Reconciliation Account in The General Ledger

Reconciliation Account in The General Ledger

ESSAY- ID	53563633773
Type	Essay
Writer Level	Masters
Style	APA
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Perfect Number of Pages to ESSAY-	5-10 Pages

Description/Paper Instructions

Reconciliation Account in The General Ledger

Figure 5-15: Segments of customer master data

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Master Data 141

a company code and include data such as payment terms and the reconciliation account in the general ledger. Recall from Chapter 3 that (1) customer accounts are subledger accounts, (2) subledger accounts are linked to the general ledger via reconciliation accounts, and (3) the accounts receivable account is typically used as the reconciliation account for customers. The accounting department will typically complete this part of the customer master data. Sales area data are specifi c to a particular sales area, which, as we discussed earlier in this chapter, is made up of one sales organization, one distribution channel, and one division. Sales area data relate to sales, shipping, billing, and partner func- tions. Examples are the sales offi ce and the currency in which the transaction is conducted. Shipping data specify the preferred delivering plant, priorities, and methods. They also defi ne delivery tolerances and policies for dealing with partial deliveries. Billing data include billing terms and tax-related data.

If a customer is served by multiple sales areas, then the data must be defi ned separately for each sales area. This arrangement permits a company to apply different terms and conditions for different areas. Figure 5-16 illus- trates this approach for a hypothetical customer with offi ces in both the United States and Germany. The customer purchases materials from both GBI’s US and Germany companies. The general data for the customer apply across both GBI companies—that is, the GBI enterprise that is represented by the cli- ent. However, accounting data for the customer must be defi ned separately for each GBI company. Recall that one piece of data in the customer master record is the reconciliation account, which is based on the chart of accounts. If GBI US and GBI DE use different charts of accounts, then they may have dif- ferent reconciliation account numbers. Further, the currencies and tax-related data are also different. Thus, the accounting data are different for each country (company code).

Finally, the customer purchases materials for its facilities throughout the United States. Consequently, it deals with both US sales organizations (UE00 and UW00). In addition, the customer purchases exclusively on a wholesale basis. Therefore, master data for this customer must be defi ned for two sales areas in the United States UE00�WH� BI and UW00�WH�BI (see Figure 5-16).

Figure 5-16: Multiple defi nitions of a customer

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142 CHAPTER 5 The Fulfi llment Process

In contrast, the customer in Germany deals only in the northern part of the country and purchases exclusively via the Internet. Therefore, only one set of sales area data is defi ned for that customer.

Customers can play different roles or partner functions in the fulfi ll- ment process. The four required partner functions are sold-to party, ship-to party, bill-to party, and payer. One customer may fi ll all four roles, or each role may be fi lled by a different customer. The customer who submits the order is the sold-to party. This is the primary type of business partner. The order may indicate that the materials should be shipped to a different location or that the invoice should be sent to someone else. These are the ship-to party and bill-to party functions, respectively. For example, the customer may request that the material be shipped to one of its customers. In this case, the party that actually receives the shipment is considered the ship-to party. However, the invoice will be forwarded to the customer that ordered the materials—that is, the bill-to party. Alternatively, the bill-to-party may be another company that processes invoices for the customer. As another example, a large enterprise may be comprised of a number of companies, such as franchises. An order may be placed by headquarters, the sold-to party, with instructions to deliver the mate- rials to numerous franchises, the ship-to parties. The invoice may be sent to headquarters, which also serves as the bill-to party. Finally, the payment may be outsourced to another company, which will be the payer of the invoice.

GBI US has 12 customers, and GBI DE has 7. These customers are listed in Figure 5-17. Additional details of the master data for each customer are provided in Appendix 5A. Rocky Mountain Bikes (RMB), the customer used in our example, is located in Denver, Colorado, and therefore is serviced through GBI’s Western US sales organization. In addition, RMB purchases via the wholesale channel. Therefore, it is associated with the sales area made up of the Western US sales organization (UW00), the wholesale channel of distri- bution (WH), and the bicycle division (BI) (look back to Figure 5-6). Further, because RMB is a small company, its partner functions are usually all located at the same address. However, it is not uncommon for RMB to request that materials be shipped directly to various racing events or to its retail custom- ers. In our example, RMB has requested that the materials be delivered to the RMB booth at the racing location in Colorado Springs, not to its head offi ce in Denver. In this case, RMB is the sold-to party, bill-to party, and payer, but the ship-to party is the racing location. Finally, because the materials are to be delivered in Colorado, they will be delivered from the San Diego plant.

Figure 5-17: GBI customers

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Master Data 143

Demo 5.2: Review customer master

CUSTOMER-MATERIAL INFORMATION (INFO) RECORD

A customer-material information record is comprised of master data spe- cifi c to one customer and one material. In contrast to data in a material master, which apply to all customers, and data in a customer master, which apply to all purchases made by a particular customer, data in a customer-material info record relate to purchases of a specifi c material by a specifi c customer.

Some data in a customer-material info record are not found elsewhere. One example is the customer material number, which cross-references the company’s material number with the customer’s material numbers. Figure 5-18 provides some examples of material numbers used by GBI and its customer RMB. RMB’s material numbers are noted as the customer material number in the info record. This cross-referencing of material numbers enables the cus- tomer to place an order based on its internal material numbers, which the info record then translates into the company’s material numbers. Remember that most customers also have enterprise systems that manage their procurement process. Consequently, the customer material number is the link between the seller’s master data and the buyer’s master data.

Figure 5-18: RMB and GBI material numbers

In certain cases the data in a customer-material info record supersede data found in other master data, such as the material master and customer master. For example, preferences related to shipping, such as delivering plant, tolerances, and partial deliveries that are included in the customer master apply to all materials purchased by the customer. However, if these preferences vary for different materials, then they are included in the customer-material info record. For example, if deliveries are normally sent to one specifi ed plant but deliveries for a particular material must be sent to a different plant, then this preference is noted in the customer-material info record for that material, not in the customer master.

The customer-material info records for RMB also note that RMB prefers the bikes to be shipped via special ground freight (truck) due to the weight and size of the shipping boxes. In contrast, the company requests that GBI ship the shirts via standard air freight (FedEx or UPS 2-day). Finally, the info records indicate that RMB will accept partial deliveries for shirts but not for bikes, because shirts have a very short lead time and can be reordered quickly if needed.

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144 CHAPTER 5 The Fulfi llment Process

Demo 5.3: Review customer–material info record

PRICING CONDITIONS

Pricing conditions are master data that companies use to determine the selling prices of their products. Companies create conditions for various components of the fi nal selling price, including gross prices, discounts, freight, surcharges, and taxes. Conditions can be fi xed amounts, percentages, or based on a sliding scale, and they can be either independent of or relative to other conditions. For example, the price of a product can be material specifi c and customer inde- pendent, meaning that the seller charges the same price to all of its customers. Alternatively, the price can be customer specifi c, in which case the company charges different customers different prices, perhaps based on some agree- ments between the company and the customer. Similarly, discounts can be uniform, or they can be based on the quantity or value of the purchase. For example, GBI offers a 10% discount for purchases of between 100 and 500 units and a 20% discount for purchases of more than 500 units. Freight is gen- erally based on the weight of the shipment, and it may be waived for purchases greater than a predetermined amount. Thus, the fi nal price to the customer is a function of, or conditioned on, numerous variables.

Because numerous conditions are defined for a product, a company must have a procedure to determine which conditions apply to a particular customer order. This procedure, called the condition technique, consists of identify- ing available condition types (gross price, customer-specifi c price, discounts, freight, surcharges, etc.) and determining which ones apply to the particular circumstances of the order.

Recall that in our example, RMB wishes to purchase 40 bikes and 100 t-shirts. The bikes do not qualify for a discount, so GBI will charge the stan- dard price of $2,800 per bicycle. However, the t-shirts qualify for a 10% dis- count, so the price will be $27 per shirt, reduced from the standard price of $30.

Demo 5.4: Review pricing conditions

OUTPUT CONDITIONS

A variety of outputs that are generated during the fulfillment process, such as quotations, confirmations, and invoices, must be communicated to customers. The data needed to perform this task are included in output conditions. The condition technique used to determine pricing is also used to determine how outputs from the process are communicated to the customer.

Output conditions are defined separately for the different output types (quotations, invoices, etc.). Data in the condition master include the output medium (e.g., print, fax, EDI), partner function (e.g., sold-to party, ship-to party), and transmission time (e.g., immediately, or periodically using a program).

RMB prefers to receive order confirmations via e-mail within 4 hours of acceptance or shipment of an order. It also prefers to receive paper invoices. GBI must maintain all of these output conditions in its ERP system.

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