Chapter 11: The General Ledger and Financial Reporting Cycle Accounting Information Systems:

Transcription

Chapter 11: The General Ledger and Financial Reporting Cycle Accounting Information Systems:
Accounting Information Systems:
Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo, Raval,
and Wong-On-Wing
Chapter 11: The General
Ledger and Financial
Reporting Cycle
Slides Authored by Somnath Bhattacharya, Ph.D.
Florida Atlantic University
Transaction Processing
System Architectures
A firm’s transaction processing systems
may either be manual or computerized
Manual Transaction
Processing Systems
From Prior Processing Steps
Sales
Invoices
Sales
Journal
Cash Remittance
Advices
Cash Receipts
Journal
Accounts Receivable
Subsidiary Ledger
Miscellaneous
Source
Documents
Journal
Vouchers
General
Ledger
Paychecks
Payroll
Journal
Suppliers’
Invoices
Purchases
Journal
Checks
Cash
Disbursements
Journal
Accounts Payable
Subsidiary Ledger
Trial
Balance
Managerial
Reports
Figure 11-1
Balance
Sheet
Income Cash-flow
Statement Statement
Computerized Transaction
Processing System
T1
D1
T2
T3
T4
T5
D2
D3
D4
D5
T6
T7
D1
D6
M1
A1
P1
D9
D8
D7
D2
P2
D3
Display
T8
Figure 11-2
T9
(see text book for details)
Benefits & Differences of a ComputerBased General Ledger System - I
Transaction Data may be captured by electronic
devices and stored on magnetic media, rather
than on hard-copy documents
Transaction Data can be verified by programmed
edit checks, in order to detect and prevent
errors, rather than by human clerks
Added data may easily be captured, in order to
identify transactions with individual employees
or organizational units
Transactions can be quickly posted directly to
ledgers, rather than being laboriously entered
into journals and then posted
Figure 11-3
Benefits & Differences of a ComputerBased General Ledger System - II
Transaction Processing, including summarizing
of journals and ledgers and computing trial
balance totals, can be done faster with fewer
errors
Financial Statements and other financial
summaries can be prepared at any time during
the accounting period, rather than being
delayed until the end of the period;
furthermore, the ledgers can be kept in balance
at all times
Detailed listings of journals and ledgers,
reflecting all individual transactions rather than
summaries, can be printed for thorough review
Figure 11-3
Continued
Benefits & Differences of a ComputerBased General Ledger System - III
Required Stewardship Reports can be prepared
quickly and easily from stored transaction data,
using stored computer programs
A wide variety of managerial reports and
analyses can also be prepared from data stored
in related files and tables, thereby providing
managers and employees with useful
information; in manual systems all reports must
be laboriously prepared by clerks
Figure 11-3
Continued
The Central Role of the General
Ledger & Financial Reporting Cycle
The main inputs to the general ledger and
financial reporting cycle are the outputs of
all the other cycles.
The general ledger provides the
chart of accounts structure, which
combines the financial and
managerial sides of accounting.
Objectives of the General
Ledger System
To record all accounting transactions promptly
and accurately
To post these transactions to the proper
accounts
To maintain an equality of debit and credit
balances among the accounts
To accommodate needed adjusting journal
entries
To generate reliable and timely financial reports
pertaining to each accounting period
Brief Chart of Accounts
Account Code
100-199
200-299
300-399
400-499
500-599
600-699
700-899
900-999
Account Code
Current Assets
Non-current Assets
Liabilities
Owners’ Equity
Revenues
Cost of Sales
Operating Expenses
Non-operating
Expenses
Figure 11-5
Expense Accounts

















850
852
855
859
861
863
870
871
872
873
881
883
884
888
891
892
899
Administrative Expense Control
Officers’ Salaries
Office Salaries
Overtime Premium
Unemployment Insurance Expense
FICA Expense
Office Supplies
Office Repairs
Telephone & Telegraph
Postage
Dues & Subscriptions
Donations
Travel
Depreciation
Insurance
Taxes
Miscellaneous Administrative Expense
Figure 11-6
Potential Sources of Data
Input
Routine external transactions
Routine internal transactions
Non-routine transactions
Adjusting entries
Accruals
Deferrals
Re-evaluations
Corrections
Reversing entries
Closing entries
Forms of Data Input
Journal Vouchers
A non-routine, adjusting, reversing, or
correcting transaction
A summarization of a batch of
routine transactions
Computer-oriented inputs
The Batch-entry journal voucher
A pre-formatted data-entry screen
Individual non-routine journal entries
Data Processing
Daily Processing
High volume transactions
sales
cash receipts
purchases
cash disbursements
payroll
End of Period Processing
Standard entries
Nonrecurring adjusting entries
Information Output
General Ledger Analysis
General journal listing
General ledger change report
Financial Statements
Balance sheet
Income statement
Statement of cash flows
Managerial Reports
Account-oriented analyses
Responsibility-oriented reports
System Flowchart Showing Period-End
Preparation of Outputs Relating to the
General Ledger
Current
Journal
Entries &
Adjusting
Journal
Entries
Budget
Master
File
General
Ledger
Master
File
Responsibility
Center
Master File
Journal entry
Journal entry
proof listing
Figure 11-11
General ledger
change report
General ledger
trial balance
Journal
Voucher
File
Prepare
various
listings and
financial
statements &
managerial
reports
Financial
Reports
Format File
General
Ledger
History File
Journal
Voucher
History
File
Statement of
Comparative
cash flows
balance sheets
Income
Comparative
analyses of
statements
general ledger
accounts
Budgetary Control
Reports
Responsibility
Center Reports
Responsibility Reporting
President
VP
Finance &
Accounting
VP
Engineering
VP
Production
VP
Marketing
VP
Industrial
Relations
Purchasing
Production
Planning
and
Control
Production
Superintendent
Receiving
Shipping and
Stores
Quality
Control and
Maintnance
Production
Unit 1
Figure 11-15
Production
Unit 2
Supervisor
Production
Unit 3
Finishing
Assembly
File-Oriented Approach to
Data Management
General Ledger Master File
Current Journal Voucher File
General Ledger History File
Responsibility Center Master File
Budget Master File
Financial Reports Format File
Record Layout of a
General Ledger Master File
Account Account
Account
Account Total Total
Total
Number Description Classification Balance Debits Credits Debits
Total
Current
Credits Account
Debits
or
beginning year-to year-to current current Balance Credit
of year - year
Figure 11-17
-year month
month
Linked Tables within a General
Ledger Relational Data Base
Account Responsibility
Number
Code
Account Account
Number Description
Budgeted
amount for month
Account
Classification
Figure 11-18
Preparer’s
initials
Total Credits
Month-to-date
Dr or Cr
Account
Number
Journal
Date of
Voucher Transaction
Number
Total Debits
Month-to-date
Reference
Number
Journal
Amount of
Voucher Number line item
Description of Amount of
Transactions Transaction
Dr or Cr
The General Ledger’s Risk
Exposures
 1) Incorrect journal entries
 2) Incorrect posting of journal entries
 3) Transactions not recorded or not posted
 4) Inadequate authorization for journal entries
 5) Control accounts out-of-balance with subsidiary
ledgers
 6) Imbalances between debit and credit balance
accounts
 7) Defects or breaks in the audit trail
 8) Interception of data transmitted via the web
 9) Unauthorized access to and viewing of confidential
data via the Web
 10) Unauthorized alterations to the company’s financial
data via the Web
 11) Breakdown of the Web server
General Controls Pertaining to
the General Ledger
Organizational Controls
Documentation Controls
Asset Accountability Controls
Management Practice Controls
Data Center Operations Controls
Authorization Controls
Access Controls
Passwords
Special terminals
Access logs
Transaction logs
Frequent backups
Application Controls Pertaining
to the General Ledger: Input
Pre-numbered and well-designed journal
vouchers
Validating data on journal vouchers
Correcting detected errors before the data
are posted to the general ledger
Compiling standardized adjusted
journal entries
Pre-computing batch control totals
Programmed Checks for Editing
& Validating Journal Entry Data
Validity check
Field check
Limit check
Zero-balance check
Completeness check
Echo check
Programmed Checks for Editing
& Validating Journal Entry Data
Internal label check
Sequence check
redundancy matching check
Relationship check
Posting check
Batch control/total checks
Application Controls Pertaining to
the General Ledger: Processing
Posting journal entries to the general ledger
accounts with a variety of program checks
performed before and after posting
Summing the amounts posted to the
general ledger accounts and then
comparing the posted totals to the
pre-computed batch control totals
Establishing and maintaining an
adequate audit trail
Application Controls Pertaining to
the General Ledger: Output
 Preparing frequent trial balances, with any differences
between total debits and credits being investigated
 Maintaining a log or file of journal vouchers by number
and periodically checking to make certain that the
sequence of numbers is complete
 Printing period-end listings and change reports for
review by accountants before the financial statements
are prepared
 Reviewing financial reports and other outputs for
correctness and reasonableness
 Auditing general ledger procedures
Web-Security Procedures
Authentication
Authorization
Accountability
Data Transmission
Disaster Contingency & Recovery
Plan
Accounting Information Systems:
Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo,
Raval, and Wong-On-Wing
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