1. ACCOUNTING INFORMATION SYSTEMS 11e Gelinas ►Dull ► Wheeler ► HILL
Chapter 16: The General Ledger and Business Reporting (GL/BR) Process (IPP)
ACCOUNTING INFORMATION SYSTEMS 11e
Gelinas ►Dull ► Wheeler ► HILL
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2. Introduction
The GL is the center of the business reporting process, but it is not the only subsystem within the overall accounting information system.
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3. System Definition and Functions (Slide 1 of 3)
General ledger and business reporting (GL/BR) process is an interacting structure of people, equipment, activities, and controls that is designed to accomplish both operations and information system functions.
The GL/BR process has fewer operational functions; it focuses mainly on information functions.
The work of the GL/BR process is the processing and communicating of information.
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4. System Definition and Functions (Slide 2 of 3)
General ledger (GL) process includes the following:
Accumulating data, classifying data by general ledger accounts, and recording data in those accounts.
Driving the financial reporting, business reporting, and other reporting subsystems by providing information needed to prepare external and internal reports.
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5. Organizational Setting
Feeder process is any business process that accumulates business event data that are then communicated to and processed within the GL. Includes:
Everything discussed in the earlier business process chapters.
The treasurer, because they furnish the GL with updates for investing and financing activities.
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6. Horizontal Perspective of the General Ledger and Business Reporting Process (slide 2 of 6)
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7. Horizontal Perspective of the General Ledger and Business Reporting Process (slide 5 of 6)
Managerial reporting officer has responsibilities similar to the financial reporting manager with respect to preparing internal reports used for management decision making.
Financial reporting manager possesses expertise in financial reporting to external parties.
Performance reports are prepared by the managerial reporting officer and compare actual performance with budgeted expectations.
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8. Horizontal Perspective of the General Ledger and Business Reporting Process (slide 6 of 6)
Performance reports are often part of a managerial reporting system known as a responsibility accounting/reporting system because it is tied to the hierarchy or chain of responsibility/authority reflected by the firm’s organization chart.
Reports are prepared that provide the level of detailed information each decision maker needs for his or her specific job.
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9. Logical System Description
DFDs are used to explain the logical features of the GL/BR process.
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10. Discussion and Illustration (Slide 1 of 5)
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11. Discussion and Illustration (Slide 3 of 5)
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12. Discussion and Illustration (Slide 4 of 5)
Bubble 1.0
Check business event updates to make sure they come from the correct feeder process (input validity).
Ensure no business event updates have been overlooked (input completeness).
Verify the debit and credit equality of “halves” of entries flowing from different systems (input completeness and input accuracy).
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13. Discussion and Illustration (Slide 5 of 5)
Bubbles 2.0 through 4.0, plus 6.0, are reminiscent of the bookkeeping/ accounting cycle.
Process 4.0: Preparing business reports involves several steps which include preparing a worksheet, drafting financial statement footnotes, and formatting and compiling financial statements into an informative package.
Process 6.0 is triggered by a time-based event.
Process 5.0 shows how the GL/BR process can “fuel” other reporting systems that rely on information aggregated in the system.
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14. The general ledger master data
General ledger master data contains summarized information of all of an organization’s business event data.
Main inputs consist of transactions from the business event data captured in the various feeder processes.
The source code field of each GL entry provides a beginning point of reference for developing a proper audit trail.
Code allows tracing from GL entry back to the feeder system and individual business events aggregated into the GL balances.
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15. Coding the GL Chart of Accounts
The more sophisticated the data classification and coding scheme used, the broader the range of financial reports that can be produced.
Consider hierarchical coding:
1XXX = assets
X1XX = current assets
XX1X = cash accounts
XXX3 = cash in bank
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16. Limitations of the Hierarchical Chart of Accounts Approach
Most GL systems only capture the chart of account number and debit or credit entry.
Other information about a business event is discarded.
After closing, detailed business event-level data are purged.
Changing account numbers/account structures raises a problem with comparability.
The movement towards an ERP environment makes the chart of accounts less important.
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17. ERP Financial Module Capability (slide 1of 2)
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.
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18. ERP Financial Module Capability (slide 2 of 2)
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19. eXtensible Business Reporting Language (XBRL) (Slide 1 of 3)
eXtensible Business Reporting Language (XBRL): an XML-based language consisting of a set of tags used to unify the presentation of BR information into a single format that is easily read by most software packages and easily searched by Web browsers.
XBRL enhances the searchability and comparability of information among periods and organizations, and enables easy transfer of information among a variety of systems (including those of regulators).
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20. eXtensible Business Reporting Language (XBRL) (Slide 2 of 3)
Taxonomy: A group of definitions that together provide meaning to reporting concepts. Enables transfer of information among a variety of systems.
Instance or instance document: XBRL document that contains all information, at a given point in time, including tags, about the occurrence of an item—for example, a trial balance instance document.
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21. eXtensible Business Reporting Language (XBRL) (Slide 3 of 3)
Technology Application 16.1: An Example of XBRL
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22. Financial Reporting Fraud
Committed on behalf of an organization
Not for the personal benefit of the perpetrator(s).
Frequently committed to “help” the organization.
The Enron Corp. fraud was a primary participating factor in the passing of the Sarbanes-Oxley Act of 2002.
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23. The Sarbanes-Oxley Act (SLIDE 1 OF 2)
The intent of SOX is “To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.”
Section 302 requires the CEO and CFO to certify that financial statements do not contain material untrue facts nor omit material facts, and that accounting internal controls have been established and evaluated.
Penalty for violation is up to 20 years prison and $5 million in fines.
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24. The Sarbanes-Oxley Act (SLIDE 2 OF 2)
Section 401 of SOX covers disclosures in financial reporting including “off balance sheet” financing and calls for transparent reporting of the true economic effect.
Section 404 mandates the SEC set rules defining a report on internal control that must be included with the annual report.
Section 409 requires rapid and current disclosure of information regarding material changes in financial conditions or operations.
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