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Chapter 5
Accounting could “keep the books,” that is, maintain records of all financial transactions.
Data sharing, however, usually did not occur in real time, so Accounting’s data were often
out of date. Further, because the shared data were often not the only information that
Accounting needed to prepare reports for management, accountants and functional area
clerks usually had to spend considerable time doing additional research to create those
reports.
An ERP system, with its centralized database, avoids these problems. For example,
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suppose finished goods are transferred from the assembly line to the warehouse. An
employee in the warehouse can easily record the transaction, using a terminal or a bar-
code scanner. In SAP ERP, the Materials Management module would see the transfer event
as an increase in finished goods inventory available for shipment; the Accounting module
would see the event as an increase in the monetary value of the finished goods inventory.
With ERP, everyone uses the same database to record operating data. This database is
then used to generate management reports, produce financial statements, and create
budgets.
In accounting, a company’s accounts are kept in a record called the general ledger.In
the SAP ERP system, input to the general ledger occurs simultaneously with the business
transaction in the specific module. Many SAP ERP modules cause transaction data to be
entered into the general ledger, including:
• Sales and Distribution (SD)—The SD module records a sale and then creates
an accounts receivable entry (a general ledger document that indicates a
customer owes money for the goods received by the customer).
• Materials Management (MM)—The MM module controls purchasing and
records inventory changes. The receipt of goods from a purchase order
creates an accounts payable entry in the general ledger, which indicates the
company has an obligation to pay for goods it has received. Whenever
material moves into or out of inventory (purchased materials arrive from the
vendor, raw materials are taken out of inventory to support production, or
finished goods go from production to inventory), general ledger accounts are
affected.
• Financial Accounting (FI)—The FI module manages the accounts receivable
and accounts payable items created in the SD and MM modules, respectively.
The FI module is also where the general ledger accounts are closed at the
end of a fiscal period (quarter or year), and it is used to generate financial
statements.
• Controlling (CO)—The CO module tracks the costs associated with
producing products. To make a profit, a company must have an accurate
picture of its product costs so it can make correct decisions about product
pricing and promotions, as well as capital investments.
• Human Resources (HR)—The HR module manages the recruiting, hiring,
compensation, termination, and severance of employees; the HR module also
manages benefits and generates the payroll.
• Asset Management (AM)—The AM module manages fixed-asset purchases
(plant and machinery) and the related depreciation.

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