Module 1 Instructor's Notes

Intended Use

The first module of the AIS series is designed to reinforce the material that was covered in the beginning financial accounting class and to help the students transition from a general business student into an accounting major. This module is primarily what was termed a practice set during the paper and pencil days of accounting.

This module is broken into two separate assignments. The first assignment deals with journal entries in the first half of the month and the second assignment deals with transactions in the second half of the month with the associated adjusting and closing entries. However, the two assignments can easily be made into a single assignment that covers an entire month of transactions with the adjusting and closing entries. We have used the assignment in both forms and find that the students struggle with the journal entries and getting the feedback on the first assignment, makes the second assignment much more of a positive experience.

While the module is placed in the beginning AIS course, some academic programs offer the beginning AIS course after the first intermediate accounting course. In that case, you may wish to use the material in this module in the first intermediate course.

Module Scope and Curricular Content

The material in this module is designed to reinforce the following topics from the beginning financial accounting class:

· Journal entries for a variety of common business transactions

· The accounting cycle, including journal entries, posting to the general ledger, creation of a trial balance, adjusting entries and closing entries

· Review of intermediate level spreadsheet functionality

· Getting students ready for the material in the first intermediate accounting class.

In addition, the material is designed to introduce the students to:

· The differences between a strictly manual accounting system and a semi-computerized accounting system using the SAP system (it is termed semi-computerized because it does not use the fully integrated SAP functionality, that is done in modules 3 and 4 of the material)

· Begin the transition from a manual accounting system to a fully integrated accounting system

· Begin to introduce the students to control concepts.

Description of the Material

The first assignment (the Cottonwood Inc. company – Part 1) deals with journal entries in the first half of the month of January. These transactions are designed to be a straightforward review of the work they should have done in the beginning financial accounting class.

The second assignment (continuing with the Cottonwood Inc. company – Part 2) deals with some slightly more complex transactions (not difficult by any measure, but the students seem to struggle with some of them), adjusting journal entries and period end closing. In the second assignment, the students are also required to mirror all of the spreadsheet activity in the SAP system.

We find that some of the problems the students encounter include

· Difficulty in handling a perpetual inventory system

· Difficulty in determining the timing of the recording of transactions – this includes timing with respect to sales activities and also timing with respect to purchasing of inventory for resale

· Inadequate knowledge of Excel functionality

· Inadequate knowledge of or no exposure to the SAP system

· Parking documents in SAP instead of actually recording them in the ledger

· Making errors in the entries in the SAP system and not understanding how to reverse these erroneous entries.

Besides the two assignments, material in the module includes:

· A practice problem and solution that the students can use as a review and also as a model for the work they are to submit (this is the Tucker Boats problem). This problem differs from the Cottonwood problem since it is a new company and has no beginning balances to deal with. Students are allowed to freely ask questions about this problem, but generally questions about the specific circumstances with respect to the Cottonwood problem are limited by the instructor.

· The practice problem solution is in Excel format from which the students can model their answers to the Cottonwood problem. This solution is referenced in the remedial Excel material that is discussed in the next bullet.

· Remedial material in video format that reviews the following concepts:

o Static and dynamic references in Excel (i.e. $ notation)

o IF statements in Excel

o Linking of spreadsheets

o VLOOKUP functionality in Excel (all of the above concepts are used in the Tucker Boats solution that should be provided to the students)

o Three videos showing how to get started using the SAP system.

· An Excel solution to the two assignments for use by the instructor in grading the assignments

· A video walking the students through the process of recording journal entries in the SAP system, the SAP reports and resolving some problems

· A video discussing how the students can view their work (i.e. the ledger entries) in the SAP system

· A video explaining how to handle parked documents

· A video for instructors discussing some important points

SAP System Configuration

This assignment is preconfigured in a golden client that can be copied and used without any modifications necessary by you. This means that all of the company codes, the chart of accounts, materials management and financial accounting modules are already set up and ready for the students to work. The idea is that for each new semester you can start with a clean client copy of the system and use that system for any or all of the modules in this module set (the accounting information systems modules).

Student accounts are all predefined with the appropriate authorizations to do their work. The student accounts start with USER-01 and end with USER-99. The initial password for each account is SAP4US. I usually do not assign accounts USER-95 to USER-99 to any students and instead reserve them for my own use. If your class size exceeds the number of available accounts, then you can just request an additional client and assign the additional students accounts on that client.

If you are serviced by a hosting center, contact your system administrator for access to the system. If your school is self-hosted, then you need to have your system administrator contact the CSU Chico hosting center to provide a client copy of the system.

Each student will be using their own company code in the SAP system. In this way, no student will interfere with the work of other students. It should be emphasized that a student MUST work only in their assigned company code and that harsh penalties will result if this procedure is not followed.

As mentioned above, the “golden client” is already configured for this module and also for modules 3 and 4 of the beginning AIS material. Each student account will be preset to the appropriate company code (80XX). However, it is the student’s responsibility to check to be sure that they are in the right company code while doing their SAP work. The SAP authorizations are also set properly so that each student can successfully complete the assignment.

It should also be stressed that SAP is a real business system that does not allow the erasure of transactions. You may want to use this as a discussion point with respect to controls. However, this means that mistakes by the students can only be corrected by entering a reversing journal entry to eliminate the error and then making the correct entry. There are other opportunities within the SAP part of the assignment that allow you to discuss the role of internal controls and stress their importance.

It is strongly advised that you as a faculty member test the assignments prior to distribution to the students. This should be done using a user account that has exactly the same user authorizations as a student account.

Grading

Grading of the assignments can be tedious because of all of the detailed journal entries. However, the grading of the SAP part of the assignment should not be very time consuming. It is usually sufficient to simply look at the balance sheet and income statements to check balances. If those balances are incorrect (i.e. they don’t match the student’s trial balance in Excel), then it is necessary to check the entries in the ledger accounts. One thing some students don’t seem to be able to grasp is that presentation of results is an important issue. In the extreme, some students will submit their printed journal entries on two pages with the accounts on one page and the dollar amounts on the other. My policy is that if it is difficult to grade, then your grade will suffer.

SAP Solution

I have done a series of screen captures that should show you exactly what the system will produce. Even though the SAP system is only used in the second assignment, I suggest that the students first enter the beginning balances and the journal entries for assignment 1 into the system and then check that against their Excel answer after entering the beginning balances and then again after entering the first half journal entries. Only if and when those are correct, should they proceed to enter the journal entries for the second half of the assignment and then the adjusting entries. You should remind the students that if they did make an error entering data into SAP and they have already posted the entry, then the only way to correct that is with a reversing entry and then making the correct entry. This is a good time to discuss audit trail and why this feature is necessary for good control.

Following are the screen captures for the first part of the assignment.

The screen to enter the journal entries:

There are videos for the students that illustrate these functions. There used to be quite a problem with the students accidentally parking documents. In the newest version of SAP that no longer seems to be a serious problem. I did include a video dealing with parked documents, but there is a good chance that won’t be a problem any more.

The screen to display account balances:

The message they get if they haven’t yet made any entries:

Entering the beginning balances (note the green traffic light to show that debits equal credits):

After posting the entry, note the message on the bottom of the screen:

Listing after beginning balances are posted:

An alternative listing of the journal entries:

The journal list that is produced:

The financial statements after entry of beginning balances and part 1 transactions (note that this reconciles with the Excel spreadsheet trial balance);

The statements after the journal entries for the second half of the month, but before adjusting entries:

The statements after the adjusting journal entries:

The final exercise for the this assignment is for the students to simulate the closing of the books at the end of the period. The following screens show how this is done.