Accounting information system an overview 9e bodnar and hopwood 2015 chapter 16

General Ledger and Reporting System
Chapter 16

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Learning Objectives

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Describe the information processing operations required to update the general
ledger and to produce reports for internal and external users.
Identify the major threats in general ledger and reporting activities and evaluate the
adequacy of various control procedures for dealing with them.
Understand the implications of new IT developments, such as XBRL, and changes in
external reporting requirements, such as IFRS, for the design and operation of the
general ledger and reporting system.
Discuss how tools like responsibility accounting, balanced scorecards, and graphs
can be used to provide information managers need to effectively monitor
performance.

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General Ledger and Reporting System Process

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Update general ledger
Post adjusting entries
Prepare financial statements
Produce managerial reports

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General Ledger and Reporting System

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Update General Ledger

Threats

1.
2.

Controls

Inaccurate updating of general ledger
Unauthorized journal entries

1 a. Data entry processing
integrity controls
b. Reconciliations of accounts
from subsidiary journals to
general ledger accounts
(e.g., Accounts payable)
c. Audit trail
2 a. Access controls
b. Reconciliations and control
reports

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c. Audit trail

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Adjusting Entries

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Accruals

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Deferrals

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Estimates

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Revaluations

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Corrections

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Made at end of accounting period to reflect events that have occurred but are not in the
financial statements (e.g., wages payable)
Made at end of accounting period to reflect exchange of cash prior to performance of
related event (e.g., rent)
Portion of expenses expected to occur over a number of accounting periods (e.g.,
depreciation)
Entries made to reflect differences between actual and recorded value of an asset or
change in accounting principle

Entries made to counteract effects of errors found in the general ledger

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Post Adjusting Entries

Threats

1.
2.

Controls

Inaccurate adjusting entries
Unauthorized adjusting entries
1 a. Data entry processing
integrity controls
b. Spreadsheet error protection
controls
c. Standard adjusting entries
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail creation and

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review

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Prepare Financial Statements
Produce Managerial Reports

Threats

1.
2.
3.

Controls

Inaccurate financial statements
Fraudulent financial reporting
Poorly designed reports and graphs

1 a. Processing integrity controls
b. Use of packaged software
c. Training and audits
2 a. Audits
3 a. Responsibility accounting
b. Balanced scorecard
c. Training on proper graph
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design

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New Standards and Technology That Affect Financial
Reporting

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International Financial Reporting Standards (IFRS)

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Understand the systems implications due to the fact that the IFRS is different in financial
reporting than Generally Accepted Accounting Principles (GAAP)

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eXtensible Business Reporting Language (XBRL)

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Specifically used for communicating financial data (required by the Securities and Exchange
Commission (SEC) if public company)

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Evaluating Performance

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Responsibility accounting

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Flexible budget

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Budget formula based upon level of activity (e.g., production levels)

Balanced scorecard

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Reporting results based upon managerial responsibilities in an organization

Measures financial and nonfinancial performance

Graphs

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Data visualization and proper graph design

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Key Terms

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Journal voucher file
Trial balance
Audit trail
XBRL
Instance document
Element

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Schema
Linkbases
Style sheet
Extension taxonomy
Responsibility accounting
Flexible budget
Balanced scorecard

Taxonomy

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