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General Ledger and Reporting System UAA – ACCT 316 Accounting Information Systems Dr. Fred Barbee.

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Presentation on theme: "General Ledger and Reporting System UAA – ACCT 316 Accounting Information Systems Dr. Fred Barbee."— Presentation transcript:

1 General Ledger and Reporting System UAA – ACCT 316 Accounting Information Systems Dr. Fred Barbee

2 General Ledger and Reporting Activities

3 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.

4 Objectives 4.To accommodate needed adjusting entries. 5.To generate reliable and timely financial reports pertaining to each accounting period.

5 Basic Activities (Processes) 1.Update the general ledger 2.Post adjusting entries 3.Prepare financial statements 4.Produce managerial reports

6 1. Analyze Transactions 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)

7 Update The General Ledger Updating consists of posting journal entries that originated from two sources: 1.Accounting subsystems 2.The treasurer

8 Update The General Ledger Accounting subsystems Treasurer Journal voucher General ledger Update the GL Journal entry

9 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.

10 Post Adjusting Entries 1.Accruals (wages payable) 2.Deferrals (rent, interest, insurance) 3.Estimates (depreciation) 4.Revaluation (change in inventory method) 5.Corrections

11 Post Adjusting Entries Controller Journal voucher Post adjusting entries Prepare financial statements Adjusting entries Financial statements Adjusted trial balance

12 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.

13 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

14 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

15 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.

16 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.

17 Responsibility Accounting

18 Installing Responsibility Accounting Create a set of financial performance goals (budgets) Measure and report actual performance. Evaluate based on comparison of actual with budget.

19 Responsibility Accounting Measures the results of each responsibility center and

20 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!

21 Responsibility Centers

22 Responsibility Center A segment of an organization with authority... To incur and control costs To earn revenues, and To invest funds in assets.

23 Responsibility Center... A responsibility center can be: A cost center A revenue center A profit center An investment center

24 Responsibility Centers A Systems Perspective

25 A firm can be examined in the context of Input  Process  Output Processing Steps Within Information Systems Processing Steps Within Information Systems Data (Inputs) Information (Outputs) DM DL MOH DM DL MOH Goods, Services, Ideas Working Capital Equipment Etc. Working Capital Equipment Etc. Resources used...Capital...Output...

26 A firm can be examined in the context of Input  Process  Output Processing Steps Within Information Systems Processing Steps Within Information Systems Data (Inputs) Information (Outputs) DM DL MOH DM DL MOH Goods, Services, Ideas Working Capital Equipment Etc. Working Capital Equipment Etc. Resources used...Capital...Output... Resources are converted through the use of working capital, equipment, etc.

27 Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output Process Control only this Cost Center

28 Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output Process Control only this Revenue Center

29 Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output Process Control these Profit Center

30 Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output Process Control these Investment Center

31 Control Objectives, Threats & Procedures

32 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.

33 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.

34 Threats and Controls in the General Ledger and Reporting System Process/ActivityThreat Applicable Control Procedures Updating the general ledger ErrorsInput 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

35 Threat 1: Errors in Updating the GL

36 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

37 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

38 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.

39 Input Edit and Processing Controls Validity Check Field checks Zero-balance checks Completeness Test Closed-loop verification Sign Check

40 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

41 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

42 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...

43 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.

44 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

45 Threat 2: Unauthorized Access to the GL

46 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.

47 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

48 Threat 3: Loss or Destruction of the GL

49 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

50 Integrated Data Model

51 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.

52 Integrated Data Model (1, N) (1, 1) Cash (1, N) Cash disbursements Cash receipts (1, 1) Integrated Data Model

53 (1, N) (1, 1) (1, N) Cash Pay employees Issue stock Dividend payment Debt payment Issue debt (1, 1) (0, N) (1, 1) (0, N) (1, 1) (0, N) (1, 1) (0, N) Integrated Data Model

54 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

55 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


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