Enterprise Resource Planning Systems Accounting

Instructor: David Gloag

David has over 40 years of industry experience in software development and information technology and a bachelor of computer science

In this lesson, we'll take a look at enterprise resource planning, what it is, how it contributes to business decisions, and how it impacts management accounting.

The Difficulty of Business

Managing a business isn't trivial. Just ask any Fortune 500 company CEO. Running a successful business of any size takes a plan, a coordinated effort to marshal the various resources a company can bring to bear on a business problem or opportunity. Do you think that our current mobile technology appeared out of thin air? Not likely! Once the problem or opportunity was identified, decisions were made that best-utilized resources to solve that problem or address the opportunity. There is an area in business that deals with this type of activity. It is called Enterprise Resource Planning.

Enterprise Resource Planning

Enterprise Resource Planning (ERP) is the activity a business undertakes that examines:

  • Processes - the specific ways that various parts of the business are undertaken and accomplished
  • Intellectual Property - the knowledge that the business has developed and is incorporating into their products and services
  • Services - the activities or expertise that the business sells to interested third parties
  • Technology -the products that the company creates or has at its disposal
  • Staffing - the employees or contractors available to perform the work needed

A company can apply any or all of these to a business problem or opportunity. This encompasses many aspects of the business including product planning, development, manufacturing, sales, and marketing.

ERP's Contribution to Business Decisions

Accounting ledgers record the transactions for a business. General ledgers record all transactions, debit ledgers record sales transactions, and credit ledgers record purchase transactions. Most of us are familiar with this at some level. ERP systems use this information to contribute to business decisions in a number of ways. In particular:

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