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Chapter 16 The General Ledger and Business Reporting (GL/BR ...


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  • 1. Chapter 16 The General Ledger and Business Reporting (GL/BR) Process
    • Accounting Information Systems 8e
    • Ulric J. Gelinas and Richard Dull
    © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use
  • 2. Learning Objectives
    • Describe how the business processes discussed in Chapters 10 though 15 provide data required for general ledger (GL) updates.
    • Understand how the GL and business reporting capabilities support an organization’s external and internal reporting functions.
    • Understand the limitations of the traditional GL approach in contemporary systems.
    • Analyze control issues and control plans associated the GL and related business reporting extensions.
    • Describe the technological trends and advances in financial reporting.
  • 3. Functions of GL/BR
    • GL
      • Accumulating data, classifying data by GL accounts, recording data in those accounts.
      • Fueling FR, BR and other reporting subsystems.
  • 4. Functions of GL/BR (Cont’d.)
    • BR
      • Preparing general-purpose, external financial statements.
      • Ensuring that F/S conform to GAAP.
      • Generating web-based forms.
      • Generating ad hoc & predetermined business reports.
  • 5. Horizontal Perspective of the GL/BR Process Flow 1. Business processes (feeder processes) send updates to the business reporting department.
  • 6. Horizontal Perspective of the GL/BR Process Flow 2. The treasurer notifies the business reporting department of investing and financing transaction activities.
  • 7. Horizontal Perspective of the GL/BR Process Flow 3. The controller notifies the business reporting department of various adjusting entries.
  • 8. Horizontal Perspective of the GL/BR Process Flow 4. Adjusted trial balance figures are sent from the business reporting manager to the financial reporting officer.
  • 9. Horizontal Perspective of the GL/BR Process Flow 5. Actual results are sent from the business reporting manager to the budgeting and managerial reporting managers; the actual results will be one of the inputs used in formulating next period’s budgets.
  • 10. Horizontal Perspective of the GL/BR Process Flow 6. The financial reporting officer sends GAAP-based financial statements to the treasurer, controller, and various external constituencies (e.g., owners, potential investors, banks, potential lenders).
  • 11. Horizontal Perspective of the GL/BR Process Flow 7. The managerial reporting officer sends performance reports to various cost centers, profit centers, or investment centers.
  • 12. Responsibility Accounting/Reporting System
    • Responsibilities of the managerial reporting officer:
      • Similar to those of the financial reporting officer.
      • Prepares performance reports comparing actual performance with budgeted expectations.
  • 13. Responsibility Accounting Performance Reporting
  • 14. Horizontal and Vertical Information Flows
  • 15. GL/BR Process: Context Diagram
  • 16. GL/BR Process: Level 0 DFD
  • 17.
    • 1113 Cash in Bank
      • 1xxx = assets
      • x1xx = current assets
      • xx1x = cash accounts
      • xxx3 = cash in bank
    • --------------------------------------------------
      • 1111 might mean petty cash 1112 might mean change fund 1121 might mean trade accounts receivable 1122 might mean receivables from officers
    Coding the GL Chart of Accounts
  • 18. Limitations of the GL Approach
    • Most GL systems only capture the chart of account number and debit or credit.
    • Other information about a business event is generally discarded.
    • After closing, detailed event-level data are purged from the system.
    • Changing account numbers /account structures raises a problem with comparability.
  • 19. Technology-Enabled Initiatives in Business Reporting
    • ERP Financial Module Capability
    • Balanced Scorecard
    • Business Intelligence
    • eXtensible Business Reporting Language (XBRL)
  • 20. ERP Financial Module
    • Wide range of options available.
    • For security reasons and ease of use, limit user’s access to menu items needed to perform his or her responsibilities.
    • ERP security can become detailed and complex due to different privilege levels for different users.
    • Users can be assigned different access levels: view access, write access, entry access, and/or change access.
  • 21. Financial Reporting Menu for Microsoft Dynamics GP
  • 22. Balanced Scorecard
    • Methodology for assessing organization’s business performance via 4 components:
      • Financial: Traditional methods of business performance
      • Internal business processes: Capacity to identify core competencies and assess performance
      • Customers: How customers perceive the organization in terms of value.
      • Innovation and improvement activities: How the organization is improving and creating additional value.
    • Functionality included in applications by all major ERP vendors.
  • 23. Business Intelligence
    • Integration of statistical and analytical tools with decision support technologies.
    • Facilitates complex analyses of data warehouses by managers and decision makers.
    • Modules use highly complex analytical techniques to search for relationships that will provide insight for decision making.
  • 24. eXtensible Business Reporting Language (XBRL)
    • XML-based language consisting of a set of tags used to unify presentation of business reporting information into a single format.
    • Easily read by almost any software package.
    • Easily searched by web browsers.
    • Several regulators have begun accepting or requiring filings be done in XBRL format.
  • 25. An Example of XBRL
  • 26. The Sarbanes-Oxley Act
    • Section 302
      • Requires CEO and CFO to certify that financial statements neither contain material untrue facts nor omit material facts and that they have established and evaluated internal controls.
      • Penalty for violation of section 302 up to 20 years prison and $5 million in fines
    • Section 401
      • Covers disclosures in financial reporting, including “off balance sheet” items.
      • Report should clearly reflect the economic reality of business events.
    • Section 404
      • Mandates the SEC set rules defining a report on internal control that must be included with annual report.
      • Must include responsibility of management and an attestation to the control relative to internal control.
    • Section 409
      • Requires rapid and current disclosure of information regarding material changes in financial conditions or operations.
  • 27. Current Environment for External Financial Reporting
    • Users demand immediate information.
    • For many, email has replaced overnight delivery and fax.
    • Investors want more information faster.
    • Sarbanes-Oxley demands “rapid and current” disclosures.
    • SEC has shortened the time companies have for reporting certain events.
    • Real-time reporting of events is likely just over horizon.
    • Continuous assurance (continuous auditing) provides assurance through monitoring automated controls and business events in real or near-real time.