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Assignment
Course code: 704
Course Title: Accounting Information System
3rd
Year: 2015 Semester:
Date:01 /10/2015
Submitted By:
Projit kumar pal
ID : 14-01-51-041
Submitted To:
Mr. Mashiur Rahman
Asstt. Prof. SoB. AUST
What Is ERP?
ERP stands for Enterprise Resource Planning. ERP is an enterprise-wide information system
that facilitates the flow of information and coordinates all resources and activities within the
business organization. Functions typically supported by the system include manufacturing,
inventory, shipping, logistics, distribution, invoicing, and accounting. Some solutions now
embed customer relationship management functionality. A wide variety of business activities
including sales, marketing, billing, production, inventory management, human resource
management, and quality control depend on these systems. The ERP system assists in
managing the connections to outside stakeholders as well as enhancing performance
management. It uses a centralized database and usually relies on a common computing
platform. It provides the user a unified, consistent, uniform environment.
ERP solutions evolved from applications focused on materials requirements and resource
planning and computer integrated manufacturing. The Enterprise Resource Planning term
came about when software developers were searching for a name that would more aptly
describe these broader systems. These new solutions provided functionality that
encompassed other applications in addition to manufacturing.
They have more than a dozen integrated modules that address the breadth of the
organization's needs.
access.
The vendor has a solid understanding of the market's wants and needs and is
One of the primary benefits of deploying a Full-Function ERP solution is the consolidation of
often-dispersed data. The consolidation of data resulting from ERP use creates many
organizational benefits:
Provides a real-time, enterprise-wide view of the business for faster and more
effective decision-making.
cycle,
Even the firms characterized as laggards realized significant benefits from their
ERP implementations. These less than stellar performers realized:
distributing),
As the study points out, single percentage savings might not sound all that impressive, but
Expenditure
Revenue
Conversion
Administration
Sales
Purchase
Planning
Capital
Sales Return
Purchase Return
Resource Management
Investment
Cash Disbursement
Logistic
General Ledger
Cash Collection
Payroll
1. Revenue:
Revenue process includes
a)
b)
c)
a) Sales process
Purchase order
Price Verification
Sales order
Credit Limit
Prepare shipment
documents
Update accounts
receivables
Update General
Ledger
Purchase order
A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating
types, quantities, and agreed prices for products or services. Bangladeshi mans wear
brand Cats eye company ltd submits a purchase order of 500 pcs of shirt to Micro Fiber
Company Limited.
Price Verification:
Micro fiber company ltd (seller) submit a price quotation of Tk 650 per pcs to Cats eye
(buyer). Buyer verifies the price and confirm the final price at Tk 600 per pcs.
Sales order
A sales order records the customer's originating purchase order which is an external
document. The customer's PO is the originating documents which trigger the creation of
the sales order. In a manufacturing environment, a sales order can be converted into a
work order.
Credit Limit
As a regular customer, The Cats eye company ltd gets a credit facility of Tk 7,00,000
from Micro Fiber company ltd. After receive the PO, the company immediately verify the
buyers credit limit for future operations.
Inventory & sales preparation
After checking the credit limit, the seller checks the availability of the product in
warehouse. If the product is available and matches with the buyers sample, then the
seller prepares the goods for shipment as per the buyers requirement.
Prepare shipment documents
Seller sends the goods to the buyer after preparing the invoice and packing list. After that
seller update the sales record accordingly.
Update accounts receivables & General Ledger
Seller updates the accounts receivable as per the sales record and prepare monthly
statement and general ledger accounts.
Warehouse &
Inventory
Update account
receivable
Update General
Ledger
After receiving the sales return, seller update the sales return record and prepare a credit
memo and send it to customer.
Update account receivable
After the sales return, seller updates the account receivable accounts, cash record and
general ledger.
C) Cash collection process
Update account
receivable
Cash receive
Seller receives cash/cheque payment from buyer and prepare a cash receipt journal while
it match with the original sales invoice.
2. Expenditure:
Expenditure process includes
d) Purchase
e) Purchase Return
f) Cash Disbursement
g) Payroll
d) Purchase:
What is purchase?
Purchase defined as the acquisition of needed goods and services at the optimum cost
from competent, reliable sources in a timely manner.. Though there are several
organizations that attempt to set standards in the purchasing process and the process can
vary between organizations to organization.
The Golden Rule of Purchasing:
Purchasing must acquire needed goods and services:
Of the right quality
In the right quantity
At the right price
At the right time
Purchase process
Where information technology is not heavily ingrained - Traditional Purchasing processes
tend to be characterized by high levels of bureaucracy, encumbered with manual
authorization (often requiring multiple signatures independent of the order value.), slow
communications and a focus on unit price rather than long term commodity
arrangements.
The diagram below provides an example of a traditional purchasing process.
Purchase
requisition
Authorized purchase
requisition
Select vendor
Prepare purchase
order and send to
vendor
Receive goods (if
match) and
prepare receiving
record
Receive invoice
from vendor and
Update inventory
Update account
payable
Purchase return
(if need)
Update inventory
Update account
record (after
payable
return)
Purchase requisition & Authorized purchase requisition
Update general
ledger
Vendor selection
The vendor selection process can be a very complicated
Purchase order
A completed purchase requisition will be reviewed and approved in the Procurement
Department according to the organizations policy for requisition approval. Once the
requisition has been approved, it will be used to create a Purchase Order (PO).
Receive goods
Vendor prepares to supply the goods and service to the buyer after receives the PO. Buyer
prepare a receiving record after receive the goods.
Update inventory record
Buyer receive invoice from seller (supplier) and update the inventory records.
Update accounts payables
Buyer updates the accounts payable after the new purchase record.
Sales return & update accounts payables (if need)
Buyer updates the accounts payable if any purchase return occur.
Update General Ledger
Buyer updates the general ledger as per the purchase records.
e) Purchase return process
A purchase return occurs when a buyer returns merchandise that it has purchased from a
supplier.
Rejected goods
from customer
Authorization to
return goods
Document Match
Prepare debit
memo & send to
vendor
Receive credit/
cash from vendor &
update account
payable
Update inventory
record
Update General
Ledger
Rejected goods return from customer
Goods can be return to vendor for various reasons with a authorization of return.
Return goods with a debit memo
Return goods after match with the purchase invoice and send a debit memo to the vendor.
Update account payable, inventory record & general ledger
Update account payable and inventory record after receiving refund or credit memo from
vendor against return.
f) Cash Disbursement process
Cash disbursement means the payment of money against purchase.
Prepare for
payments
Payment to vendor
Update accounts
payable record
Update General
Ledger
g) Payroll process
The payroll is the amount of money that a company pays its employees at any given time.
Sometimes every two weeks, or sometimes once every month
Working hour
correction and
approve the time
sheet
Prepare payroll
register
Prepare payroll
Voucher
Transfer fund to
payroll bank
account
Update general
ledger
4. Administration:
Administration process includes
k) Capital
l) Investment
m) General Ledger
K) Capital:
Capital is the money that is going to be invested in a business. Some of the money will
come out of from personal investment. Some of the money may come from another
source of financing, such as a bank or a small business center loan. Thats the capital for
starting a business. Knowing how much capital needs to start a business will be a
deciding factor on the type of business might be start.
Here we consider tk 50 lac as our capital, where tk 25 lac from personal investment and
tk 25 lac from bank loan.
l) Investment:
Investment encompasses a wide variety of funding options. While funding for capital
investment is generally in the form of common or preferred equity issuance, it may also
be through straight or convertible debt. Funds invested in a firm or enterprise for the
purposes of furthering its business objectives. Capital investment may also refer to a
firm's acquisition of capital assets or fixed assets such as manufacturing plants and
machinery that is expected to be productive over many years.
m) General Ledger:
The general ledger is a collection of the group of accounts that supports the value items
shown in the major financial statements. It is built up by posting transactions recorded in
the sales daybook, purchases daybook, cash book and general journals daybook. The
general ledger can be supported by one or more subsidiary ledgers that provide details for
accounts in the general ledger. For instance, an accounts receivable subsidiary ledger
would contain a separate account for each credit customer, tracking that customer's
balance separately. This subsidiary ledger would then be totaled and compared with its
controlling account (in this case, Accounts Receivable) to ensure accuracy as part of the
process of preparing a trial balance.