General Ledger Application Small Business Information System Barry Floyd

Agenda General Ledger Application General Ledger Application Reporting Reporting Budgeting Budgeting Review of QuickBooks Review of QuickBooks Setup of a loan account Setup of a loan account Recurring transactions Recurring transactions Sending out statements Sending out statements Discussion of reports Discussion of reports Reconciliation of bank accounts (not required) Reconciliation of bank accounts (not required) ERP overview discussion ERP overview discussion

Learning Objectives Understand the notion of a “General Ledger” function Understand the notion of a “General Ledger” function Understand the interaction of the GL with the other applications Understand the interaction of the GL with the other applications See how to create transactions in QuickBooks See how to create transactions in QuickBooks Understand key reports in QuickBooks Understand key reports in QuickBooks

General Ledger Application The mainstay of an integrated set of accounting modules The mainstay of an integrated set of accounting modules Houses the Chart of Accounts Houses the Chart of Accounts Provides functionality for budgeting and reporting activities Provides functionality for budgeting and reporting activities

GL Activities Update General Ledger Accounts Update General Ledger Accounts Post adjusting entries Post adjusting entries Prepare Financial Statements Prepare Financial Statements Produce Managerial Reports Produce Managerial Reports Create budgets Create budgets

Update General Ledger Accounts Consists of posting journal entries that originate from two sources Consists of posting journal entries that originate from two sources Accounting subsystems Accounting subsystems For example, revenue cycle subsystem would generate a summary journal entry debiting accounts receivable and cash and crediting sales for all sales made during the update period. For example, revenue cycle subsystem would generate a summary journal entry debiting accounts receivable and cash and crediting sales for all sales made during the update period. Could also update accounts in real time. Could also update accounts in real time. Treasurer Treasurer Treasurer’s office creates individual journal entries to update the general ledger for nonroutine transactions such as the issuance or retirement of debt, the purchase or sale of investment securities, or the acquisition of treasury stock. Treasurer’s office creates individual journal entries to update the general ledger for nonroutine transactions such as the issuance or retirement of debt, the purchase or sale of investment securities, or the acquisition of treasury stock. Journal entries to update the general ledger may be documented on a form called a journal voucher. Journal entries to update the general ledger may be documented on a form called a journal voucher.

Post adjusting entries Adjusting entries originate from the controller’s office after the initial trial balance has been prepared. Adjusting entries originate from the controller’s office after the initial trial balance has been prepared. The trial balance is a report that lists the balance for all general ledger accounts but does not include adjusting entries The trial balance is a report that lists the balance for all general ledger accounts but does not include adjusting entries

Adjusting Entries Accruals Accruals Entries made at the end of the accounting period to reflect events that have occurred but for which cash has not yet been received or disbursed Entries made at the end of the accounting period to reflect events that have occurred but for which cash has not yet been received or disbursed Interest revenue earned, wages payable Interest revenue earned, wages payable Deferrals Deferrals Entries made at the end of the accounting period to reflect exchange of cash prior to performance of the related event. Entries made at the end of the accounting period to reflect exchange of cash prior to performance of the related event. Recognizing the portion of advance payments from customers earned during a specific period and expensing the portion of prepaid assts (e.g., rent, interest, and insurance) used in this period. Recognizing the portion of advance payments from customers earned during a specific period and expensing the portion of prepaid assts (e.g., rent, interest, and insurance) used in this period.

Adjusting Entries (continued) Estimates Estimates Entries that reflect a portion of expenses that occur over a number of accounting periods. Examples include depreciation and bad debt expenses. Entries that reflect a portion of expenses that occur over a number of accounting periods. Examples include depreciation and bad debt expenses. Revaluations Revaluations Entries made to reflect either differences between the actual and recorded value of an asset or a change in an accounting principle. Examples include change in method to value inventory, reducing the value of inventory to reflect obsolescence, etc. Entries made to reflect either differences between the actual and recorded value of an asset or a change in an accounting principle. Examples include change in method to value inventory, reducing the value of inventory to reflect obsolescence, etc. Corrections Corrections Entries made to counteract the effects of errors found in the general ledger Entries made to counteract the effects of errors found in the general ledger

Output of Adjusting Entry Process Adjusted Trial Balance Statement Adjusted Trial Balance Statement

Prepare Financial Statements Income statement Income statement Uses information from the revenue and expense account balances in the adjusted trial balance. Uses information from the revenue and expense account balances in the adjusted trial balance. Balance Sheet Balance Sheet Closing entries that zero out all revenue and expense accounts and transferring the net income or loss to retained earnings. Closing entries that zero out all revenue and expense accounts and transferring the net income or loss to retained earnings.

Reports Managers Managers Detailed information about the results of performance in their particular area of responsibility Detailed information about the results of performance in their particular area of responsibility Investors and Creditors Investors and Creditors periodic financial statements to help them assess the organization’s performance periodic financial statements to help them assess the organization’s performance

Budgeting Discussed in last class … Discussed in last class …

Summary The General Ledger is the heart of an accounting information system The General Ledger is the heart of an accounting information system It tracks all records of transactions and provides the functionality necessary for reporting. It tracks all records of transactions and provides the functionality necessary for reporting.

ERP Discussion What is ERP? What is ERP? What is ERP? What is ERP? How can ERP improve a company's business performance? How can ERP improve a company's business performance? How can ERP improve a company's business performance? How can ERP improve a company's business performance? How long will an ERP project take? How long will an ERP project take? How long will an ERP project take? How long will an ERP project take? Will ERP fix my integration problems? Will ERP fix my integration problems? Will ERP fix my integration problems? Will ERP fix my integration problems? What will ERP fix in my business? What will ERP fix in my business? What will ERP fix in my business? What will ERP fix in my business? Will ERP fit the ways I do business? Will ERP fit the ways I do business? Will ERP fit the ways I do business? Will ERP fit the ways I do business? What does ERP really cost? What does ERP really cost? What does ERP really cost? What does ERP really cost? When will I get payback from ERP—and how much will it be? When will I get payback from ERP—and how much will it be? When will I get payback from ERP—and how much will it be? When will I get payback from ERP—and how much will it be? What are the hidden costs of ERP? What are the hidden costs of ERP? What are the hidden costs of ERP? What are the hidden costs of ERP? Why do ERP projects fail so often? Why do ERP projects fail so often? Why do ERP projects fail so often? Why do ERP projects fail so often? How do I configure ERP software? How do I configure ERP software? How do I configure ERP software? How do I configure ERP software?