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General Ledger and
Reporting System
UAA – ACCT 316
Accounting Information Systems
Dr. Fred Barbee
General Ledger and
Reporting Activities
Objectives
1. To record all accounting transactions
promptly and accurately.
2. To post these transactions to the
proper accounts.
3. To maintain an equality of debit/credit
balances among the accounts.
Objectives
4. To accommodate needed adjusting
entries.
5. To generate reliable and timely
financial reports pertaining to each
accounting period.
Basic Activities (Processes)
1. Update the general ledger
2. Post adjusting entries
3. Prepare financial statements
4. Produce managerial reports
1. Analyze
Transactions
10. Reverse
(Optional)
9. Prepare
Post-Closing
Trial balance
2. Journalize
8. Close
3. Post
7. Prepare
Statements
4. Prepare
Unadjusted
Trial Balance
6. Prepare
Adjusted Trial
Balance
5. Adjust
Update The General Ledger
 Updating consists of posting journal
entries that originated from two
sources:
1. Accounting subsystems
2. The treasurer
Update The General Ledger
Accounting Journal entry
subsystems
Update the
GL
Journal
entry
Treasurer
Journal
voucher
General
ledger
Post Adjusting Entries
The second activity in the general ledger
system involves posting various
adjusting entries.
Adjusting entries originate from the
controller’s office, after the initial trial
balance has been prepared.
Post Adjusting Entries
1. Accruals (wages payable)
2. Deferrals (rent, interest, insurance)
3. Estimates (depreciation)
4. Revaluation (change in inventory
method)
5. Corrections
Post Adjusting Entries
Post adjusting
entries
Journal
voucher
Adjusting
entries
Controller
Financial statements
Adjusted trial
balance
Prepare
financial
statements
Prepare Financial Statements
The third activity in the general ledger
and reporting system involves the
preparation of financial statements.
The income statement is prepared first.
The balance sheet is prepared next.
The cash flows statement is prepared last.
Produce Managerial Reports
 The final activity in the general ledger
and reporting system involves the
production of various managerial
reports.
 What are the two main categories of
managerial reports?
1. General ledger control reports
2. Budgets
Produce Managerial Reports
Control Report Examples
– lists of journal vouchers by numerical
sequence, account number, or date
– listing of general ledger account balances
Budget Examples
– operating budget
– capital expenditures budget
Produce Managerial Reports
Budgets and performance reports should
be developed on the basis of
responsibility accounting.
Responsibility Accounting involves
reporting financial results on the basis of
managerial responsibilities within an
organization.
A concept that implies
that every economic
event that affects the
organization is the
responsibility of and
can be traced to an
individual.
Responsibility
Accounting
President
and CEO
Vice President
Marketing
Vice President
Production
Vice President
Controller
Responsibility Accounting
President
and CEO
Vice President
Marketing
Vice President
Production
Vice President
Controller
Installing Responsibility
Accounting
Create a set of financial performance
goals (budgets)
Measure and report actual performance.
Evaluate based on comparison of actual
with budget.
Responsibility Accounting
Measures the
results of each
responsibility
center and
Responsibility Accounting
compares
those results
with some
standard or
benchmark.
Heh man, that isn‘t
funny! Please don’t
erase that line, I’m
benchmarking!
Responsibility Centers
Responsibility Center
A segment of an organization with
authority . . .
 To incur and control costs
 To earn revenues, and
 To invest funds in assets.
Responsibility Center . . .
A responsibility center can be:
A cost center
A revenue center
A profit center
An investment center
Responsibility Centers
A Systems Perspective
A firm can be examined in the context of
Process  Output
Data
(Inputs)
Resources used . . .
DM
DL
MOH
Processing Steps
Within
Information Systems
Capital . . .
Working
Capital
Equipment
Etc.
Input 
Information
(Outputs)
Output . . .
Goods, Services, Ideas
A firm can be examined in the context of
Data
(Inputs)
Resources used . . .
DM
DL
MOH
Input 
Resources
are
Process  Output
converted through
Processingthe
Steps use of working
Information
Within
(Outputs)
capital,
equipment,
Information
Systems
etc.
Capital . . .
Working
Capital
Equipment
Etc.
Output . . .
Goods, Services, Ideas
Responsibility Centers:
A Systems Perspective
Input
Process
Output
Control only this
Cost Center
Responsibility Centers:
A Systems Perspective
Input
Process
Control only this
Revenue Center
Output
Responsibility Centers:
A Systems Perspective
Input
Process
Control these
Profit Center
Output
Responsibility Centers:
A Systems Perspective
Input
Process
Output
Control these
Investment Center
Control Objectives,
Threats & Procedures
Control Objectives
1. Updates to the general ledger are
properly authorized.
2. Recorded general ledger transactions
are valid.
3. Valid, authorized general ledger
transactions are recorded.
Control Objectives
4. General ledger transactions are
accurately recorded.
5. General ledger data are safeguarded
from loss or theft.
6. General ledger system activities are
performed efficiently and effectively.
Process/Activity
Threats
Threat
and Controls
Applicable Control
the Procedures
in
GeneralErrors
Ledger and Reporting
Updating the
Input andSystem
processing
general ledger
controls;
reconciliations and
control reports;
audit trail
Access to general Loss of
ledger
confidential data
and/or
concealment of
theft
Access controls;
audit trail
Loss or
destruction of the
general ledger
Backup and disaster
recovery procedures
Loss of data and
assets
Threat 1: Errors in
Updating the GL
Errors in Updating GL
Can lead to poor decision making based
on erroneous information in financial
performance reports.
Control procedures fall into three
categories:
Input edit and processing controls
Reconciliations and control reports
Maintenance of an adequate audit trail
Input Edit and
Processing Controls
 There are two sources of journal entries
for updating the general ledger:
1. Summary journal entries from other AIS
cycles
2. Direct entries made by the treasurer or
controller
Input Edit and
Processing Controls
Journal entries made by the treasurer
and controller are original data entry.
Several types of input edit and
processing controls are needed to
ensure that they are accurate and
complete.
Input Edit and
Processing Controls
Validity Check
Field checks
Zero-balance checks
Completeness Test
Closed-loop verification
Sign Check
Input Edit and
Processing Controls
Calculation run-to-run totals to verify
accuracy of journal voucher batch
processing
Standard adjusting entry file for recurring
adjusting entries made each period
Reconciliation and
Control Report
Reconciliations and control reports can
detect if any errors were made during the
process of updating the general ledger.
Trial Balance
Comparing the general ledger control
account balances to the total balance in the
corresponding ledger
Reconciliation and
Control Report
 The audit trail is the path of a
transaction through the accounting
system.
 The audit trail should allow you to do
three things . . .
Reconciliation and
Control Report
1. Trace any transaction from its
original source document to the
general ledger and to any report or
other document using that data.
Reconciliation and
Control Report
2. Trace any item appearing in a report
back through the general ledger to its
original source document
3. Trace all changes in general ledger
accounts from their beginning balance
to their ending balance
Threat 2: Unauthorized
Access to the GL
Unauthorized Access to the GL
Unauthorized access to the general
ledger can result in confidential data
leaks to competitors or corruption of the
general ledger.
It can also provide a means for
concealing the theft of assets.
Unauthorized Access to the GL
User IDs and passwords
Read-only access to the general ledger
System checks of authorization codes for
each journal voucher record before
posting
Threat 3: Loss or
Destruction of the GL
Loss or Destruction of the GL
Adequate backup and disaster recover y
procedures must be in place to protect
the general ledger.
Use of internal and external file labels
Performance of regular backup of the
general ledger
Integrated Data Model
Integrated Data Model
An integrated enterprise-wide data
model represents a merging of separate
data models.
This merging primarily involves linking
each resource with the events that
increase and decrease that resource.
Integrated Data Model
Cash
receipts
Cash
disbursements
(1, 1)
(1, 1)
(1, N)
Cash
(1, N)
Integrated
IntegratedData
DataModel
Model
(0, N)
Cash
(1, 1)
(1, N)
(0, N)
(0, N)
(0, N)
Issue
debt
(0, N)
(1, 1)
Pay
employees
(1, 1)
(1, 1)
Issue
stock
(1, 1)
Dividend
payment
(1, N)
Debt
payment
Benefits of an
Integrated Data Model
What are some benefits of an Integrated
data model?
Improved support for decision making
Integration of financial and nonfinancial
information
Improved internal reporting
Benefits of an
Integrated Data Model
 Development of a virtual value chain
occurs in three stages.
 What are these stages?
1. Visibility
2. Mirroring
3. Building new customer relationships