Ch. 3 Flashcards
The key processes in financial accounting
- general ledger (GL)
- Accounts receivables accounting
- accounts payable accounting
- Asset accounting
- bank ledger accounting
Is used to record the financial impacts of business process steps
general ledger (GL)
is associated with the fulfillment process and is used to manage money owed by customer for goods and services sold to them
Accounts receivables accounting
is associated with the procurement process. Manage money owed to the vendor.
accounts payable accounting
Is used to record data related to the purchase, use, and disposal of assets such as buildings equipment, machinery, and automobiles
Asset accounting
is concerned with recording data associated with bank transactions.
bank ledger accounting
Typical financial statements
balance sheet
Income statement/ profit and loss statement
statement of cash flow
is a snapshot of the organization at a point in time. Financial position of an organization
balance sheet
indicates the changes in a company’s financial position over a period of time. Indicates the financial performance of an organization.
Income statement, also known as a profit and loss statement
displays all cash receipts and payments over a specified period of time
statement of cash flow
Organizational Data has three elements or levels.
Client
Company Code
Business areas
are internal divisions of an enterprise
Business areas
is a division of an enterprise for which management monitors performance
segment
A list of accounts that can be included in a general ledger an ordered listing of accounts that comprise a company’s general ledger.
chart of accounts
Are what the company owns, such as cash, inventory of materials, land, buildings, and money owed to the company by its customers (receivables)
Assets
are what the company owes to others, including money owed to vendors (payables) and loans from financial institutions
Liabilities
refers to the owner’s share of the company’s assets.
Owner’s equity
are the monies the company earns by selling its products and services
Revenues
are the costs associated with creating and selling those products and services.
Expenses
groups together accounts with similar characteristics.
account group
all bank and cash accounts are consolidated in one account group
liquid assets
The typical company code data in general ledger accounts consist of the following elements.
Account currency
tax-related data
field status group
determines the currency in which all the transactions are recorded.
Account currency
each country has to comply with distinctive tax laws that require it to include different
tax-related data
determiner both the screen lay out for documents entry and the status of each field on the screen.
field status group
each item in the account is marked as either “open” or “cleared”
open item management
which are temporary accounts that hold data until these data are moved to another account
clearing accounts
display is enabled, a link to the line-items that are included in account balances is maintained.
line-item
Asset accounts are used to track the purchase price as well as increases and decreases in the asset’s value over time. Such accounts are maintained in ____________________.
subsidiary ledgers or subledgers
are general ledger accounts that consolidate data from a group of related subledger accounts
Reconciliation accounts
Records the impact (financial data) of a transaction step on financial accounting
Financial accounting document (FI document)
is a two character code that identifies the specific business process step that generated the document.
document type
which is a two-digit code that determines how a low item in posted
posting key
an organizations can implement multiple ledgers in parallel and use each ledges for different purposes
parallel accounting
is associated with a location where costs are incurred
cost center
Costs incurred during processes can be allocated to or absorbed by these orders
cost objects
have a physical form
Tangible assets
are nonphysical form
intangible assets
include a variety of financial instruments such as securities, long-term notes (debts), and mortgages
Financial assets
a group of assets that possess similar characteristics
asset class
The two most important parameters
account determination
Depreciation
The reconciliation account for each asset in the asset subledger account is determined by its association with an asset class.
account determination
an asset’s value diminishes due to wear and tear.
Depreciation
which specifies how long the company anticipates using the asset.
useful life
which is the value of the asset after it is depreciated.
book value
is used to prepare financial statements for shareholders and to meet regulatory requirements.
Book depreciation
is used to allocate the cost of using the asset to a cost center
Cost accounting depreciation
is used to file federal and state income tax returns
Tax depreciation
After an asset has completed its useful life, it is disposed of, or retired.
Retirement
provides an overview of all the activities related to the asset
asset explorer
is a hierarchical grouping of general ledger accounts that must be included in the financial statements.
financial statement version
Three transaction types
Acquisition
Depreciation
Retirement
Asset can be acquired either externally or through internal processes.
Acquisition
If an asset has completed its useful life
Retirement
A depreciation that is planned, periodic, and recurring decrease
Ordinary depreciation
When extraordinary or unforeseen circumstances cause the asset to lose value
Unplanned depreciation
Account information can be obtained at three levels
Account balance
Line items display
Original FI documents
