general ledger and reporting system uaa – acct 316 accounting information systems dr. fred barbee
TRANSCRIPT
General Ledger and Reporting System
UAA – ACCT 316 Accounting Information Systems Dr. Fred Barbee
General Ledger and Reporting Activities
Objectives
1. To record all accounting transactions promptly and accurately.
2. To post these transactions to the proper accounts.
3. To maintain an equality of debit/credit balances among the accounts.
Objectives
4. To accommodate needed adjusting entries.
5. To generate reliable and timely financial reports pertaining to each accounting period.
Basic Activities (Processes)
1. Update the general ledger
2. Post adjusting entries
3. Prepare financial statements
4. Produce managerial reports
1. Analyze Transaction
s
2. Journalize
3. Post
4. Prepare Unadjusted
Trial Balance
5. Adjust
6. Prepare Adjusted
Trial Balance
7. Prepare Statements
8. Close
9. Prepare Post-Closing
Trial balance
10. Reverse (Optional)
Update The General Ledger
Updating consists of posting journal entries that originated from two sources:
1. Accounting subsystems
2. The treasurer
Update The General Ledger
Accountingsubsystems
Treasurer Journal voucher
General ledger
Update theGL
Journal entry
Journal entry
Post Adjusting Entries
The second activity in the general ledger system involves posting various adjusting entries.
Adjusting entries originate from the controller’s office, after the initial trial balance has been prepared.
Post Adjusting Entries
1. Accruals (wages payable)
2. Deferrals (rent, interest, insurance)
3. Estimates (depreciation)
4. Revaluation (change in inventory method)
5. Corrections
Post Adjusting Entries
Controller
Journal voucher
Post adjustingentries
Preparefinancial
statements
Adjusting entries
Financial statements
Adjusted trial balance
Prepare Financial Statements
The third activity in the general ledger and reporting system involves the preparation of financial statements.
The income statement is prepared first.
The balance sheet is prepared next.
The cash flows statement is prepared last.
Produce Managerial Reports
The final activity in the general ledger and reporting system involves the production of various managerial reports.
What are the two main categories of managerial reports?
1. General ledger control reports
2. Budgets
Produce Managerial Reports
Control Report Examples
– lists of journal vouchers by numerical sequence, account number, or date
– listing of general ledger account balances
Budget Examples
– operating budget
– capital expenditures budget
Produce Managerial Reports
Budgets and performance reports should be developed on the basis of responsibility accounting.
Responsibility Accounting involves reporting financial results on the basis of managerial responsibilities within an organization.
Responsibility Accounting
A concept that implies that every economic event that affects the organization is the responsibility of and can be traced to an individual.
V ice P res id en tM arke tin g
V ice P res id en tP rod u c tion
V ice P res id en tC on tro lle r
P res id en tan d C E O
Responsibility Accounting
V ice P res id en tM arke tin g
V ice P res id en tP rod u c tion
V ice P res id en tC on tro lle r
P res id en tan d C E O
Installing Responsibility Accounting
Create a set of financial performance goals (budgets)
Measure and report actual performance.
Evaluate based on comparison of actual with budget.
Responsibility Accounting
Measures the results of each responsibility center and
Responsibility Accounting
compares those results with some standard or benchmark.
Heh man, that isn‘t funny! Please don’t erase that line, I’m
benchmarking!
Responsibility Centers
Responsibility Center
A segment of an organization with authority . . .
To incur and control costs
To earn revenues, and
To invest funds in assets.
Responsibility Center . . .
A responsibility center can be:
A cost center
A revenue center
A profit center
An investment center
Responsibility Centers
A Systems Perspective
A firm can be examined in the
context of Input Process Output
A firm can be examined in the
context of Input Process OutputProcessing Steps
WithinInformation Systems
Processing StepsWithin
Information Systems
Data
(Inputs)
Information
(Outputs)
DMDL
MOH
DMDL
MOH
Goods, Services,
Ideas
Goods, Services,
Ideas
WorkingCapital
EquipmentEtc.
WorkingCapital
EquipmentEtc.
Resources used . . . Capital . . . Output . . .
A firm can be examined in the
context of Input Process Output
A firm can be examined in the
context of Input Process OutputProcessing Steps
WithinInformation Systems
Processing StepsWithin
Information Systems
Data
(Inputs)
Information
(Outputs)
DMDL
MOH
DMDL
MOH
Goods, Services,
Ideas
Goods, Services,
Ideas
WorkingCapital
EquipmentEtc.
WorkingCapital
EquipmentEtc.
Resources used . . . Capital . . . Output . . .
Resources are converted through the use of working capital, equipment,
etc.
Responsibility Centers:A Systems PerspectiveResponsibility Centers:A Systems Perspective
InputInput OutputOutput Process Process
Control only this
Cost Center
Responsibility Centers:A Systems PerspectiveResponsibility Centers:A Systems Perspective
InputInput OutputOutput Process Process
Control only this
Revenue Center
Responsibility Centers:A Systems PerspectiveResponsibility Centers:A Systems Perspective
InputInput OutputOutput Process
Process
Control these
Profit Center
Responsibility Centers:A Systems PerspectiveResponsibility Centers:A Systems Perspective
InputInput OutputOutput Process
Process
Control these
Investment Center
Control Objectives, Threats & Procedures
Control Objectives
1. Updates to the general ledger are properly authorized.
2. Recorded general ledger transactions are valid.
3. Valid, authorized general ledger transactions are recorded.
Control Objectives
4. General ledger transactions are accurately recorded.
5. General ledger data are safeguarded from loss or theft.
6. General ledger system activities are performed efficiently and effectively.
Threats and Controls in the General Ledger and Reporting System
Process/Activity ThreatApplicable Control
Procedures
Updating the general ledger
Errors Input and processing controls; reconciliations and control reports; audit trail
Access to general ledger
Loss of confidential data and/or concealment of theft
Access controls; audit trail
Loss or destruction of the general ledger
Loss of data and assets
Backup and disaster recovery procedures
Threat 1: Errors in Updating the GL
Errors in Updating GL
Can lead to poor decision making based on erroneous information in financial performance reports.
Control procedures fall into three categories: Input edit and processing controls
Reconciliations and control reports
Maintenance of an adequate audit trail
Input Edit and Processing Controls
There are two sources of journal entries for updating the general ledger:
1. Summary journal entries from other AIS cycles
2. Direct entries made by the treasurer or controller
Input Edit and Processing Controls
Journal entries made by the treasurer and controller are original data entry.
Several types of input edit and processing controls are needed to ensure that they are accurate and complete.
Input Edit and Processing Controls
Validity Check
Field checks
Zero-balance checks
Completeness Test
Closed-loop verification
Sign Check
Input Edit and Processing Controls
Calculation run-to-run totals to verify accuracy of journal voucher batch processing
Standard adjusting entry file for recurring adjusting entries made each period
Reconciliation and Control Report
Reconciliations and control reports can detect if any errors were made during the process of updating the general ledger.
Trial Balance
Comparing the general ledger control account balances to the total balance in the corresponding ledger
Reconciliation and Control Report
The audit trail is the path of a transaction through the accounting system.
The audit trail should allow you to do three things . . .
Reconciliation and Control Report
1. Trace any transaction from its original source document to the general ledger and to any report or other document using that data.
Reconciliation and Control Report
2. Trace any item appearing in a report back through the general ledger to its original source document
3. Trace all changes in general ledger accounts from their beginning balance to their ending balance
Threat 2: Unauthorized Access to the GL
Unauthorized Access to the GL
Unauthorized access to the general ledger can result in confidential data leaks to competitors or corruption of the general ledger.
It can also provide a means for concealing the theft of assets.
Unauthorized Access to the GL
User IDs and passwords
Read-only access to the general ledger
System checks of authorization codes for each journal voucher record before posting
Threat 3: Loss or Destruction of the GL
Loss or Destruction of the GL
Adequate backup and disaster recover y procedures must be in place to protect the general ledger.
Use of internal and external file labels
Performance of regular backup of the general ledger
Integrated Data Model
Integrated Data Model
An integrated enterprise-wide data model represents a merging of separate data models.
This merging primarily involves linking each resource with the events that increase and decrease that resource.
Integrated Data Model
(1, N)
(1, 1)
Cash (1, N)
Cashdisbursements
Cashreceipts
(1, 1)
Integrated Data Model
Integrated Data Model
(1, N)
(1, 1)(1, N)
Cash
Payemployees
Issuestock
Dividendpayment
Debtpayment
Issuedebt
(1, 1)
(0, N) (0, N)
(1, 1)
(0, N)
(1, 1)
(0, N)(1, 1)
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Integrated Data Model
Benefits of an Integrated Data Model
What are some benefits of an Integrated data model?
Improved support for decision making
Integration of financial and nonfinancial information
Improved internal reporting
Benefits of an Integrated Data Model
Development of a virtual value chain occurs in three stages.
What are these stages?
1. Visibility
2. Mirroring
3. Building new customer relationships