Accounting information systems ch16

General Ledger
And
Business Reporting
(GL/BR) Process
1


Learning Objectives
•
•
•
•
•

•

Illustrate how the business processes
feed data required for GL updates
Explain how GL/BR reporting
capabilities support an organization’s
external & internal reporting functions
Analyze the limitations of the traditional
GL approach in contemporary systems
Describe how client/server architecture
implements GL/BR
Analyze control issues and Control
plans associated with client/server
hardware and software used to
implement the GL and related business
reporting extensions
Evaluate potential problems in operating

the GL and possible solutions to those
problems

GL/BR

2


GL/BR is a Spoke on AIS Wheel
• The GL/BR process
– Assembles financial
information for both
internal and external
users
– Depends on process
controls for accuracy and
completeness
– Relies on pervasive
controls for system
security
– Documentation of
effective controls is
required by SarbanesOxley

3


Functions of GL/BR
• GL
– accumulating data,

classifying data by
GL accounts,
recording data in
those accounts
– fueling FR, BR and
other reporting
subsystems

Reporting

Accumulating

Recording

Classifying

4


Functions of GL/BR, Cont’d.
• BR
– preparing generalpurpose, external
financial statements
– ensuring that F/S
conform to GAAP
– generating webbased forms
– generating ad hoc &
predetermined
business reports

Reporting

Accumulating

Recording

Classifying

5


GL/BR Horizontal perspective
1. Business
process feeders
send updates to
the business
reporting
department.

6


GL/BR Horizontal perspective
2. Treasurer
notifies the
business
reporting
department of
investing
transaction

activities.

7


GL/BR Horizontal perspective
3. Treasurer
notifies the
business
reporting
department of
financing
transaction
activities.

8


GL/BR Horizontal perspective
4. Controller
notifies the
business
reporting
department of
various adjusting
entries.

9

GL/BR Horizontal perspective
5. Finalized
budget figures
are sent to the
business
reporting
department from
the budgeting
department.

10


GL/BR Horizontal perspective
6. Adjusted trial
balance figures
are sent from the
business
reporting
department to
the financial
reporting officer.

11


GL/BR Horizontal perspective
7. Actual and
budget figures
are sent from the

BR department
to the budgeting
department; the
actual results will
be one of the
inputs used in
formulating next
period’s budgets.
12


GL/BR Horizontal perspective
8. Actual and
budget figures
are sent by the
business
reporting
department to
the managerial
reporting officer.

13


GL/BR Horizontal perspective
9. Financial
reporting officer
sends GAAPbased financial
statements to
Treasurer,

Controller, and
outside parties
(owners, banks,
SEC)
14


GL/BR Horizontal perspective
10. Managerial
reporting officer
sends performance
reports to various
managers.

15


E-Business Angle
Operational stores are financial information stored in
databases used to create the chart of accounts, GL and
financial reports
•

Manual Reports
– The old method of
manually preparing
financial reports
– Financial reports are
comprised of text and data
from the operational data

stores formatted as
financial statements
– Often data had to be rekeyed for each different
report created

• XBRL Enabled Reports
– Operational store data
contains descriptive
(semantic) tags
– XBRL enabled report reads
descriptive tag and merges
data into report
– Data from one data store
can be used to generate
many different reports
including Web reports
without re-keying

16


Integrated Systems Perspective
Including ERP
• Events summarized automatically by the system
eliminating the need for a separate GL process
– The GL is simply a report summarizing transactions by
account and by date in ascending order

• Treasurer still enters investment and financing
transactions into treasury module

• Controller still enters adjusting entries
• Financial reports are generated by the system using
ad hoc queries or pre-established reports

17


Internal and External Business Reporting Flows

18


Responsibility
Accounting/Reporting System
• Duties of managerial reporting officer
– Reports to assist internal management decision
making
– Performance reports comparing actual
performance with budgeted performance
– Reports are most detailed at lowest levels of
management, least detailed at highest levels of
management
– It ties into the concept of responsibility accounting
19


Responsibility Accounting
Performance Reporting

20

Summary of Horizontal and
Vertical Information Flows

21


Summary of Horizontal and
Vertical Information Flows
• Horizontal flows
– Events are
processed in various
operational systems
– Culminates in GL
and external
business reports

• Vertical Flows
– GL and other event
information flow
upward through
responsibility
accounting system
– Culminates in
internal performance
reports

22

GL/BR Process: Context Diagram
• Various feeder
processes provide
event information
• Source of internal
and external
financial reports

23


GL/BR Process: Level 0 DFD
• Detail of
common
GL/BR
processes

24


GL Hierarchical Coding
• 1113 Cash in Bank
– 1xxx

=

assets

– x1xx

=

current assets

– xx1x

=

cash accounts

– xxx3

=

cash in bank

• -------------------------------------------------– 1111 might mean petty cash
1112 might mean change fund
1121 might mean trade accounts receivable
1122 might mean receivables from officers

25