Plant Accounting monitors all capital equipment from purchase to retirement. 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 R/3 system to Plant Accounting for review before the order is released to the vendor. Additionally, any order using a capital expense general ledger account (66XXXX) is routed to Plant Accounting for release regardless of the value of the order.
This release strategy, built into the R/3 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 Plant Accounting prior notice of all pending acquisitions. With this early notice, Plant Accounting can begin the control process before the vendor has received the order for capital equipment.
The R/3 system is designed to go even further in systematically controlling all future transactions related to the purchase order for capital equipment. Plant Accounting changes the account assignment for each line item for capital equipment to the value ‘A’ (asset). The purchase order then requires the user to enter a valid R/3 asset number. Plant Accounting uses R/3 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, R/3 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.
When Accounts 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.
Plant Accounting is then responsible for monitoring fixed equipment and movable assets.