Assignment 1

Abstract:Nowadays we all know Accounting is very most important module in each company. So Companies are installing different software so efficiency and benefits are increase. ERP is very sound concept so company can perform activity easily and gains more benefits on same organization. In this paper we denote what is the Sarbanes-Oxley Act and how it related in ERP system.

Introduction
In this paper we include accounting basic concepts and types of accounting. How SAP ERP software meets these functions of accounting and ERP related to Sarbanes-Oxley Act and as well as key features of Sarbanes-Oxley Act and types of Sarbanes-Oxley Act. Because of ERP we need not do any paper work and mostly account activity done automatically by system itself. So, Accounting will perform easily and accurate by accountant.

Classification of accounting
Accounting means recording, systematic, analysis and reporting of financial transactions of a business. Accounting is the sequence process of calculating activity of economy of business to provide useful information. There are mainly two type of accounting. 1) Financial accounting 2) Managerial accounting.
Financial Accounts

Financial Accounting is basically concern with measuring, recording and classifying the transaction of a business. Below, there are denoting some financial statements. Balance Sheet, Cash Flow Statement, Notes to the Accounts etc. Financial accounting is used mainly by those outside of an organization. We can also call external accounting. Financial accounts format is

KASHYAP A. PATEL (3903856)

Page 1

Assignment 1
pre-fix by several different entities. For Example: Stock Exchange, Accounting Standards and Company Law.
Management Accounts-

Managerial accounting is used for mainly by those within an organization. We can also call internal accounting. These accounts are used to help in the decision-making process, plan and control the activities of a business and to assist management record. For Management account needs not any legal requirement and there is no fix format. This account can prepare on separate business locations, products and departments.
Financial and Management Accounting in SAP ERP-

SAP Finance gives totally information to finance manager with analytical tool to make real time decision even large organization also see financial status when required and can keep growth efficiently. We can include various sub module in SAP FI likewise bank accounting, account payable, account receivable, general ledger, travel expense management, consolidation and special purpose ledger. General Ledger of SAP FI provides unified format for different individual ledger like profit centre accounting, cost of sales ledger, consolidation staging ledger, parallel accounting, and online splitting function on entry.

SAP Features

Credit Management Currency translation

Intercompany transactions

provide reports using different languages

KASHYAP A. PATEL (3903856)

Page 2

Assignment 1
Credit Management:Company performance is decrease when bad debts and a large number of outstanding receivables are increase. You can minimize risk by fixing credit limit for customers using credit management.

Nowadays, we can see most of every enterprise extend credit to customers. Means, selling own goods but getting money at later point of time. This credit amount extended is finding by credit of customer. Total number of delayed days for customers credit is based on terms of payment associated with transaction. There are four types of credit check 1 Simple credit check

2 Automatic Credit check 3 Static Credit Check 4 Dynamic Credit Check

Currency translation (FASB52):-

The system provides standard functionality for processing transactions in foreign currencies and valuating transactions and accounts manage in foreign countries. Other benefit if you generate two different reports than you can check original exchange rate with another where posting date valid. This Function depends on Currency Translation Types. Country currency (Company code) = Local currency. All others = Foreign currency. For this we need some prerequisites likewise Local Currency defined in Company code, Foreign Currency code defined, Transaction ratio between foreign and local currency defined and exchange rate defined.
KASHYAP A. PATEL (3903856) Page 3

Assignment 1

Intercompany transactions:Lots of organization is part of an intercompany transaction. A separate document with own document number will post by the system in each company codes. We can together individual documents with help of a common cross-company code. Line items are generating by the system automatically such as Accounts payable and accounts receivable and between company codes. In nutshell, Using Intercompany transactions you can settle the inter companies accounts payable and accounts receivable. 1st company Dr. Balance Sheet account Cr. Intercompany AP 2nd company Dr. Intercompany AR Cr. Balance Sheet account

Provide reports using different languages:-

In SAP system, we can generate reports in different language. In this system, there are many language predefine. When company has branches in different countries, sometimes employee has to generate reports for other branch for analysis which is locate in other country and employee cannot understand that language so at that time he can select another language and generate report in that language so this function is very useful.

The Sarbanes-Oxley Act

Sarbanes-Oxley stands for Representative Michael Oxley and Senator Paul Sarbanes who drafted the Sarbanes-Oxley Act in July 30, 2002' .Reliability of corporate disclosures made pursuant to the securities laws and to protect investors by improving the accuracy can achieve with the Sarbanes-Oxley act. This act is a United States federal law.

KASHYAP A. PATEL (3903856)

Page 4

Assignment 1
The act contains 11 titles. Each title consists of several sections:

Responsibility of corporate Criminal Fraud Accountability and Corporate Interests Analyst Conflicts Corporate Fraud Accountability Enhanced Financial Disclosures Reports and Studies White Collar Crime Penalty Enhancement Commission Resources and Authority PCAOB Auditor Independence Corporate Tax Returns

In this act, all financial reports are necessary to include an internal control report. The basic objective of this act are restore the public confidence in publicity trade securities and public accounting, and Assure ethical business practices through heightened levels of executive awareness and accountability. Key Features of the Sarbanes-Oxley Act:Implications of the Sarbanes-Oxley Act for ERP Systems Company has to document and verify controls for getting requirement of internal control report. With the Sarbanes-Oxley Companies without ERP will have more time but Company with ERP systems will have an easier time complying.

KASHYAP A. PATEL (3903856)

Page 5

Assignment 1
Archiving

There are no more ways for deleting items in SAP ERP system. Data firstly recorded in database after than only you can remove in SAP ERP system. Archive we can say permanent storage. And also database keep record of change records.

User Authorizations

There are different levels of authorization in SAP ERP system that can manage by SAP user administration. And in this system employee can done transaction when it required. Profile Generator provide easy step of selecting function that employee could to permit to perform.

Tolerance Groups

In SAP ERP system you can set the limit size of transaction that only user can process its call tolerance. Basically limits for employee are set to checking employees ability. For a single item sets limit on dollar and total value of document. Financial Transparency In SAP ERP, you can drill down on generated reports to the main document that created it. Because of this process auditors can easily confirm the integrity of reports. With ERP system, between individual transactions and companys financial statements there are direct links so easily fraud can be detected.

KASHYAP A. PATEL (3903856)

Page 6

Assignment 1

Success Stories
GHCL
Gujarat Heavy Chemicals Ltd is divided in two parts Home Chemicals and Textiles .GHCL motto was to achieve fully opaque into its grey cloth manufacturing process or in Home Textiles business .In this manufacturing process lots of complicated stage occur and every segment requires full attention and proper planning from starting to end. So for the accurate billing and production company adopted my SAP ERP software. Company has set up the grey fabric unit in Vapi in Gujarat and production power of 1.25 lakh meters per day. Problem All complicated stage manages in spreadsheet manually. So it takes lot of time and it is not confirm its affective to solve the issues. Every excel sheet checking is also the biggest challenge of different stage of production in, Cut-Sew, Weaving, Shipment and Processing and Tally was Used for accounting. So for the heavy company normal window software is not appropriate choice. Solution GHCL totally accepted that for the betterment of company SAP required. Thus, to implement my SAP ERP ECC 6.0they selected implementation partner is OBT Global Pvt. Ltd. at its Vapi plant. GHCL implemented, Production Planning, Finance, Materials Management, Costing, Quality Management and Sales & Distribution modules in the first phase. Now from my SAP ERP System Company has clear seen the progress of work in every stage.

MTR FOOD CHAIN COMPANY India's leading purveyors of packaged foods is MTR Foods Ltd. They make many types of products likewise chips, partially pre cooked food, ready to eat meals and vegetarian snack food. And other products also include like different pickles, vermicelli and variety of ice creams. The company is one of only a few that sells packaged food nationwide. The company exports in different countries as well as. For example Counties are Australia, US, Canada and Europe. CHALLENGES
KASHYAP A. PATEL (3903856) Page 7

Assignment 1
For processed food each plant requires unique raw material. To managing the complicated supply chain is hard. There are many ways for transfer finish goods. Everything in the process is derived manually with FoxPro, Tally and Excel. So work is time taken and errors also occur. For example: Company need raw material for processed food in bulk. But due to the legacy system we cannot proper estimate the cost of the product pre and post. Now company has first

challenged how to get transparency and quality in supply chain. SOLUTION This company install SAP R/3 4.7 version. In this SAP ERP, there are so many modules but this company select five core modules. They are listed below. 1) quality assurance 2) financial accounting 3) production planning 4) sales & distribution 5) material management

After this company decided according requirement to re-engineer their business processes which are suitable in r/3 system. L&T InfoTech selected for implementation partner. They have achieved so many benefits likewise Cost control, Improvement in working capital, fatter margins, Cost control and Tabs on defaulters.

Suzlon Energy
The company Suzlon Energy is eco friendly. They provide the wind energy and control many sites at a time where wind energy generate .The huge data of the different sites compile and manipulate with the help of SAP ERP. IBM Global Services implemented all modules of SAP. Now company has got aprox 900 user licenses of SAP.

Challenges KASHYAP A. PATEL (3903856) Page 8

Assignment 1
Initially company was using hereditary system which could not able to integrate and compile all information of sites .So the Company could not handle the main site area. Due to disconnection of sites company will not control the efficiency and deficiency of material, distribution and Quality of work as well as financial work also. Solution

After evaluating all ERP package they decide SAP ERP system in their company because of SAP gives better road map and sound management capabilities. They decided IBM is implementation partner and purchase whole set of SAP ERP 4.7 include all modules. IBM project started in May 2004 and it was completed in November 2004. In this system they can achieve official financial sheet on March 31st and improve planning of financial. Now company can able to take strategic decision on its business. They have achieved better inventory management and process of invoice became streamline.

SAP ERP Implementation Failure:

Shane Company SAP ERP project failure overview (2008)

Shane Company has 23 branches in 14 different states and field for bankruptcy in Jan of 2009. Initially Shane Company claimed their bankruptcy on SAP software that this bankruptcy came because of SAP project delays and cost revenue of SAP project. At analysis time project expected budget was around $10 million but at ending time when calculated the sum up it was $36 million and other main factor is project planned for 1 year but in real project toke approximately 3 years. After blaming on sap later on they knew main failure factor was vendor who name is Ciber Novasoft.

Poor management of SAP ERP from both side 1) the Shane Company senior management and 2) project management side.

An improper implementation plan and budget. Cost was not properly managed and budget also.
Page 9

KASHYAP A. PATEL (3903856)

Assignment 1

Undefined processes with untested system functionality.

Whirlpool Corporation (failure in 1999)

The Whirlpool Corporation was founded in 1911 and it is an American multinational manufacturer. Company revenue of approximately is around $18.4 billion and company has more than 70 manufacturing centre in the world and has more than 70,000 employees. In 1999 when SAP ERP had been install and last phase come up it was go-live. But Previous day of go live, there are so many warnings comes and some of them serious problems. Whirlpools implementation partner of SAP was Deloitte. At that time Deloitte and Management of Whirlpool decided to go live anyway. They think every problem are known so they can easily solve problem in next week after going live. Distribution systems and external shipping had more disrupt from interface problems. Now Shipments were cancelled for 6 8 weeks so many customers cancelled orders and went elsewhere.

Fox Meyer Drugs (failure in 1995)

United states fourth largest distributor of pharmaceuticals is fox Meyer drugs. It was a 5$ Billion

Company. They want to implement sap r3 and pinnacle warehouse automation. According to owner risks of the project is classified into customer mandate, Requirements and scope, execution and environment. Customer mandate

The customer mandate depends on commitment from both uses and management. Reports reveal that some users were not committed even though senior management commitment was high. There was moral problem among the employees of warehouse, warehouse automation threatened their jobs. Three warehouse were closed and there loss of $ 34 million.

KASHYAP A. PATEL (3903856)

Page 10

Assignment 1

Requirements and scope

FoxMeyer signed a large contract to supply university Health system consortium, Immediate after the project started. This event exacerbated the need for unexpected volume of R/3 transaction. Before the contract testing being done for indicate if r/3 can run or not on HP 9000 servers.

Execution

Because of shortage of knowledgeable and skill person, the project execution was an issue. There were more than 50 consultants

Environment

When FoxMeyer realize the project in trouble its dependence on vendors and consultants prevented it from seeing how could now gain control. Project dramatically changed with the UHC contract like profibility was erased, project cost raised and companys narrow margins were lowered.

Conclusion:In nutshell, Accounting is part and parcel of any organization and Accounting has mainly two types internal and external. SAP ERP is very sound ERP software which is satisfies all account activity with accuracy. And From success story and failure story we can say this is very critical software. For successful implement we need care many points which are denote in Success and failure story. WORDCOUNT:-2452.

KASHYAP A. PATEL (3903856)

Page 11

Assignment 1

Bibliography:o Quickmba-2010, Classification of accounting, viewed on 11th December,2011,<

http://www.quickmba.com/accounting/ >

o Tutor2u-2009

Features of mySAP, viewed on 11th December,2011,<

http://www.tutor2u.net/blog/index.php/business-studies/C123/>

o Scribd-2011,Classification of

accounting ,Viewed on 11th December,<

http://www.scribd.com/doc/18740959/managementaccountingnotes>

o Currency Transaction ,Features of SAP, Viewed on 12th December,<

http://help.sap.com/saphelp_nw04/helpdata/en/ec/076f3b6c980c3be10000000a11402 f/frameset.htm >

o Credit Management/Risk Management, Features of SAP, Viewed on 12th December <http://help.sap.com/printdocu/core/print46c/en/data/pdf/FIARCR/FIARCR.pdf> o SAP FICO-2011, Features of SAP, Viewed on 12th December, < http://sap-f2.blogspot.com/2009/10/intercompany-transactions-in-sap-ap-ar.html >

o Enterprise governance and sox with mySAP erp financial,mySAP ERP meets the implication of SOX, Viewed on14thDecember,<http://www.sap.com/solutions/businesssuite/erp/financials/pdf/Entpr_Gov_SO_Compliance.pdf>

KASHYAP A. PATEL (3903856)

Page 12

Assignment 1
o ExpressComputer-2003, Success of SAP ERP implementations, viewed on 15
December

http://www.expresscomputeronline.com/20050124/management.shtml >

o r3now-2005 ,failure of SAP ERP implementations , viewed on 15 December <http://www.r3now.com/sap-erp-project-failures-lessons-learned-and-minicase-studies-3>

KASHYAP A. PATEL (3903856)

Page 13