14 - Chapter 14 The General Ledger and Reporting System...

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Unformatted text preview: Chapter 14 The General Ledger and Reporting System System Learning Objectives Learning Describe the activities and data processing Describe performed by the general ledger and reporting system system Identify the major threats and corresponding Identify controls controls Understand emerging GL and reporting Understand technology technology The AIS and Its Subsystems The FINANCING CYCLE Get Get cash cash Funds Give Give cash cash Funds REVENUE CYCLE Give Give goods goods Get Get cash cash Data Funds Data EXPENDITURE CYCLE Give Give cash cash Data Get Get goods goods General Ledger & Reporting System Data Data Finished goods Labor Raw materials HUMAN RESOURCES CYCLE give give cash cash get get labor labor PRODUCTION CYCLE Give Give F/G F/G Get Get MLO MLO Basic Activities Basic Update the General Ledger Post Adjusting Entries Prepare Financial Statements Produce Managerial Reports Data Flow Diagram Accounting Subsystems Journal Entries A Journal Entries A 1.0 Update General Ledger 4.0 Produce Managerial Reports Budget Budget Director Budgets & Reports General Ledger Trial Balance Treasurer B Adjusting Entries Adjusted Trial Balance Closing Entries D Managers Financial Statements Journal Voucher 2.0 Post Adjusting Entries Adjusting Entries Controller C 3.0 Prepare Financial Statements E Financial Statements Financial Statements F External Users Update General Ledger Update Post journal entries from the operating subsystems (cycles) Post journal entries from treasury activities Post Adjusting Entries Post Accruals • Transaction recorded but cash hasn’t been paid • Example: Example: Deferrals • Cash has been paid but transaction isn’t complete • Example: Example: Estimates • Transaction is allocated over future periods • Example: Example: Revaluations • Required by GAAP • Example: Example: Corrections • Corrections of errors • Example: Example: What causes adjusting entries (other than GAAP)? Prepare Financial Statements Prepare 1. Prepare income statement first • Revenue and expense accounts • After adjusted trial balance 2. Prepare balance sheet second • Requires closed revenue and expense accounts • Monthly and yearly closings – Zero current month balances – Leave yearly balances intact 3. Prepare statement of cash flows last • Data from income statement • Data from balance sheet Produce Managerial Reports Produce Performance reports Responsibility basis Covered in managerial/cost accounting courses Control Objectives Control All GL updates are properly authorized All GL transactions are valid (occurred) All valid, authorized GL transactions are recorded All GL transactions are recorded accurately GL data are safeguarded from loss/ theft GL activities are performed efficiently/effectively Data Warehouses Data A database from the transactions database Used for strategic planning House data for several years Sometimes contains separate “data marts” for each Sometimes organizational function organizational See text for more XBRL XBRL XBRL XBRL eXtensible Business Reporting Language tensible usiness eporting General purpose language used to communicate (financial) data Benefits • Financial statements published only once – Can be used in any format – HTML, Adobe, text, etc. • Interpretable – Recipients don’t have to reenter data for analysis – More accurate and reliable internet searches Read the XBRL article posted on WebCT (covered on final exam) Definition Definition A standard language standard • Open • Platform independent • International Designed to report financial data Designed financial • Timeliness • Accuracy • Efficiency • Cost-effective electronic storage • Ease of manipulation and repurposing A derivative of XML Languages Languages XBRL (and XML) are declarative languages • They describe data • They describe “what is • They don’t say anything about what should be done with the data • Example • • Values are assigned to income and loss The interpretation is up to the computer program that manipulates the income The and loss and In contrast, C and COBOL are procedural languages • They specify the sequence of operations the computer must follow to They accomplish a specific task (a program) accomplish • Example • Procedural statement tells the computer to subtract expenses from Procedural income and print the resulting profit figure income Balance Sheet Example Balance ASSETS Cash Equipment Furniture Total assets LIABILITIES Accounts payable Total liabilities EQUITY Paid-in capital Total equity Total liability & equity XBRL tagging: 4,000 2,000 5,000 11,000 1,000 1,000 10,000 10,000 11,000 <Assets.Cash>4,000 <Assets.Equipment>2,000 <Assets.Furniture>5,000 <Assets.Total>11,000 <Liabilities.AccountsPayable>11,000 <Liabilities.Total>1,000 <Equities.PaidInCapital>10,000 <Equities.Total>10,000 <LiabilitiesAndEquity.Total>11,000 Major Issues Major Who will use the web-enabled tools? • Accountants • End users • Example: Sabre (American Airlines internal EDI) Universal taxonomy • All accounts for every company included • Definitions and tags are consistent company to company History History Electronic computer • Used primarily as a classified military technology in the 1030s & Used 1940s 1940s • Made available for commercial consumption after WWII • Proprietary embedded control codes were used to format documents • • • • Called markup codes (from the printing industry) Not standardized Documents created on one computer couldn’t be displayed on another Example: the code “<Format-12>” might be interpreted as “center Example: text” on one computer and “double space” on another text” Standard codes replaced markupcodes History History SGML Specific Coding GML XML HTML XBRL 1950 1960 1970 1980 1990 2000 WWW Computer PC Spreadsheet Browser Current Usage Current To date, the FDIC is the only regulator requiring XBRL tagging • Goal is to reduce bank reporting from 45 days to 30 days • All 9,000 banks must report using XBRL by October, 2005 SEC has a voluntary program • Wants companies to assess the XBRL's effectiveness to see if the Wants standard can streamline financial reporting to the EDGAR system and reduce errors and • Only a few companies currently are participating • More to come as software becomes more readily available XBRL Example XBRL Source: XBRL International XBRL Example – What It Means XBRL Source: XBRL International END OF CHAPTER 14 END ...
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