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Chapter Summary Accounting in ERP Systems
• Companies need accounting systems to record transactions and generate financial
statements. Accounting activities can generally be classified as either financial accounting
or managerial accounting.
• Financial accounting consists of documenting all the transactions of a company that have
an impact on the financial state of the organization, and then using those documented 151
transactions to create reports for investors and external parties and agencies. Managerial
accounting deals with determining the costs and profitability of a company’s activities. The
goal of managerial accounting is to provide managers with detailed information so they can
make informed decisions, create budgets, determine the profitability of a particular product,
sales region, or marketing campaign, and so on.
• An accounting system should let a user summarize data in meaningful ways so the data
can then be used to assist managers in their day-to-day work and in long-range planning.
• Unintegrated information systems are more likely to result in accounting data that is
inaccurate or not current, which can affect decision making and therefore profitability.
• Closing the books means that balances for temporary or nominal accounts (such as
revenue, expense, gain, and loss) are transferred to the retained earnings account. An
integrated information system simplifies the process of closing the books and preparing
financial statements. Using an integrated information system and a common database to
record accounting data has important inventory cost-accounting benefits. More precise
record keeping is possible, which can lead to more accurate product cost calculations.
These, in turn, can help managers determine which products are profitable and which are
not.
• The use of an integrated system and a common database to record accounting data has
important management-reporting benefits. With an ERP system, a user can use the built-in
query tools to build reports as well as drill down within reports to the source documents
(transactions) that were used to create the report.
• The Sarbanes-Oxley Act of 2002, passed in the wake of the Enron collapse and other high-
profile bankruptcies, promoted management accountability by requiring extra financial
approval and reporting. Because ERP systems can help companies meet the requirements
of this legislation, the act has increased the demand for integrated data reporting.
• Extensible Business Reporting Language (XBRL), a subset of XML (Extensible Markup
Language), is a standards-based language for the electronic communication of business
and financial data. For financial reporting, XBRL provides an identifying, computer-readable
tag for each item of financial data. For instance, “company net profit” has its own unique
XBRL tag.

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