ch3

Question 1

two major categories of accounting process

Answer 1

1-financial (FI)

2-managerial (CO)

Question 2

point of financial accounting

Answer 2

communicate process financial data to INVESTORS. heavily legally controlled

Question 3

point of managerial accounting

Answer 3

manage costs and revenues = try to increase profit margin

Question 4

smallest entity that supports a full set of books

Answer 4

company code. use for each legal entity or country

Question 5

business areas

Answer 5

INTERNAL division to generate financial statements for. can be across company codes

Question 6

chart of accounts

Answer 6

• “MAP OF GENERAL LEDGER”. pretty much a list of all accounts and their ID #s
• 3 types: operative, country specific, group
• must have at least one but can have an alternative if desired

Question 7

4 types of general ledger accounts

Answer 7

• balance sheet
• income statement
• sub ledgers/reconciliation accounts
• GR/IR account

Question 8

general ledger accounts

Answer 8

• defined as COA+company code

- where all business transactions occur?

Question 9

master data

Answer 9

persistent, non-transactional data

Question 10

profit and loss accounts

Answer 10

organize revenues and the cooresponding expenses

Question 11

subledgers

Answer 11

organize reconciliation accounts by subcategory

Question 12

reconciliation accounts

Answer 12

sum of a number of subledgers. cannot be posted to directly. they are general ledger accounts

Question 13

accounting document

Answer 13

document that records financial impact of some process step

Question 14

parallel accounting

Answer 14

use multiple versions of chart of accounts. useful to apply different accounting priciples

Question 15

leading ledger

Answer 15

in parallel accounting, use one COA so every company has same accounting principles. prob more useful for CO

Question 16

nonleading ledger

Answer 16

in parallel accounting, use local practices. prob more useful for FI. (ex: GAAP rules in USA)

Question 17

posting key

Answer 17

two digit code that determines how line item is posted.

determine debit/credit and TYPE of account (customer, G/L etc.)

Question 18

cost center

Answer 18

organization element of CO. pretty much a cost bucket used to accumulate expenses.

Question 19

debit on the asset side

Answer 19

INCREASES (+) asset

Question 20

debit on the credit side

Answer 20

DECREASES (-) liability

Question 21

payment accounting entry

Answer 21

credit an asset like bank acct

Question 22

operative COA

Answer 22

a chart of accounts used on company code level. can have multiple for each company code

Question 23

country specific COA

Answer 23

across company codes can have same chart of accounts, but postings will very depending on local reporting rules

Question 24

group COA

Answer 24

consolidation of all the different COAs of all your different company codes. (add up operative COAS)