1. By Hollander, Denna, Cherrington PowerPoint slides by: Bruce W. MacLean, Faculty of Management, Dalhousie University Accounting, Information Technology, and Business Solutions, 2nd Edition Irwin/McGraw-Hill  The McGraw-Hill Companies, Inc., 2000 An Overview of the General Ledger Architecture Appendix B

2.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Supplement B Objectives  List and describe various file types.  Describe how a computer stores and accesses data.  Describe various processing methods.  Explain the difference between physical and logical file structures.  Describe how computers search for data.  Describe the processing and audit trail of an automated, batch general ledger.  Describe the processing and audit trail of an automated, online general ledger.

3.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Overview of Basic System Terms and Concepts n Master files contain the balance or status of entities - vendors, credit customers, inventory, assets, employees n Transaction or activity files - contain activity data - batches of source data - (orders, sales, payments) n History or archive files inactive past or historical data n Reference files (rates, prices, chart of accounts) n Suspense files - items awaiting action, errors, missing information

4.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Storage and Access of Data in a System n sequential storage - read through all records - tape cartridges and open reel tapes require sequential storage and sequential access of data n random access - storage in any order - hard disk, floppy disk to CD-ROM disk n direct access - any record can be retrieved directly regardless of position without reading all of the records n ISAM indexed sequential access method. The file can be processed sequentially, but the index can also be used to directly identify the location of one group of records. n sequential - paper, tape, or disk n direct - disk or paper

5.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Processing Methods n Batch: accumulates transaction data for a period of time. Then all of the transactions in the transaction file are posted to the master file in one processing run. (Tape processing is always batch) n Online: means the computer-input device is connected to the CPU so that master files are updated as transaction data are entered n Real-time: denotes immediate response to an information user; transaction data are entered and processed to update the relevant master files and a response is provided to the person conducting the business event fast enough to affect the outcome of the event n Report-time: the data used to generate the requested report is processed as the report is created.

6.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Physical and Logical File Structures n Access stores data in pages which match the physical sector size of your hard drive n A page may contain one or more records n Tables contain one or more records n Only the portion of the table being viewed is loaded into memory n The table is stored on the physical device and is updated each time a change is made n Excel loads the whole spreadsheet into memory and updates the hard drive only when the whole file is saved n Nevertheless, the computer can take the randomly stored data (the file’s physical structure) and create a list in alphabetical order for the processor or the user to see (the file’s logical structure).

7.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Computer Data Searching n Each record normally has a data field called a key attribute (also known as a primary key) that uniquely identifies it and distinguishes it from other records in the file. The key attribute is created at the time the record is initially stored in the file. n When a computer user requests a particular record he/she must identify its key. The computer searches the file and compares the key input by the user with the keys of records in the file to locate a record or records that match the input key. n A secondary key (non-primary key attribute) can identify a record as part of a group; thus searching on a secondary key can locate a group of records with some common characteristic.

8.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Other basic systems concepts you should understand: Logical versus physical Primary versus secondary keys Field Record File

9.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill A Review of The Traditional Manual General Ledger Architecture n In a manual system, paper source documents serve as the repository for the detail transaction data and carry the data, information, and special documentation such as proof of approvals and authorizations from one person to the next. Each document has a unique identifying number (primary key) n Files of source documents are organized or sequenced in one of many methods, including: ä By date/chronologicallyAlphabeticallyBy document number/sequenced. n Traditional systems collect and store data by business function, so there is duplicate data retained in various departments  Manual systems employ batch processing. transaction record transaction file  Each source document is a transaction record, and each document file is a transaction file. Each function or department retains transaction files that document the work or activity they have performed. The documents relating to a particular transaction comprise a portion of the audit trail. The source documents provide the activity details that support summary data postings to journals and ledgers. journals transaction files  The journals used in the accounting departments are also transaction files that contain accounting summary data. master files  The system’s master files include the subsidiary ledgers and the general ledger used by various accounting departments.  Manual systems employ batch processing. transaction record transaction file  Each source document is a transaction record, and each document file is a transaction file. Each function or department retains transaction files that document the work or activity they have performed. The documents relating to a particular transaction comprise a portion of the audit trail. The source documents provide the activity details that support summary data postings to journals and ledgers. journals transaction files  The journals used in the accounting departments are also transaction files that contain accounting summary data. master files  The system’s master files include the subsidiary ledgers and the general ledger used by various accounting departments.

10.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Traditional Automated General Ledger Architecture n Automated general ledger systems still include source documents, journals, ledgers, a trial balance, and, of course, the financial statements themselves. n Some source data, the ledgers, and journals are in computerized form (tape and disk) rather than paper form. n The posting and mathematics are performed electronically rather than manually. n Document flows are similar to the manual systems, as is the large degree of data duplication n Basically, the physical design of the system (rather than the logical design) was altered as manual processes and paper files were replaced with, or supplemented by, computer processes and tape or disk files contents of machine readable and computer data files are similar n The accounting system boundary is often defined as the ledgers and the journals that feed into the ledgers. n Some automated systems allow users to input source document data online, rather than waiting for batch input.

11.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Journal Voucher Batch Key in journal voucher data Unsorted Journal Vouchers Sort vouchers in chart of account order Sorted Journal Vouchers General Ledger Master Edit input and update master file Old General Ledger Master New General Ledger Master Sorted Journal Vouchers Error and Exception Report General Ledger Tape Batch Processing Example

12.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill General Ledger Tape Batch Processing Example Step 1: The data is entered into the computer system. Input: A batch of journal vouchers (journal entries). Process: Transfer of data from paper to tape. Output: A tape of unsorted journal entry transaction data. Step 2: The transaction data is sorted to order the data in the same ordering scheme as the primary key of the master file (in chart of account order). This step is needed because of the sequential posting procedure. Input: A tape of unsorted journal entry transaction data. Process: Sort all the journal entries in chart of account order. Output: A sorted tape of journal transaction data.

13.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill General Ledger Tape Batch Processing Example Step 3: The transaction data is posted to the master file. Input: The sorted tape of journal transaction data and the current (pre-posting) general ledger master file. Process: Update the balances in the general ledger master file to reflect journal entry data, and perform edit routine to identify journal vouchers with errors or incomplete information. Output: The transaction file of journal entries, the old (pre-posting) master general ledger file, the new updated general ledger master file, and an error and exception list displaying all the journal vouchers that could not be processed due to errors. If necessary, the old master file and the transaction file can provide back up copies for the new master file.

14.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Journal Voucher data Input data (could use scanner) General Ledger Master Edit data and update master file Error and Exception Message N (Journal Voucher file numerical order) General Ledger Back-up Transaction Log General Ledger Disk On-line Processing Example

15.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill General Ledger Disk On-line Processing Example Step 1: Input Journal Voucher (journal entry) data and update the general ledger master file (chart of account balance). Input: Journal entry data and the General Ledger Master File. (Paper journal voucher is not mandatory.) Process: Edit check input data and, if possible, update the applicable chart of account balances in the general ledger master file. Output: Updated general ledger master file and/or an on-line (immediate) error report. Notice how no data preparation (sorting) is mandated in this example, due to the use of a direct access storage medium. On-line processes should maintain a transaction log of all transaction inputs and a periodic back-up to the master file. Such back-up procedures protect system users from loss of data.

16.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill General Ledger Software Packages n Several general ledger accounting software packages are available in the market. General ledger packages differ in terms of features and scope. Most are comprised of a series of modules, and many users add on modules that you can purchase to make the general ledger information more useful. n Sample GL software modules include:  The general ledger  Accounts payable  Accounts receivable  Order entry/invoicing  Payroll  Reports  Inventory Stock control  Purchase control  Job costing  Fixed Assets

17.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Vendors n ERP Software Vendors ä Baan Company Baan Company ä Computer Associates International, Inc. Computer Associates International, Inc. ä Geac Computer Corporation Geac Computer Corporation ä J.D Edwards Enterprise Software J.D Edwards Enterprise Software ä Oracle Oracle ä PeopleSoft PeopleSoft ä SAP AG SAP AG n Other Vendors ä Account Mate Account Mate ä ACCPAC International ACCPAC International ä AICPA Software AICPA Software ä Champion Software Champion Software ä Cougar Mountain Software Cougar Mountain Software ä Cyma Systems, Inc. Cyma Systems, Inc. ä DacEasy DacEasy ä Data Pro Data Pro ä Flexi ä Great Plains Software ä Intuit ä Lawson Software ä Macola ä M.Y.O.B Bestware Canada ä Navision® Software ä One Write Plus ä Open Systems Inc.

18.  The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Adapting to Change n General ledger vendors are working to adapt their products to changing user desires and needs. n In fact, one vendor states that its products do not just process debit and credits, but are designed to support all financial information flows. n When you read about trends and developments in GL packages, the vendors often mention the following types of advances: ä Flexibility ä Network/client server capable ä Graphically based ä More look up ability ä Ability to drill down to detail ä Supports data mining ä More user defined output