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Organizational Data 51

manage money owed to vendors for the purchase of materials and services.
Asset accounting is used to record data related to the purchase, use, and
disposal of assets such as buildings, equipment, machinery, and automobiles.
Finally, bank ledger accounting is concerned with recording data associated
with bank transactions.
As previously stated, the fi nancial data recorded in the general ledger
are used to generate the fi nancial statements needed for external reporting.
Typical fi nancial statements are the balance sheet, income statement, and
statement of cash fl ow. A balance sheet is a snapshot of the organization
at a point in time. It identifi es assets, liabilities, and equity. In contrast, an
income statement, also known as a profit and loss statement, indicates
the changes in a company’s fi nancial position over a period of time. It identifi es
revenues, costs, and profi ts or losses. Finally, a statement of cash flow dis-
plays all cash receipts and payments over a specifi ed period of time. We begin
this chapter by examining the organizational data and master data relevant to
fi nancial accounting.

ORGANIZATIONAL DATA
The organizational data associated with fi nancial accounting are client, com-
pany code, and business area. We discussed both client and company code in
Chapter 2. Recall that a client is the highest organizational level in the sys-
tem; it represents an enterprise that consists of multiple companies. Therefore,
even the largest enterprise can have only a single client. The various companies
within an enterprise are represented by a company code. Applying this sce-
nario to GBI, the global GBI enterprise is represented by a client, while the
two companies, GBI US and GBI Germany, are represented by company codes
US00 and DE00, respectively. Financial statements are generally prepared at
the company code level. Thus, GBI US and GBI Germany will generate sepa-
rate fi nancial statements to meet the regulatory requirements of each country. 1
Business areas are internal divisions of an enterprise that are used to
defi ne areas of responsibility or to meet the external reporting requirements
of an enterprise segment. A segment is a division of an enterprise for which
management monitors performance (revenue, costs, profi tability, etc.) sepa-
rately from other segments. Financial statements are generated for each busi-
ness area within the enterprise. A business area is often based on either the
enterprise’s product line or its geographic division, across company codes.
Figure 3-2 illustrates two hypothetical business areas for GBI. The upper part
of the fi gure identifi es three companies within the GBI enterprise—GBI US,
GBI Germany, and GBI Australia. It also defi nes two business areas based
2
on product lines—bicycles and accessories. GBI generates fi nancial statements

1 Although the International Accounting Standards Board (IASB) has created a global standard
for fi nancial reporting called the International Financial Reporting Standards (IFRS), not all
countries have adopted this standard. In addition, local regulatory requirements still mandate that
companies maintain fi nancial data in different ways. Consequently, there continues to be a need to
generate different fi nancial statements for different countries.
2 GBI currently only has companies in the United States and Germany. The companies referred
to in this section and in Figure 3-2 are only included to facilitate a discussion of business areas.

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