1. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-1 Accounting Information Systems 9 th Edition Marshall B. Romney Paul John Steinbart

2. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-2 General Ledger and Reporting System Chapter 15

3. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-3 Learning Objectives 1. Describe the information processing operations required to update the general ledger and to produce other reports for internal and external users. 2. Identify the major threats in general ledger and reporting activities, and evaluate the adequacy of various internal control procedures for dealing with them. 3. Read and explain an integrated enterprise- wide REA data model.

4. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-4 Learning Objectives 4. Discuss and design a Balanced Scorecard for an organization. 5. Explain the relationship between online transaction processing systems and data warehouses used to support business intelligence. 6. Understand the implications of new IT developments, such as XBRL, for internal and external reporting.

5. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-5 Introduction Linda Spurgeon, AOE’s president & CEO, is not satisfied with the financial reporting capabilities of AOE’s new ERP system. She has three primary goals: 1. To develop a Balanced Scorecard in a timely manner. 2. To speed up trend analysis data on the company’s financial performance. 3. To lower costs associated with providing financial information to interested external parties on a timely basis.

6. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-6 Introduction This chapter discusses the information processing operations involved in updating the general ledger and preparing reports that summarize the results of an organization’s activities.

7. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-7 Learning Objective 1 Describe the information processing operations required to update the general ledger and to produce other reports for internal and external users.

8. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-8 General Ledger and Reporting Activities What are the four basic activities performed in the general ledger and reporting system? 1. Update the general ledger 2. Post adjusting entries 3. Prepare financial statements 4. Produce managerial reports

9. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-9 Update The General Ledger (Activity 1) The first activity in the general ledger system is to update the general ledger. Updating consists of posting journal entries that originated from two sources: 1. Accounting subsystems 2. The treasurer

10. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-10 Update The General Ledger (Activity 1) Accounting subsystems Treasurer Journal voucher General ledger Update the general ledger Journal entry

11. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-11 Post Adjusting Entries (Activity 2) 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.

12. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-12 Post Adjusting Entries (Activity 2) What are the five basic categories of adjusting entries? 1. Accruals (wages payable) 2. Deferrals (rent, interest, insurance) 3. Estimates (depreciation) 4. Revaluation (change in inventory method) 5. Corrections

13. Post Adjusting Entries (Activity 2) Controller Journal voucher Post adjusting entries Prepare financial statements Adjusting entries Financial statements Adjusted trial balance

14. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-14 Prepare Financial Statements (Activity 3) 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.

15. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-15 Produce Managerial Reports (Activity 4) 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

16. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-16 Produce Managerial Reports (Activity 4) What are examples of control reports? – lists of journal vouchers by numerical sequence, account number, or date – listing of general ledger account balances What are examples of budgets? – operating budget – capital expenditures budget

17. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-17 Produce Managerial Reports (Activity 4) Budgets and performance reports should be developed on the basis of responsibility accounting. What is responsibility accounting? It involves reporting financial results on the basis of managerial responsibilities within an organization.

18. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-18 Learning Objective 2 Identify the major threats in general ledger and reporting activities, and evaluate the adequacy of various internal control procedures for dealing with them.

19. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-19 Control Objectives, Threats, and Procedures What are the control objectives in the general ledger and reporting system? Updates to the general ledger are properly authorized. Recorded general ledger transactions are valid. Valid, authorized general ledger transactions are recorded.

20. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-20 Control Objectives, Threats, and Procedures General ledger transactions are accurately recorded. General ledger data are safeguarded from loss or theft. General ledger system activities are performed efficiently and effectively.

21. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-21 Control Objectives, Threats, and Procedures What are some threats? –errors in updating the general ledger –inaccurate/incomplete journal entries –inaccurate/incomplete posting of journal entries –unauthorized access to the general ledger –loss or destruction of general ledger data

22. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-22 Control Objectives, Threats, and Procedures What are some exposures? – inaccurate records and reports, resulting in bad decisions based on erroneous information – leak of confidential data – corruption of general ledger – cover-up of theft – loss of data – loss of assets

23. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-23 Control Objectives, Threats, and Procedures What are some control procedures? – input, edit, and processing controls – reconciliations and control reports – access controls – adequate audit trail – proper backup procedures – disaster recovery plan

24. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-24 Learning Objective 3 Read and explain an integrated enterprise-wide REA data model.

25. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-25 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.

26. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-26 Integrated Data Model (1, N) (1, 1) Cash (1, N) Cash disbursements Cash receipts (1, 1)

27. Integrated Data Model (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)

28. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-28 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 – enables exploitation of the virtual value chain

29. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-29 Benefits of an Integrated Data Model What are the three basic activities of the virtual value chain? 1. Gathering information 2. Synthesizing, organizing 3. Distributing the information to customers

30. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-30 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

31. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-31 Learning Objective 4 Discuss and design a Balanced Scorecard for an organization.

32. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-32 Balanced Scorecard What is a balanced scorecard? – a report that measures four dimensions of performance What are those measures? – financial – internal operations – innovation and learning – customer perspectives of the organization

33. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-33 Learning Objective 5 Explain the relationship between online transaction processing systems and data warehouses used to support business intelligence.

34. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-34 Data Warehouses Data warehouses, which contain both current and historical data, can provide additional support for strategic decision making. Whereas transaction-processing databases are designed to minimize redundancy, data warehouses purposely build in redundancies in order to maximize query efficiency.

35. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-35 Data Warehouses The process of accessing data contained in the data warehouse and using it for strategic decision making is referred to as Business Intelligence. The two main techniques of business intelligence are: Online Analytical Processing (OLAP) Data mining

36. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-36 Learning Objective 6 Understand the implications of new IT developments, such as XBRL, for internal and external reporting.

37. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-37 Opportunities for Using Information Technology The Extensible Business Reporting Language (XBRL) has addressed two problems: Different requirements for the manner in which information is delivered. The need for manual reentry of information into standalone decision analysis tools.

38. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-38 Opportunities for Using Information Technology XBRL provides two benefits: It enables organizations to publish information only once using standard XBRL tags. XBRL tags are interpretable.

39. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-39 Case Conclusion What did Stephanie Cromwell and Elizabeth Venko decide? They decided that AOE needs to switch to an online general ledger system. They agreed that AOE will first acquire a general ledger package that is built on a relational database.

40. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 15-40 End of Chapter 15