Global bike inc case study journal entries

CASE STUDY

Order-to-Cash Example Using SAP ERP
The previous assignment dealt with the purchase-to-pay cycle. This assignment deals with the mirror image of that business cycle, the order-to-cash cycle.

Product
SAP ERP

GBI Release 6.04

Level
Undergraduate

Graduate

Focus
Order-to-Cash Cycle and

Accounting Entries

Test of Transactions

Application Controls

Authors
Jim Mensching

Nancy Jones

Contributors
Dawna Drum

James Marlatt

Version
1.0

MOTIVATION
This assignment will take you through the business process of Customer Order Management. However, we will be concentrating on the accounting specific parts of the transaction. That means that we will ignore the pre-sales activities such as inquiries and quotes, but will stress those points where accounting entries are made.

Primary learning objectives are:

· Experience the steps in a typical sales transaction

· See how an ERP system handles a typical sales transaction

· Work through the procedures involved in a test of transactions

· Look at a special feature of the sales and distribution (SD) module of SAP

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.

SAP_University_Alliances_130_CG8_R

Assignment Overview
This assignment will take you through the business process of Customer Order Management, transaction cycle Order-to-Cash. You will be performing the following steps:

1. Create Sales Views for OLHTXX

2. Create a Customer Master record

3. Set up Credit Limit for the Customer

4. Check inventory availability

5. Check the status of various accounts

6. Create a Sales order

7. Display the Sales Order and record the Scheduled Delivery Date and pricing information

8. Display the Document flow

9. Check the status of various accounts

10. Create the Delivery for Sales Order

11. Check the status of various accounts

12. Display the Document flow

13. Post the goods delivered in General Ledger and appropriate Sub-Ledgers

14. Check the status of various accounts

15. Display the Document flow

16. Create an Invoice (Bill) for the Delivery

17. Check the status of various accounts

18. Display the Document flow

19. View the Invoice in Print Form

20. Record the accounting document

21. Receive and Post the Incoming Payment in General Ledger and the Sub-Ledgers

22. Check the status of various accounts

23. Display the Document flow

24. Show the journal entries

NOTE: You are to enter information into the system and also answer questions embedded within this assignment. Whenever an XX appears in the problem, you should enter your assigned two-digit number. You will be graded on both the results of what you entered on the SAP system and your answers to the questions in this assignment. You must hand the abbreviated assignment sheet (submission document) in when you complete the assignment. The abbreviated assignment sheet is provided to you. Use the same SAP instance and client that you used for the previous assignment.

IMPORTANT INFORMATION: As in the last assignment, you will operate in your own company code. This code is USXX (where XX is your assigned number). Be sure that you use only this company code. Otherwise your entries will be made to someone else’s books.

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.

Task 1 – Extend the Material Master Record for Sales
Create Sales Views for Finished Product OLHTXX
Since now you have to sell the OLHTXX to a customer, you will maintain the sales views for the product.

These new views for the material masters must now be created (extended) to make the materials available for sale.

1.1 In the previous assignment you created the material master record for use by the purchasing department. Why would there be a need to have a separate view (i.e. access) by the sales department? Explain your answer in terms of controls.

Logistics ► Materials Management ► Material Master ► Material ► Create (Special) ► Trading Goods (MMH1)

Create Finished Product (Initial Screen)

Field

Input

Material Number

OLHTXX

Industry Sector

Retail

Click on Select Views

Select the following views:

And Continue

Organizational Level

Field

Input

Plant

DLXX (Dallas)

Sales Org.

UWXX (US Wholesale)

Distr. Channel

IN (internet)

And Continue

Note: You will get a message on the status bar that the material already exists and will be extended.

Sales: Sales org. 1 View

General data

Field

Input

Division

AS (Accessories)

Delivering Plant

DLXX

Tax data

Tax Jurisdiction Code

UTXJ, UTX2 and UTX3 (all three tax jurisdictions are exempt from sales taxes)

Tax Classification

0 (Exempt)

Click on Conditions Button

Enter the sale price as 50 under Amount

Go Back S_F_BACK

Sales: Sales org. 2 View

Grouping terms

Field

Input

Mat. Statistics Group

1 (A material)

Sales: General/plant View

General data

Field

Input

Availability Check

02 (individual requirements)

Trans. grp.:

0001 (on pallets)

Loading Grp.:

0002 (handcart)

1.2 What type of application control is loading group? (You may wish to refer to the list in the procure-to-pay assignment.)

1.3 Thinking about the sales process and demands on inventory, how might the different values in the availability check be used?

Click on Enter and (Save)

Task 2 – Create a Customer Master Record
In business-to-business transactions, it is common practice to create a customer master record for customers with whom your company has business contacts. This way the customer's information does not need to be collected every time it places an order or makes an inquiry. In this step, you will create a customer master record. This master record contains all data necessary for processing the business transactions. Both the accounting department and the sales and distribution department have access to the customer master record. In order to avoid data redundancy, the data for both departments is stored in a common master record. However, typically the accounting area will be responsible for entering specific data and the sales area will be responsible for entering other data. At the end of this step, we will ask you what information should be entered by each department, so as you enter the data, think about who would be most appropriate to enter that data.

Create a Customer Master record
Logistics ► Sales and Distribution ► Master Data ► Business Partners ► Customer ► Create ► Complete (XD01)

Customer Create: Initial Screen

Field

Input

Account Group

Sold-to party

Customer

Leave blank

Company Code

USXX

Sales organization

UWXX

Distribution channel

IN (internet)

Division

AS (accessories)

Select Enter to continue

2.1 Why would we want to classify customers based on their distribution channel?

2.2 How could this classification of customers have accounting implications?

2.3 There are three main areas to enter data when creating a customer: general data, company code data, and sales area data. As you enter the customer data, state here which area of data (General Data, Company Code, and Sales Area Data) should be entered by only people in the accounting department. Explain your answer.

Create Customer: General Data
Note: You may need to expand the screen to see all of the fields.

Address
Field

Input

Name

your last nameXX Company

Search term 1/2

XX

Street

your choice

Postal code

80202

City

Denver

Country

US

Region

CO

Transportation Zone

0000000002 (region west)

Select Control Data tab to continue

Create Customer: Control Data
Control Data

· You do not need to enter information on this screen

Select Payment Transactions tab to continue

Payment Transactions

· You do not need to enter information on this screen

Select Marketing tab to continue

Marketing

· You do not need to enter information on this screen, however there are many marketing related fields on this screen. Before you go on, answer the following question.

2.4 What might the customer classification category be used for by marketing and sales employees?

Select Unloading Points tab to continue

Unloading Points

Field

Input

Unloading point

Dock 1

Calendar Key

US

2.5 You entered the calendar key of US. Why is it important for the system to have a control like this? (Hint: Think about holidays in the US and those in other countries.)

Select Export Data tab to continue

Export Data

· You do not need to enter information on this screen

Select Contact Persons tab to continue

Contact Person

· You do not need to enter information on this screen

2.6 The system forces the user to click on all of the tabs even if there is no data to enter. What type of application control is this? (You may wish to refer to the list in the procure-to-pay assignment.) Also, explain why the system is set up this way.

Create Customer: Company Code Data
Select Company Code Data button on the application tool bar

Account Management
Field

Input

Reconcil. Account

110000 (Trade – Accounts Receivable)

Sort Key

003 (document date)

Cash mgmt group

E2 (Domestic Customer)

Select Payment Transactions tab to continue

Payment Transactions

Field

Input

Payment terms

0001 (payable immediately)

Tolerance Group

GBI

Payment History Record

selected

Select Correspondence to continue

Correspondence

· You do not need to enter information on this screen

Select Insurance tab to continue

Insurance

· You do not need to enter information on this screen

Create Customer: Sales Area Data
Select Sales Area Data to continue

Sales

Field

Input

Order probab.

100 (%)

Currency

USD

Cust. price proc.

1 (standard)

Select Shipping tab to continue

Shipping

Field

Input

Delivery priority

02 (normal)

Order combination

select

Shipping Conditions

01 (Standard)

Delivery plant

DLXX

Max partial deliveries

9

Select Billing Document tab to continue

Billing Document

Field

Input

Incoterms

FOB

Comment next to incoterms

Free on Board XX

Payment terms

0001

Acct Assgmt Group

01 (domestic)

Taxes

Enter 0 (exempt) for Tax Classification for all taxes

Select Partner Functions tab to continue

Partner Functions

· You do not need to enter information on this screen

Click on Save to save this customer master record

Write down your customer number _______________________.

Task 3 – Set up Credit Limits for the Customer
The purpose of this task is to establish credit limits for your customers. Each customer has an established credit limit. How the system reacts to a customer that has exceeded the credit limit you established is determined in configuration. The current setting is to provide a warning message, but not stop the processing of an order or delivery.

Set up Credit Limits for the Customer

Logistics ► Sales and Distribution ► Credit Management ► Master Data ► Change (FD32)

Customer Credit Management Change

Field

Input

Customer

Your customer number generated by the system in the previous task.

Credit Control Area

GL00

Check the following:

· Overview

· Central data

(Continue)

Customer Credit Management Change: Overview

Click on Next Screen icon

Customer Credit Management Change: Central Data – Maximum permitted credit limits

Field

Input

Total Amounts

5000

Individual limit

5000

Currency

USD

Select: Goto ►Control area data ► Status (at the very top of your screen)

Customer Credit Management Change: Status

Credit limit data

Field

Input

Credit Limit

5000

(Save)

Task 4 – Check Inventory Availability
Usually before a sales order is written, inventory is checked to be sure that the order can be fulfilled. While SAP will automatically check availability when you create the sales order and will not allow a promised delivery to be scheduled before it is feasible to deliver, the sales staff may do this separately in order to discuss with the customer available options in the case where there isn’t sufficient inventory.

Check inventory availability
Logistics ► Materials Management ► Material Master ► Material ► Display ► Display Current (MM03)

Display Material

Field

Input

Material

OLHTXX (goods you ordered in the previous assignment)

Click on Select Views

Select (highlight) the Accounting 1 and Plant Stock views only.

Click on Continue

Field

Input

Plant

DLXX

Click on Continue

When on the Display Material screen select Environment ► Stock Overview (at the top of the screen)

This displays the available inventory.

4.1 How many are available to fill the order? Will this be sufficient to fill a customer order for 20 helmets?

Now let’s look at the accounting value of the inventory.

Accounting ► Financial Accounting ► General Ledger ► Account ► Display Balances (FS10N or FAGLB03)

You need to examine the appropriate account in the general ledger. Remember that the chart of accounts for your company is GLXX and that your helmets are considered trading goods. (You will not want to use any of the direct posting accounts.)

4.2 One of the auditor’s roles is to verify inventory values. The auditor would have to verify both the quantity on hand and the unit cost to determine the inventory value. How would the auditor verify the quantity?

4.3 Explain how the auditor would verify the unit cost of the good within the SAP system.

4.4 What documents would the auditor look for to verify the cost? Hint: Think about the previous assignment.

4.5 According to the general ledger, what is the current value of your trading goods inventory?

Task 5 – Check Status of Various Accounts
As you did in the previous assignment, you are to track the balances in the important accounts. In audit terminology this is called a test of transactions. In this case the following accounts should be checked:

· Check inventory in materials management

· Check inventory in the general ledger

· Check accounts receivable in the general ledger

· Check accounts receivable in the subsidiary ledger

· Check sales revenue in the general ledger

· Check cost of goods sold in the general 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 step.

Check status of various accounts.
- 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) as the posting date

- Check A/R sub-ledger: Transaction: FD10N

Enter the the change in value for each of these accounts after each step noted. You will be completing this table as you go through the subsequent steps.

MM Inv

GL Inv

GL Cash

Sales Revenue

COGS

GL AR

Customer Subledger

After task 4

After task 8

After task 10

After task 13

After task 16

After task 20

Task 6 – Create a Sales Order
The sales order is the central document in Sales and Distribution. A sales order can be based on preceding inquiries and quotations. If the customer was given a formal quote and the customer accepts those terms, then a sales order would be created directly from the quote. The information entered in the sales order is transferred to subsequent documents, which are used to process the business transaction further. This is an important feature of an integrated system. Having to re-enter this data is inefficient and also can introduce errors into the process. During the delivery process, goods are transported to the customer. At the end of this process, the delivered goods and/or the services rendered are invoiced during billing. The billing data is then automatically forwarded to Financial Accounting and profitability analysis.

Create a Sales Order

Logistics ► Sales and Distribution ► Sales ► Order ►Create (VA01)

Create Sales Order: Initial Screen

Field

Data

Order type

OR

Sales organization

UWXX

Distribution channel

IN (Internet)

Division

AS (Accessories)

Click on Enter

Create Standard Order: Overview

Field

Data

Sold-to Party

Your customer #

Purchase Order Number

PO-XX

Purchase Order Date

Today’s date

Req. Deliv. Date

Today’s date

Material

OLHTXX

Order Quantity

20

Plant

DLXX

Click on Enter

Select: Goto ► Item ► Shipping

Field

Data

Storage Location

TGXX

Click on Enter

6.1 Notice the net weight for the order. Where did the system get this data? (Hint: Think back to the previous assignment.)

Save .

You may get a warning about the date – just ignore the warning by hitting enter .

Write down the sales order document number: _________________________

Task 7 – Display the Sales Order
Display the sales order and record the scheduled delivery date and pricing information
Logistics ► Sales and Distribution ► Sales ► Order ► Display (VA03)

Display Sales Order: Initial Screen

Field

Data

Order

sales order number from Task 6

Click on the Enter

To display the delivery date for a line item, select the box to the left of the item, and click on Shipping tab.

Fill in the following details from the information on the screen:

Display Standard Order: Overview

Field

Data

Delivery date

Material available date

Loading Date

Click on Sales Tab.

To display the pricing, select the box to the left of the item and then select: Goto ► Item ► Conditions or click on the conditions icon at the bottom left part of the input screen.

Record the cash discount for this item ________________.

Use the green arrow S_F_BACK to go back to the Display Standard Order: Overview screen. Stay in the sales order display function to complete the following task.

Task 8 - Display the Document Flow for the Sales Order
While you are in the sales order display function (VA03), you can display a graphical representation of the status of your sales order. This function provides a quick reference for those entities who need to know the status of an order.

Use the following menu path to display the sales order document flow.
Environment ► Display Document Flow

Highlight your Standard Order

Select the Status Overview button and write down or paste the screen print of the current status of the sales order. Note you may need to expand the list to see the full system status report.

Task 9 – Check Status of Various Accounts
Repeat the checks in task 5 and record in that table.
Task 10 – Create the Delivery for the Sales Order
Create the delivery for the sales order
Logistics ► Sales and Distribution ►Shipping & Transportation ► Outbound Delivery ►Create ►Single Document ►With Reference to Sales Order (VL01N)

Create Outbound Delivery with Order Reference

Field

Data

Shipping point

DLXX

Selection date

Delivery date from Task 7

Sales order

Sales order number from Task 6

Click on the Enter icon

Change Planned GI date to today’s date

Go to the Picking tab.

For Picked Quantity, enter the same quantity as what is in the Delivery Quantity field

Click on Enter

If you get more information messages, click on enter to ignore them all.

Save

Write down the Delivery Note number: ___________________

Task 11 - Check Status of Various Accounts
Repeat the checks in task 5 and record in that table.
Task 12 - Display the Document Flow for the Sales Order
Check document flow as you did in task 8 and write down or paste the screen print of the current status of the order.

Task 13 – Post the Goods Issue
Change the delivery note and update the picked quantity. Post goods issue to notify that the delivery has left the plant
Logistics ► Sales and Distribution ► Shipping & Transportation ► Outbound Delivery ► Change ►Single Document (VL02N)

Change Outbound Delivery

Field

Data

Outbound Delivery

Delivery number from Task 10

Click on Enter

Select the Post Goods Issue button to inform the system that the goods have left the dock. At this time the system records the goods transaction and creates a goods issue document.

Task 14 - Check Status of Various Accounts
Repeat the checks in task 5 and record in that table.
Task 15 - Display the Document Flow for the Sales Order
Check document flow as you did in task 8 and write down or paste the screen print of the current status of the order.

Task 16 – Create an Invoice for the Delivery
Create an invoice (bill) to the customer for goods delivered
Logistics ► Sales and Distribution ► Billing ► Billing Document ►Create (VF01)

The delivery document number should default. If not, enter the delivery document from Task 10.

Click on Enter

.

Invoice Create: Overview of Billing Items

16.1 What is the dollar amount in “Net Value”?

Save

Write down the billing document number: _____________________

The system will confirm that the invoice has been posted

Task 17 - Check Status of Various Accounts
Repeat the checks in task 5 and record in that table.
Task 18 - Display the Document Flow for the Sales Order
Check document flow as you did in task 8 and write down or paste the screen print of the current status of the order.

Task 19 – Locate the Accounting Document Number
To locate the accounting document that corresponds to your customer invoice use the following menu path:

Logistics ► Sales and Distribution ► Billing ►Billing Document ► Display(VF03)

Enter Billing document # if already not defaulted.

Select the Accounting button

Write down the accounting document number: _________________

19.1 Double click on the accounting document. What is the journal entry?

Task 20 – Post the Customer’s Payment on Account
Typically, businesses post customer payments in batch either electronically from the bank or via a scan, but sometimes, we may need to post one individual payment. We will use the individual posting to illustrate the accounting transaction that occurs when a payment is posted.

Post payment to the invoice created
Accounting ► Financial Accounting ►Accounts Receivable ► Document Entry ► Incoming Payment (F-28)

Post-Incoming Payment: Header Data

Field

Data

Document Date

Today’s date

Company code

USXX

Currency/ate

USD

Bank data

Account

100000 (Bank Account)

Amount

the invoice amount

Value date

Today’s date

Open Item Selection

Account

Your customer #

Automatic Search

Select

Click on Enter or Process open items

Note: The amount you entered should be equal to the assigned amount and there should be 0.00 under not assigned field . The system posts the document if the debits are equal to credits unless partial payment is made.

Save

document number: ________________

Task 21 - Check Status of Various Accounts
Repeat the checks in task 5 and record in that table.
Task 22 - Display the Document Flow for the Sales Order
Check document flow as you did in task 8 and write down or paste the screen print of the current status of the order.

Task 23 – Write Down the Journal Entries the System Made.
By using the information contained within the table in task 5, 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 to you as “Order to Cash 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.