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Describe key issues related to enterprise systems and system integration

Question One
1 Mark

Learning Outcome(s):

(LO1) Describe key issues related to enterprise systems and system integration

There are three types of data in an enterprise system, which are Organizational data, Master data, and Transactional data. Briefly explain the characteristics of the enterprise data.



Organizational data are used to represent the structure of an enterprise.

Examples of organizational structure are companies,




storage areas,

sales regions.

organizational data elements


company code,



Master data represent entities associated with various processes. For example, processes involve buying materials from vendors and selling materials to


In this example,




are represented

in an ERP system using master data.

The most commonly used master data in an organization is the material

master. Materials are used in numerous processes. They are purchased, sold,

produced, and planned for. They are used in maintenance and service, and

in projects. Consequently, material master data are some of the most com-

plex and extensively utilized data in an ERP system. In contrast, other master


Processes are executed in the context of organizational levels, involve

master data, and result in transaction data. Transaction data reflect the conse-quences of executing process steps, or transactions.

Examples of transaction

data are dates,



payment and delivery

Question Two
1.5 Marks

Learning Outcome(s):

(LO1) Describe key issues related to enterprise systems and system integration

What is meant by Enterprise data management and why it needs alignment among various stakeholders?


Enterprise systems are one of the most complex and powerful information systems

in use today. As we explained in Chapter 1, this book will cover the world’s most

popular ES—SAP ERP—in great depth. Although you might have studied enter-

prise systems in a previous course, we provide a quick review of the key concepts

to refresh your knowledge and to place these concepts in an appropriate context

for the rest of this course. In this section we briefl y discuss the architecture of enter-prise systems, the SAP® Business Suite, SAP ERP, and the technology platform—

SAP® Netweaver—that forms the foundation for these applications

Data in an ERP system are used to represent the physical system in

which process steps such as creating a purchase order and receiving goods are

carried out. These steps generate data, which represent the outcomes of the

steps. There are three types of data in an ERP system: organizational data,

master data, and transaction data.

As we discussed earlier, a central component of any ERP system is the com-

mon database that stores data related to all the processes. Without this func-

tion, integrating the various processes would be diffi cult, if not impossible.

Therefore it is essential to understand how data are organized in an ERP

system. We address this topic in the following section. We then introduce the

different types of data that are stored in an ERP system, and we identify basic

data elements that are common to many processes. We will develop these top-

ics and introduce additional data elements in later chapters that discuss spe-

cifi c processes. For the purposes of this chapter we will restrict our discussions

to the procurement and fulfi llment processes introduced in Chapter 1.

Data in an ERP system are used to represent the physical system in

which process steps such as creating a purchase order and receiving goods are

carried out. These steps generate data, which represent the outcomes of the

steps. There are three types of data in an ERP system: organizational data,

master data, and transaction data.


Question Three
1.5 Marks

Learning Outcome(s):

(LO2) Identify principal enterprise systems architectures and implementation strategies

Discuss the difference between business function and business process, and explain how a business process cuts across functional lines in an organization.



Organizations exist either to serve some commercial purpose or to achieve

some social objective. They differ depending on the purpose or goal they are

trying to achieve, their ownership or management structure, and the regula-

tory environment in which they operate. Some organizations create and deliver

products or services to customers to make a profi t. For example, a bicycle

manufacturer produces a variety of bicycles and accessories. It then sells these

products to numerous retailers who, in turn, sell them to the fi nal consumers.

Other companies provide services, such as repairs to the bicycles. Yet others

provide the manufacturer with the parts and materials needed to make the

bicycles. Achieving the organization’s objectives involves many different types

of work. For example, the manufacturer must design the bicycles, identify what

parts it will use to make them, determine where to obtain these parts, produce

the bicycles, identify its customers, and market and sell the bicycles to them. In

addition, it must determine how to manage its money, its various facilities such

as factories and warehouses, and the many people that it must recruit, employ,

train, and retain. This work is completed in numerous processes.

Although organizations exist for many different purposes, vary greatly in

size and complexity, and operate in many different industries, they all exhibit

similarities in the ways that they operate. Regardless of their type or size, suc-

cessful organizations and industries use processes and enterprise systems to

complete the work needed to achieve their goals. Processes may vary slightly

depending on the unique characteristics of the industry or the structure of the

organization, but the basic activities can be recognized by anyone who has

developed a process view of business. Likewise, companies may employ differ-

ent enterprise systems to manage their processes. However, you can apply the

principles, concepts, and techniques explained in this textbook to most of

the enterprise systems you are likely to work with.

A business process, illustrated in Figure 1-2, is a set of tasks or activi-

ties that produce desired outcomes. Every process is triggered by some event,

such as receiving a customer order or recognizing the need to increase inven-

tory. The columns in the fi gure represent different parts, or functional areas,

within an organization, such as sales, warehouse, manufacturing, and account-

ing. Thus, the specifi c steps in the process are completed in different functional

areas. For example, when a retailer (customer) places an order for bicycles,

the manufacturer (seller) uses a specifi c process to ensure that the correct

Function business?!

Question Four
1 Mark

Learning Outcome(s):

(LO2) Identify principal enterprise systems architectures and implementation strategies

Explain the general ledger, subsidiary ledgers, and reconciliation accounts, and how they are related.


Reconciliation accounts are general ledger accounts that consolidate data

from a group of related subledger accounts, such as customers and vendors.

The reconciliation account for customers is accounts receivable, and the rec-

onciliation account for vendors is accounts payable. Because the general led-

ger can include multiple reconciliation accounts, it is necessary to indicate

which subledger each reconciliation account is associated with. This informa-

tion appears in the reconciliation account for account type fi eld in the gen-

eral ledger account master data. These concepts are related to the accounts

receivable and payable accounting processes introduced at the beginning

of the chapter. These processes will be explained in greater detail later

in this chapter.

One special characteristic of reconciliation accounts is that it is not

possible to post data directly into them. Rather, data must be posted to sub-

ledger accounts, at which point they are automatically posted to the corre-

sponding reconciliation account as well. Thus, when a company sells products

or services to a customer on credit, the amount owed is noted in the custom-

er’s subledger account and is also posted to the corresponding reconciliation

account (accounts receivable). Likewise, when the company owes money to

a vendor for purchases it made on credit, this amount is noted in the ven-

dor’s subledger account and is simultaneously posted to the corresponding

reconciliation account (accounts payable). The balance in the reconcilia-

tion account (e.g., accounts receivable and accounts payable) is the sum of

the postings in the related subledger accounts (e.g., customers and vendors,


We will consider subledger and reconciliation accounts in greater

detail in the process section of this chapter. We now turn our attention to

the key concepts involved in fi nancial accounting, beginning with accounting


Some fi nancial data are not directly maintained in the general ledger. For

example, customer accounts, which track the amounts customers owe and

the payments they have made, are maintained separately for each customer.

Although it is necessary to track sales and payments separately for each cus-

tomer, it is not necessary to include each customer account in the general led-

ger. Similarly, data about each vendor and asset, such as an automobile, are

maintained in separate accounts. Vendor accounts track purchases from and

payments made to them. Asset accounts are used to track the purchase price

as well as increases and decreases in the asset’s value over time. Such accounts

are maintained in subsidiary ledgers or subledgers, and they are not part

of the general ledger.

Although customer and vendor accounts are not part of the general ledger,

the data in these accounts must be refl ected in the general ledger. Companies

accomplish this task by posting the data from subledger accounts into

special accounts in the general ledger called reconciliation accounts.


General ledger accounting is based on the double entry accounting system,

where every transaction has both a debit entry and a credit entry. Recall that

accounts are divided into balance sheet accounts (Figure 3-5) and income (profi t

and loss) statement accounts (Figure 3-6). Balance sheet accounts are grouped

into assets, liabilities, and equity, while profi t and loss accounts are divided into

revenue and expenses. Figure 3-11 illustrates how postings are debited and

credited to these accounts using a “T” account. Debits are displayed on the

left side of the T account, and credits on the right side. An increase in an asset

account or an expense account results in a debit posting, whereas a decrease

results in a credit posting. Conversely, an increase in revenue or liability results

in a credit posting, whereas a decrease generates a debit posting. Below we

present several examples involving GBI to illustrate and clarify the concept of

postings. Please refer to Appendix 3A at the end of this chapter for the specifi c

accounts that are included in the examples


The accounts in the general ledger are defined based on the selected COA. The

general ledger is an instantiation of the COA for a particular company and

can include some or all of the accounts in the COA. Like most master data,

the data in general ledger accounts are segmented by organizational level

(Figure 3-4). COA account data include a COA or client segment and a

company code segment.

The COA segment typically includes an account number, short and long

text, an account group, and an indication as to whether the account is a balance

sheet or a profi t and loss account. Each account is assigned a unique account

general ledger accounts, subsidiary ledgers, and reconciliation

accounts, to provide a complete picture of the fi rm’s fi nancial status.

Management accounting focuses primarily on the allocation of costs and

revenues to proper areas within the fi rm. Costs and revenues that are incurred

as the various business processes are executed are accumulated in various cost

objects. Firms then utilize these data to manage the organization.

2. Accounts Payable Accounting – Concerned with vendors and involve:

➢ sub-ledgers to track money owed to individual vendors: vendor master

➢ reconciliation accounts: Accounts payablereconciliation


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