SAP ACCOUNTING ASSIGNMENT

© SAP AG

CASE STUDY

Product

SAP ERP GBI Release 6.04

Level

Undergraduate Graduate

Focus

Purchase-to-Pay Cycle and Accounting Entries Test of Transactions Application Controls

Authors

Nancy Jones Jim Mensching

Contributors

Dawna Drum James Marlatt

Version

1.01

MOTIVATION

Primary learning objectives:

• Experience the steps in a typical purchasing transaction

• See how an ERP system handles a typical purchasing transaction

• Work through the procedures involved in a test of transactions

• Investigate the various types of application controls in an ERP system

Secondary learning objectives:

• See the integration between materials management (MM) and financial accounting (FI) modules of SAP

• Learn about how a suspense account (the GR/IR account) is used

• Look at some of the basic settings needed in the FI module in order to have the system function properly

PREREQUISITES

Before you use this case study, you should be familiar with navigation in the SAP system. You should also be familiar with internal controls and have a basic understanding of business processes and transaction cycles. .

NOTES

This case study uses the Global Bike Inc. (GBI) data set, which has exclusively been created for SAP UA global curricula.

Purchase-to-Pay Example Using SAP ERP

The objective of this assignment is for you to become familiar with the steps

and the documents involved in a typical purchasing transaction and also

investigate how the SAP system is set up and operates for this type of

transaction.

Page 2

CASE STUDY

Assignment Overview

For this assignment, we start by examining the master data in the system. As you should already

know, the chart of accounts is of central importance to any accounting information system. Thus we

look at the chart of accounts and other settings used to configure the financial accounting system. We

then create master data for a new material and a new vendor and then link these together using an

information record. After that we run through a transaction in which we purchase the material we just

created from the vendor we also just created. As the various steps of the purchase are recorded in

SAP, we examine the accounts that are affected in both the financial (FI) and materials management

(MM) modules. In auditing terminology this is called doing a test of transactions. We will be looking

at typical business-to-business transactions and concentrating on the internal controls within the SAP

system and the way the system is configured to process these transactions.

Keep in mind that this business process is normally done by more than one person in order to

properly segregate duties and maintain authorization controls. However, in this exercise you will do

all of the steps from your individual SAP logon. As we stressed in this course, the segregation of

duties is a very strong control. Hence, the different people involved in the business process would

have unique authorizations set up in the system and few, if any, people would be allowed to execute

all of the roles that you will assume in this assignment.

Since this course deals with accounting information systems, we want you to pay particular attention

to the controls that are designed into the SAP system. These controls are a very important part of an

integrated information system such as an ERP system. The controls embedded within SAP are a vital

part of the system and essential to the system functioning properly. Throughout the assignment you

are asked to identify the internal controls that you observe in SAP. For some of these controls you

are asked what type of application control it is. You are to select from the following list of possible

application controls. If you don’t remember what these controls are and what they mean, you should

refer to your course materials regarding application controls and review that material. Additional

information regarding these controls and more can be found at the ISACA (Information System Audit

and Control Association), website www.isaca.org.

• Field check

• Sign check

• Limit check

• Range check

• Size (or capacity) check

• Completeness check

• Validity check

• Reasonableness test

Page 3

CASE STUDY

For each of the following steps you will also be noting the nature of the accounting entries involved

in each transaction step.

You will perform the following tasks:

1. Examine the chart of accounts 2. Examine the account settings for financial accounting use 3. Create a material master 4. Create a vendor master 5. Create a purchasing information record to link the vendor and material 6. Check the inventory and accounting records 7. Create a purchase order for the material 8. Check the inventory and accounting records 9. Receive the material 10. Check the inventory and accounting records 11. Receive the invoice from the vendor 12. Check the inventory and accounting records 13. Make payment to the vendor 14. Check the inventory and accounting records 15. Write down the journal entries that the system made

For all of the following work, you will use your own company code. This company code is based on

the SAP number assigned to you by your instructor. In addition, the logon and initial password to a

specific SAP instance and client will be given to you by your instructor.

Whenever you see the value XX in the assignment you will substitute your assigned SAP

number for the x’s. Be sure to use only your assigned SAP number. For this assignment the

company code will be USXX. Whenever you are requested to enter a company, be sure to enter only

your company code.

Note that as you go through the questions, some of the answers to these questions may be related to

your accounting theory rather than a specific SAP attribute.

Page 4

CASE STUDY

Company Background

Global Bike Inc., (GBI) is a world class bicycle company serving the professional and “prosumer”

cyclists for touring and off-road racing. GBI’s riders demand the highest level of quality, toughness

and performance from their bikes and accessories.

Product development is the most critical element of GBI’s past and future growth. GBI has invested

heavily in this area, focusing on innovation, quality, safety and speed to market. GBI has an extensive

innovation network to source ideas from riders, dealers and professionals to continuously improve the

performance, reliability and quality of its bicycles.

In the touring bike category, GBI’s handcrafted bicycles have won numerous design awards and are

sold in over 10 countries. GBI’s signature composite frames are world-renowned for their strength,

light weight and easy maintenance. GBI bikes are consistently ridden in the Tour de France and other

major international road races. GBI produces two models of their signature road bikes, a deluxe and

professional model. The key difference between the two models is the type of wheels used,

aluminum for the basic model and carbon composite for the professional model.

GBI’s off-road bikes are also recognized as incredibly tough and easy to maintain. GBI trail bikes are

the preferred choice of world champion off-road racers and have become synonymous with

performance and strength in one of the most grueling sports in the world. GBI produces two types of

off-road bike, a men’s and women’s model. The basic difference between the two models is the

smaller size and ergonomic shaping of the women’s frame.

GBI also sells an accessories product line comprised of helmets, t-shirts and other riding accessories.

GBI partners with only the highest quality suppliers of accessories which will help enhance riders’

performance and comfort while riding GBI bikes.

Page 5

CASE STUDY

Task 1 – Examine the Chart of Accounts and General Ledger Accounts

Understanding the chart of accounts is a very important part of the overall understanding of the

accounting process within any organization. So first we will look at the chart of accounts for the

company and also see how it is configured in SAP.

Examine the Chart of Accounts for GBI

Menu Path: Accounting ►Financial Accounting ► General Ledger ► Information System ►

General Ledger Reports ► Master Data ► Chart of Accounts (Transaction Code

S_ALR_87012326)

Under general selections, in the field for chart of accountsm enter GL00 and click on execute.

The chart of accounts for GBI will be displayed. Place your cursor on the the line for account 200400

“Inventory – Production Supplies” and then click on the detail icon to see information regarding

the account 200400 in our chart of accounts. Note the information on the Type/Description tab.

1.1 General ledger accounts are considered master data and different controls within the master data

allow the system to group accounts that are similar. Under the “control in chart of accounts” area on

the Type/Description tab, what type of account is account 200400 “Inventory – Production Supplies”?

Now let’s examine the general ledger accounts a bit more closely. Leave the current view of the

account master data by pressing the back button until you get to the main menu.

Examine Some General Ledger Accounts for GBI

Menu Path: Accounting ► Financial Accounting ► General Ledger ► Master Records ► G/L

Accounts ► Individual processing ► Centrally (FS00)

Let’s look at the following two accounts: 100000 Bank Account and 780000 Cost of Goods Sold.

Make sure that your company code is correct (USXX). Select the account or input the account code

you want to examine and click on the display icon or hit enter. The first thing you should notice is

that there are more tabs than there were in our other view. This is because we are now looking at the

complete record of the general ledger account.

Page 6

CASE STUDY

Tasks 1.2 – 1.3 The SAP system is able to close the books at the end of a period by simply pressing a

button. Examine the bank account (a real account) and cost of goods sold (a nominal account) and

find what attribute the system needs to know to do the closing using each of these two accounts as

examples.

1.2 100000 Bank Account:

1.3 780000 Cost of Goods Sold:

Tasks 1.4 & 1.5 The next two questions deal with special accounts.

1.4 310000 Goods Receipt/ Invoice Receipt: This account is a special suspense or temporary account.

Discuss the function of this account and what its status should be after the successful completion of a

purchasing transaction in a company. (You might have to do a little research on this account.)

1.5 300000 Payables-Trade Accounts: For this account examine the Type/Description tab for your

company code (USXX). Look at the Account Group entry. Now look at the same field for account

300200 Accounts Payable (Direct Posting Account). First, describe what this field represents and

then explain why this field is different for the two accounts.

Page 7

CASE STUDY

Task 2 – Examine System Settings

In this step we look at one of the important settings in the system, the fiscal year variant. We will be

looking at how our company set up the system to handle its specific processing requirements. This is

termed SAP configuration. Configuration is done in the IMG (implementation guide). Do not make

any changes to the system while you are in the IMG.

Enter Transaction Code: OBY6

Highlight the line with your company code (USXX) by clicking on the box to the left of the company

code.

Click on the details icon in the upper left of the screen.

2.1 What is the fiscal year variant for your company code (USXX) and what does this mean from the

point of view of the accounting system? Hint: Use the search icon to the right of the field for these

two (and other) questions.

.

2.2 The university would use fiscal year variant V6. Explain why this is the fiscal year variant for the

university.

Click the yellow “Exit” icon until you are at the main menu again.

Page 8

CASE STUDY

Task 3 – Create a Master Material Record for a Trading Good

Next we start the processing steps that are involved in a purchasing transaction. For the example that

we use, the company is going to order a good that is not presently part of our inventory. In addition,

we have not previously purchased goods from the vendor that we selected to supply the good. That

means that we have to create a master record for the material and a master record for the vendor.

Remember, as discussed previously, these steps are typically completed by more than one person so

that proper segregation of duties is maintained.

The material master record contains all the data required to define and manage a material. In SAP

this is formally part of the Materials Management (MM) module. However, some important

accounting information is also contained within this record. For example, product cost and pricing

information and also tax information are contained within the material master record.

The master record consists of individual views and the individual views are presented in the form of

tabbed pages. These views are organized on a functional or departmental basis. Each department has

its own view that permits easy access and maintenance. In other words, data is integrated from

engineering, manufacturing, sales and distribution, purchasing, accounting and other departments.

This master data is used as a source of data for purchase order processing throughout the procurement

cycle. For simplicity, we are ordering a finished good that we will subsequently sell. Just a reminder:

When you see an “XX” enter your assigned SAP number.

• Create a Material Master record for a Finished Product

Logistics ► Materials Management ►Material Master ► Material ► Create (Special) ►

Trading Goods (MMH1)

Create Trading Goods: Initial Screen

Field Input

Material (Number) SDSUHMTXX

Industry Sector Retail

Click on Select Views on the application tool bar

Select the following views:

• Basic Data 1

• Purchasing

• General Plant Data/Storage 1

• Accounting 1

Click on Enter.

Page 9

CASE STUDY

Organization Level pop-up window

Field Input

Plant DLXX (Dallas)

Storage Location TGXX (Trading Goods)

Click on Enter.

Basic Data 1(screen):

Field Input

Material description (This is the field to the

right of the material number.)

Special Edition SDSU Logo Helmet XX

Base Unit of Measure EA

Material Group SFTY

Gross Weight 10

Weight Unit OZ

Net Weight 12

Click on Enter.

You should receive an error message regarding net weight.

3.1 What type of application control is used on the field “Net Weight”?

3.2 What type of application control is used on the field “Base Unit of Measure”? (Pick from the list

of controls on page 2 of this assignment.)

Page 10

CASE STUDY

Change the net weight to 10.

Click on Enter.

Purchasing:

Field Input

Purchasing Group NXX

Click on Enter.

Plant Data/Storage 1

➢ No information is needed here. However, look at the data on this tab.

3.3 How might the data on this tab be important to a company and its inventory management? Can

you think of an example of a company that might use the information on this tab to reduce inventory

losses and spoilage?

Click on Enter.

Accounting 1:

Field Input

Valuation class 3100 (trading goods)

Price Control V

Moving Price 40

There are two “pricing” choices, moving price and standard price. The SAP terminology is a little

confusing in this part of the process. What we would normally term cost, they term price. That is, by

their terminology, price (not cost) is what we paid for the good.

3.4 How is the standard price used in the accounting system? (Think about what you did in your

cost/managerial accounting class.)

Page 11

CASE STUDY

3.5 The Moving Price is the moving average price of the good. Why would the moving average price

be different from the standard price?

___________________________________________________________________

3.6 Which of the two prices (standard or moving average) would we typically use when doing

performance evaluation (i.e. variance analysis)?

Click on Enter.

Click on Yes when asked to Save.

Write down the message on the status bar.

Page 12

CASE STUDY

Task 4 – Create a Vendor Master Record

We will buy our trading good from this vendor.

Logistics ► Materials Management ► Purchasing ► Master Data ► Vendor ► Central ► Create (XK01)

Create Vendor: Initial Screen

Field Input

Vendor VendorXX

Company code USXX

Purchasing organization USXX

Account group LIEF

Click on Enter.

Create Vendor: Address

Field Input

Title Company

Name Your last name XX

Search term 1/2 XX

Street/house number Montezuma 555

Postal code/City 92115 San Diego

Country US

Region CA

Language English

(Note: You may need to expand the street address to see all the fields.)

As an experiment, enter the time zone EST.

Page 13

CASE STUDY

Click Next Screen or Enter to go to next view.

Note the error and then change the time zone back to the correct value of “PST” and click the enter

icon.

4.1 What did the system do as an application control? That is, how did the system know that EST

was wrong?

Create Vendor: Control

➢ No Information needs to be entered.

Click Next Screen or Enter.

Create Vendor: Payment Transactions

➢ No Information needs to be entered.

Click Next Screen or Enter.

Create Vendor Contact Persons

➢ Enter your name as the contact name.

Click Next Screen or Enter.

Create Vendor: Accounting Information Accounting

Field Input

Rec. Account 300000 (payables – trade accounts)

Sort Key 001 (posting date)

Cash mgmnt group A1 (domestic pmt.)

Page 14

CASE STUDY

4.2 The “Rec. Account” is a very important entry. Explain this entry. (Hint: This links back to the

account you looked at in the chart of accounts.)

Click Next Screen or Enter to go to the next view

Create Vendor: Payment Transactions Accounting

Field Input

Payt Terms (payment terms) 0001 (payable immediately)

Tolerance group (in payment terms) GBI

4.3 What is a tolerance group and how would it be used as an application control? What type of

application control is tolerance group?

Hint: Create an additional session and look at transaction code OBA4.

Highlight your company code and then select details.

Click Next Screen.

Create Vendor: Correspondence Accounting

➢ No information needs to be entered

Click Next Screen.

Create Vendor: Purchasing Data

Field Input

Order currency USD

Terms of Paymnt 0001

4.4 Explain the payment terms from this vendor. Since we are a new customer for this vendor, we may be able to negotiate changing these terms in the future. What factors would probably be

important to the vendor to give us more favorable terms?

Page 15

CASE STUDY

Click Next Screen.

Create Vendor: Partner Function

➢ No information needs to be entered.

Click on Save .

Write down the message on the status bar.

Page 16

CASE STUDY

Task 5 – Create an Information Record for the Vendor/Material

The creation of a material and a vendor will allow us to order those goods from that vendor.

However, as an additional control, we can define the relationship between the good and the vendor.

In SAP this is done by creating an information record. That is the next step in the process.

• Create an Information record for Vendor/Material

Logistics ► Materials Management ►Purchasing ► Master Data ► Info Record ► Create

(ME11)

Create Info Record: Initial Screen

Field Input

Vendor VendorXX

Material SDSUHMTXX

Purchasing Org. USXX

Plant DLXX

Click on Enter.

Create Info Record: General Data

Click on Purch. Org. data 1.

Create Info Record: Purch. Org. data 1

Field Input

Pl.Deliv.Time 2 (days)

Purch. group NXX

Standard qty. 10

Minimum qty 5

Net price 40

Page 17

CASE STUDY

The above data defines the relationship between the material and the vendor.

5.1 Explain how the above data can be a strong control in the purchasing process.

Click Save.

Write down the Information Record number shown on the status bar. ______________________

Page 18

CASE STUDY

Task 6 – Check Status of Various Accounts

The power of an ERP system is that the business transactions are simultaneously recorded in all of the

affected areas of the business in real time. In order to understand this we want you to determine

which accounts should be affected by the transactions that follow. In this case the following accounts

should be checked:

• Check inventory in materials management

• Check inventory in the general ledger

• Check cash in the general ledger

• Check accounts payable in the general ledger

• Check goods received/invoice received account in the general ledger

• Check accounts payable in the subsidiary ledger

These checks should be done after each step of the transaction. I would suggest that you open a series

of SAP sessions to do this checking and then refresh the screen after each business transaction.

- Check MM inventory: Transaction: MMBE, (Stock Overview)

Be sure to check the detailed status report to see important changes to inventory. Double click

on your material or scroll to the right to see all fields in the inventory inquiry screen.

- Check GL Cash, GL Inventory, GL AP and Goods Received/Invoice Received – All of these can be

seen from: Transaction: S_ALR_87012291, (Line Item Journal)

The company code is USXX and use today’s date (or the date of transaction or the current

month) as the posting date.

- Check A/P sub-ledger: Transaction: FBL1N (Vendor Line Item Display)

Enter the change in value for each of these accounts after each step noted. Note: it is very important

that you use the correct reporting period when you run these reports, (the current month). Otherwise

you may get the values from the journal entry exercise that we completed earlier in the semester. You

will be completing this table as you go through the subsequent steps. For MM Inventory Quantity

(MM Inv Qty) include the inventory status; such as unrestricted, on order, and so on.

MM Inventory Quantity

GL Inventory

GL Cash GL A/P GR/IR Vendor Subledger

After task 5

After task 7

After task 9

After task 11

After task13

Note: on some of the above transactions if there is no value in the account, you may get an error

message when trying to display the balance. This is normal and simply means that the balance in

the account is zero.

Page 19

CASE STUDY

Task 7 – Create a Purchase Order to Buy the Trading Good

Now that the master data has been entered into the system, we are ready to process a purchasing

transaction.

Create a Purchase Order

Logistics ► Materials Management ► Purchasing ► Purchase Order ► Create ►

Vendor/Supplying Plant Known (ME21N)

Create Purchase Order

Field Input

(Field will be defaulted) Standard purchase order

Vendor VendorXX

Document date Today’s date

Note: If the screen looks like the following, click on Header and Item Overview icons to expand those

areas.

When you expand your view, an error message may tell you to enter the organizational data and

redirect you to the Org. Data page.

Page 20

CASE STUDY

If you are not redirected to the org. data page, click on the Org. Data tab page, enter the following

data:

Field Input

Purchasing org. USXX

Purchasing group NXX

Company code USXX

Click Enter.

Hint: If you get an error message regarding the purchasing group, hit Enter again and enter the

data for the purchasing group.

Item overview area

Field Data

Material SDSUHMTXX

P.O. Quantity 75

Delivery date Today’s date

Plant DLXX

Storage location TGXX

Click Enter.

7.1 When you click on enter, the description of the material, unit of measure and price will be filled

in. Where did this data come from?

7.2 Note the warning at the bottom of the screen regarding the delivery date. What kind of an edit

check is this warning?

Page 21

CASE STUDY

Click Save.

Write down the purchase order number ___________________.

Task 8 – Check Status of Various Accounts

Repeat the checks in task 6 and record in that table.

Page 22

CASE STUDY

Task 9 – Receive the Product from the Vendor

We now need to record that we have received the goods we ordered in task 7.

Receive Goods from the Vendor

Logistics ► Materials Management ► Inventory Management ► Goods Movement ► Goods

Receipt ► For Purchase Order ► PO Number Known. (MIGO)

Goods Receipt Purchase Order screen.

Field Input

Purchase Order Purchase order # from task 7

or choose your PO from the

My Documents list on the left

side of your screen.

Delivery Note XX

Click on Enter and all the data will be copied from the purchase order.

Select Item OK at the bottom of the screen to confirm the receipt.

Click on Save.

Write down the material document number ___________________.

Page 23

CASE STUDY

Task 10 – Check Status of Various Accounts

Repeat the checks in task 6 and record in that table.

Task 11 – Receive the Invoice from the Vendor

The vendor sends the invoice for the delivered goods and we need to recognize the receipt of the

invoice in the system.

Logistics ► Materials Management ► Purchasing ► Purchase Order ► Follow-on Functions ►

Logistics Invoice Verification (MIRO)

Note: If a small window appears asking for company code, enter USXX as company code. If the

company code shown is not your company code select Edit ► Switch company code and enter your

company code.

Enter Incoming Invoice: Company Code USXX

Field Input

Invoice date Today’s date

Posting date Today’s date

Reference XX

Purchase Order/Scheduling

Agreement

Purchase order # from task 7

Click on Enter, the information will be copied from the purchase order to the invoice

• Enter Amount (in Basic data tab) same as the Balance shown in the right corner

Click on Enter, the balance should now be 0.00 and the light should be green.

Click on Post (Save).

Page 24

CASE STUDY

Write down the invoice number ___________________.

Task 12 – Check Status of Various Accounts

Repeat the checks in task 6 and record in that table.

Task 13 - Make the Payment to the Vendor

Accounting → Financial Accounting → Accounts Payable → Document Entry → Outgoing

Payment → Post (F-53)

Post Outgoing Payments: Header Data

Field Input

Document Date Today’s date

Posting Date Today’s date

Company Code USXX

Currency/Rate USD

Bank Data area

Account 100000 (Bank Account)

Amount Amount of payment

Open Item Selection area

Account (the vendor number) VendorXX

Automatic search Select

Click on Process Open Items.

The Not Assigned amount should be 0.00 .

Page 25

CASE STUDY

Post (Save) the transaction.

Write down the document number. ____________________________

Task 14 – Check Status of Various Accounts

Repeat the checks in task 6 and record in that table.

Task 15 – Write down the system-generated journal entries

By using the information contained within the table in task 6, construct all of the journal entries that

were made by SAP for these transactions. For each journal entry show the task number of the

transaction, the accounts debited and credited and the dollar amounts involved. Use the following

format:

Task #: Account 1 $$$

Account 2 $$$

Task #: Account 3 $$$

Account 4 $$$

… etc.

Assignment Submission

Place your answers on the abbreviated form of this assignment that is provided for you as “Procure to

Pay Submission.docx”. Grading of the SAP part of the assignment will be done online, that is, there

is nothing you need to submit with respect to your SAP work.

Submit your assignment in Canvas by the due date/time.

Grading Notes

I will be looking for correct answers to the questions in the assignment as long as they are your

answers and not copied from a website or elsewhere, (“cut and paste” won’t cut it), and I will be

pulling a report out of SAP to see if you completed the steps in the assignment correctly.