Presentation on theme: "General Ledger and Reporting System UAA – ACCT 316 Accounting Information Systems Dr. Fred Barbee."— Presentation 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
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 Accounting subsystems Treasurer Journal voucher General ledger Update the GL 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 adjusting entries Prepare financial 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.
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 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 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...
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.
Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output Process Control only this Cost Center
Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output Process Control only this Revenue Center
Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output Process Control these Profit Center
Responsibility Centers: A Systems Perspective Responsibility Centers: A Systems Perspective Input Output 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/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
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
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) Cash disbursements Cash receipts (1, 1) 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