Purchase orders with a total value of $4,750 or more
(the dollar threshold for capital equipment at DU/DUHS is $5,000
or more per unit) are routed by the SAP system for review before the order is released to the vendor. Additionally,
any order using a capital expense general ledger account (66XXXX)
is routed for release regardless of the value
of the order.
This release strategy, built into the SAP system, ensures that
one office (Plant Accounting) reviews all purchase orders for FF&E
at the time the order is created. Consistency of capitalization
criteria is easier because one office is responsible for reviewing
all purchase orders for all of DU/DUHS. Reviewing and releasing
the orders for FF&E gives prior notice of all
pending acquisitions. With this early notice, the control process can begin before the vendor has received the order
for capital equipment.
The SAP system is designed to go even further in systematically
controlling all future transactions related to the purchase order
for capital equipment. The account assignment changes
for each line item for capital equipment to the value ‘A’
(asset). The purchase order then requires the user to enter a valid
SAP asset number. SAP is used to create an asset master
record, utilizing information from the purchase order (description
of the item, delivery location, responsible department, etc.). When
the asset master record has been properly created and saved, SAP
assigns a new asset number to the asset master record. This number
is then entered on the line item of the purchase order. This links
the purchase order to the asset master record. The purchase order
is then saved and released to the vendor.
Payable posts an invoice, they enter the purchase order number,
line item, and amount. When the line item is for capital equipment,
the system automatically updates the related asset master record
with the relevant data including capitalization date and asset value.
This integration makes it easy to keep the values for FF&E in
balance with the payments posted by accounts payable and the related
balance sheet accounts on the general ledger.