only if an invoice
has already been created.

When you create a delivery, the corresponding goods issue is also posted. The goods leave
the warehouse and the relevant stock changes are posted. When the stock is changed, the values
in the accounting system change as well (only when you use perpetual inventory).

How to Create a Delivery document

1. From the Sales Order previously created, click ‘Copy to’ on the lower
right portion of the window.

13
 2. Choose Delivery.
3. The Delivery document will pop up. Input the quantity delivered if there is partial
delivery.
4. Note that the base document reference is listed in the ‘Remarks’ field.
5. Click ‘Add’ button. Click ‘Yes’ when prompted that you can no longer change
the document once added.
6. Click Last Data Record.

A/R Invoice
The invoice is a legally binding document. W hen an invoice is received, the posting is made
to the related customer accounts in the accounting system. If a delivery did not precede the invoice
and you sell the warehouse items, stock quantities are also updated accordingly when you issue
the invoice.

If you create an invoice without reference to the delivery, the system automatically posts
changes to the stock. In other words, if a delivery already exists for the transaction and you
create an invoice without reference to this delivery, errors can occur in inventory management
because the delivery quantity is posted twice in the system.

How to Create an A/R Invoice

1. On the Delivery document, click ‘Copy to’ on the lower right portion of the window.
2. Choose A/R Invoice.
3. Contents of the Delivery document will be copied to the A/R Invoice. Click
Accounting tab on the A/R Invoice window.
4. You can see here the Payment Means and Payment Method to see how
payment will be processed.
5. Add.

Incoming Payments
Incoming payments are the last step in the sales process, even though they are a function in banking.

How to Create Incoming Payments

1. Go to Modules Menu > Banking > Incoming Payments > Incoming Payments
2. Choose Customer in the code field. In this case, C20000 (Norm Thompson).
3. On the ‘Selected column’, check the invoice to be paid.
4. Click Payment Means on the tool bar.
5. Select the Payment Means (there are 4 options – Check, Bank Transfer, Credit Card, Cash), in
this case, choose cash.
6. On the Total field, right click, select Copy Balance Due.
7. Click OK.
8. Click ‘Add’ and click Yes when prompted with the system message.

INVENTORY CYCLE

14
 Items and Warehouses
SAP Business One enables you to manage all the items that you purchase, manufacture,
sell, or keep in stock. Services, such as labor, can also be defined as items. This can be useful for
defined services you sell on a regular basis. Items can also be used to describe fixed assets that are
tracked for accounting purposes.

For each item, enter the data relevant for a particular area in the system. This data is used
automatically by the system for purchasing, sales, production, managing your warehouse, and
accounting. SAP Business One, therefore, provides optimum support for your business processes.

Using the item data in the system, you can optimize your stock. You have complete control
over stock quantities at all times and can also analyze the financial aspects of stockholding at the
same time. In SAP Business One, there is a direct relationship between warehouses and items.

Defining a warehouse
Choose (1) Administration > (2) Setup > (3) Inventory > (4) Warehouses to define new
warehouses.
Here, you can enter a Warehouse code and a Warehouse name.

Address Fields: Specifies address details for the warehouse. This address defaults into the
purchasing document for the ship-to address for the warehouse.

Location: Specifies the warehouse location. Use this field to classify warehouses according to their
physical location.

Drop Ship: Defines the warehouse as a drop-ship warehouse. Use this option when the company
does not manage inventory for specific items, but receives commission for every order. SAP
Business One will not calculate stock postings for this warehouse.

In the Accounting tab, you define various default accounts used for inventory management per
warehouse. To define a warehouse as a default in the MRP wizard, select the Nettable checkbox.
If unchecked, the warehouse can still be chosen in MRP, but does not appear as default.Stock
Change – Marketing Documents

15
 When an item is purchased or sold, warehouse inventory is automatically reduced or increased
when the transactions are entered in purchasing and sales. For example, if a delivery note is created based
on a sales order for a customer, the warehouse stock is reduced by the delivery quantity when the delivery
note is added. If an incoming invoice is entered in purchasing, the warehouse stock increases by the
delivery quantity when the incoming invoice is added.

The purchase or sale of an item is, however, not the only transactions that result in a goods receipt
or goods issue. For example, if five pieces of an item are found damaged in the warehouse as a result of
water damage, rendering them useless, they are removed from the warehouse. These items cannot,
however, be sold because they are now useless. In this case, you have to post a separate goods issue with
the function described here.

A goods receipt may be necessary, for example, if, after carrying out a physical inventory, you
establish that you have not considered part of the quantity stored. You enter the forgotten quantity by
means of a goods receipt in the system.

Goods Receipt and Goods Issue

For goods receipts and goods issues that do not refer to a sales process or purchasing process,
you must specify the warehouse to which or from which you want to post the goods. The system always
uses the default warehouse from the item master record if you do not specify otherwise.

A goods receipt creates a journal entry that posts the value of the received goods on the debit side of the
stock account and the credit side of the inventory offset – increase account. You can use the Goods Receipt
if there is an increase in the quantity of inventory outside the regular purchase and sales process
Inventory Transfer
When you post an inventory transfer from warehouse 02 to warehouse 01, the system
creates an inventory transfer document and a journal entry. The journal entry posts the value of
the transferred goods on the debit side of the stock account of warehouse 01 and on the credit
side of the inventory account of warehouse 02.

To post a stock transfer: e.g. The current branch wanted transfer 5 pcs of A00001 from
Warehouse 1 to Warehouse 2.

Go to (1) Inventory → (2) Inventory Transactions → (3) Inventory Transfer.

4. Input the following

information: Item
No: A00001
To Warehouse: 01
From Warehouse: 02
Quantity: 5
5. Click Add.

CHART OF ACCOUNTS

16
 Chart of Accounts is a financial organizational tool that provides a complete listing of every
account in an accounting system. An account is a unique record for each type of asset, liability,
equity, revenue and expense.

The chart of accounts consists of balance sheet accounts (assets, liabilities, and stockholders’
equity) and income statement accounts (revenues, expenses, gains, losses). The chart of accounts can be
expanded and tailored to reflect the operations of the company.
Within the chart of accounts, you will find that the accounts are typically listed in the following
order:

Balance Sheet Income Statement

Assets Operating Revenues
Liabilities Operating Expenses
Owner’s Equity Non-Operating Revenues and Gains
Non-Operating Expenses and Losses

Within the categories of operating revenues and operating expenses, accounts might be further
organized by business function (such as producing, selling, administrative, financing) and/or by company
divisions, product lines, etc.

A company's organization chart can serve as the outline for its accounting chart of accounts. For
example, if a company divides its business into ten departments (production, marketing, human
resources, etc.), each department will likely be accountable for its own expenses (salaries, supplies, phone,
etc.). Each department will have its own phone expense account, its own salaries expense, etc.

17
 SAP CHART OF ACCOUNTS

The Chart of Accounts is organized by drawers and levels. The organization of the chart of
accounts follows GAAP (Generally Accepted Accounting Principles) in which there is a separate drawer
for accounts representing: Assets, Liabilities, Equity (Capital and Reserves), Revenues (Turnover), Cost of
Sales, Expenses (Operation Costs), Financing (Non-Operating Income and Expenditure), and Other
Revenues and Expenses (Taxation and Extraordinary Items). These drawers, which have been defined by
SAP and cannot be changed, organize your accounts by level in a logical fashion appropriate to your
financial accounting and reporting processes.

In the General Ledger, we distinguish between Balance Sheet Accounts and Income
Statement Accounts, also called Profit and Loss Accounts.

Balance Sheet Accounts

• The first 3 drawers: Assets, Liabilities, Equity (Capital and Reserves) hold the
Balance Sheet Accounts, such as the Sales Tax account and the Accounts Payable
Account.
• The bookkeeping balance of these accounts is kept from one fiscal year to the next.
• The Balance Sheet Accounts – reflect the monitory value of the company - stock,
assets, debt, etc.

18
Profit and Loss Accounts

• The last 5 drawers: Revenues (Turnover), Cost of Sales, Expenses (Operation Costs),
Financing (Non-Operating Income and Expenditure), and Other Revenues and
Expenses (Taxation and Extraordinary Items) hold the Profit and Loss Accounts,
such as the Income Accounts. Note that in some localizations, the lower drawers are
not all profit and loss account drawers.
• The bookkeeping balance of these accounts has to be cleared at the end of each fiscal
year –
this is the Period End Closing process (will be discussed in Unit 4: Financial Periods Process).
• The Profit and Loss Accounts - reflect the changes in the company value, such as: sell
stock –
cost of goods sold, increase revenues.

A chart of accounts arranges a company's general ledger accounts in a hierarchical structure. The
top level in the structure (level 1) consists of sections or groups for different type of accounts (assets,
liabilities, capital and reserves, turnover, and so on). The system displays the section as a cabinet drawer
(see figure). Each drawer has a section title, which you cannot change. The system displays lower-level
titles in blue and normal active accounts in black. Accounts that you have entered in the G/L Account
Determination (default accounts) are displayed in green. Levels 2 through 9 can contain either active
accounts or titles that combine several active accounts. Level 10 only contains active accounts. Because
only active accounts can be posted to in SAP Business One, it is a good practice to have all your active
accounts at the same level. In reports, a title account summarizes all the balances of each active account
below it.

Viewing of Chart of Accounts

To view the existing Chart of Accounts:
Go to (1) Financials > (2) Chart of Accounts to:
• View the chart of accounts

19
• Change the properties of an account (To view and change some of the account
properties, choose the Accounts Details button)

20
 Color Coding of SAP B1 Chart of Accounts
Title Account – summarizes all the balances of each
active account below it. A title account is color coded as
blue in SAP Business One.

Active Account – only active accounts can be posted in SAP

Business One. It directly increase or decreases the balance
of the account through the debit and credit process. An
active account is color coded as black in SAP Business One.

Control Account – these accounts are already connected

to marketing documents (purchase and sales documents),
balances will directly increase or decrease depending on
the nature of the
transaction. A control account is color coded as green in SAP Business One.

Editing of Chart of Accounts

To edit Chart of Accounts:

Add: A142000

Prepai

d Rent A143000 Office

Supplies

Go to (1) Financials > (2) Edit Chart of Accounts to:

• Add a new title (To add new account, click Add Same-Level Acct or Add Sub-
Level Acct)
• Delete an account (To delete an account, right-click on the account
you would like to delete > Advanced > Delete Account)
Note: You can only delete an account that has no postings
• Move title and accounts within the structure of the chart of accounts

1
2
 SHORT TERM - SAP QUIZZES

Which of the ff. is the concept that a business will remain in

operation for the foreseeable future? Going concern Principle

Which of the following is not one of the three essential functions

that an accounting information system performs? It assures that
management’s decisions
optimize the profitability of
the company

Michael, a company stockholder, desires financial statement that

reports the assets, liabilities, and stockholder’ equity at a specific
Balance sheet
date.

An accounting information system adds value to an organization in

All are ways in which an
many ways. Which of the following is not a way in which the AIS
AIS adds value to the
adds value?
organization
Accessing SAP Business One on cloud is done using web
browsers like Google Chrome, Mozilla, Firefox, or Safari True

Jana business owner needs the financial statement that reports

the revenues and expenses for some time, such as a year or a
Income Statement
month. Which of the following does she need?

Which of the following is a business management software that

allows an organization to use integrated applications to manage
ERP-SYSTEM
the business?

Which of the following is responsible for recording and reporting

the cash flow transactions of a company? Accounting Department

Which of the following is the fundamental concept underlying

present-day bookkeeping and accounting and is based on the fact
that every financial transaction has equal and opposite effects in at Double entry bookkeeping
least two different accounts?

Which of the following accurately depicts the components of an People, procedures, and
accounting information system? information technology
What is the activity sequence of the basic information processing
Collect data, organize and
model?
process data, and
communicate information
Which of the following double-entry bookkeeping is used to satisfy
the equation that Assets? Liabilities + Equity

Which of the following is the concept that accounting transactions

should be recorded in accounting periods when they occur, rather
in the periods where there are cash flows associated with them? Accrual Principle

Font size and Font style is predefined on SAP Business One on

cloud and cannot be change True
 Which of the following an organization uses economic resources or
inputs to provide goods or services to customers in exchange for
money or other goods and services? Business Entity

ERP-SYSTEM is a business management software that allows an organization to use a

system of integrated applications to manage the business. It aims to serve as a backbone TRUE
for your whole business.

Double Click command in SAP using PC don not have an equivalent way of doing it using
FALSE
mobile phones.

The sales order is a commitment from a customer or leads to buy a product or service. TRUE

Font Size and Font Style is predefined on SAP Business One on Cloud and cannot be
TRUE
changed.

You may build target documents directly from base documents in SAP Business One. You
may, for example, generate a Goods Receipt straight from a Purchase Order (and vice TRUE
versa).

When you execute your business transactions, the information you enter in a master
TRUE
record for a customer or a vendor in the system is immediately applied.

By entering an asterisk (*) in the item number or description box, all inventory items inside
the master data list will be shown. The same process applies to business partner master TRUE
data; simply enter an asterisk (*) in the BP Code field.

The delivery decreases the committed stock as well as the in-stock amounts. If SAP
Business One maintains perpetual inventory, the delivery has an impact on the general TRUE
ledger.

After sending the A/P Invoice to the Vendor, it is time to pay the money owing for the
TRUE
products and/or services delivered, which is done using the Banking Module.

Accessing SAP Business One on Cloud is done using WEB BROWSERS like Google
TRUE
Chrome, Mozilla Firefox or Safari.

The important information that identifies your clients, vendors, and leads, as well as the
TRUE
goods that your firm buys and sells, is referred to as master data.

The Menu BAR is a collection of icon buttons that grant you easy access to commonly-
FALSE
used functions.

Navigation in SAP Business One is done using the MODULES MENU It arranges the
TRUE
functions of the individual applications in a tree structure.

The USER-SETUP displays at the top of the screen. It contains the Windows standard
FALSE
menu (File, Edit, W window, Help) as well as generic SAP Business One functions

When you generate a goods receipt PO, SAP Business One receives the items but does
FALSE
not change the number of items in any of the warehouses.
The journal voucher file contains information that would be found in the general
addresses of
journal in a manual accounting system. Which individual journal entries are not
creditors
used to update its general ledger?

Errors in financial statements provided to creditors, investors, and government inaccurate or

agencies can cause these stakeholders to make incorrect decisions. This threat is invalid general
referred to as ledger data

Which document captures information about labor used in production? job-time ticket

The audit trail is a traceable path that shows how a transaction flows through the
information system to affect general ledger account balances. Access t the audit managers
trail is typically restricted to

Internal control is the process designed, implemented and maintained by those

governance, management and other personnel to provide reasonable assurance TRUE
about the achievement of an entity’s objectives.

Which document is used to record adjustments to accounts payable based on the

Debit memo
return of unacceptable inventory to the supplier?

Collusion is a fraud involving one or more members of management or those FALSE -

charged with governance Management Fraud

Error refers to an intentional ad by one or more individuals among management,

those charged with governance, employees or third parties, involving the use of FALSE – Fraud
deception to obtain an unjust illegal advantage.

For good internal control, who should approve credit memos? Credit manager

Which of the following is an important part of the audit trail? Journal Voucher

The combination of supplier invoice and associated supporting documentation

Voucher package
create a

What is the best control procedure to prevent paying the same invoice twice? Cancel all
supporting
documents when
the check is signed

Which document is used to authorize the release of merchandise from the

Picking ticket
inventory control (warehouse) to shipping?

Which of the following revenue cycle activities can potentially be eliminated by

Billing
technology?

From where do adjusting entries usually come? Controller

An adjusting journal entry to record interest revenue that has been received is an
Accrual
example of which of the following?

Which of the following expenditure cycle activities can be eliminated through the Approving vendor
use of IT or reengineering? invoices

Where should unclaimed paychecks be returned? Cashier

The jus-in-time inventory system attempts to minimize, if not eliminate, finished
goods inventory by purchasing and producing goods in response to forecasted FALSE - Actual
sales.

Segregation of duties can help minimize the risk of inventory theft. Employee who
are responsible for controlling physical access to inventory should not be accords TRUE
without review and approval.