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Chapter 16

The General Ledger and


Business Reporting (GL/BR)
Process
Accounting Information Systems 8e
Ulric J. Gelinas and Richard Dull

2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated,
in whole or in part, except for use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for classroom use

Learning Objectives
Describe how the business processes discussed in
Chapters 10 though 15 provide data required for
general ledger (GL) updates.
Understand how the GL and business reporting
capabilities support an organizations external and
internal reporting functions.
Understand the limitations of the traditional GL
approach in contemporary systems.
Analyze control issues and control plans associated the
GL and related business reporting extensions.
Describe the technological trends and advances in
financial reporting.
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Functions of GL/BR
GL
Accumulating data,
classifying data by
GL accounts,
recording data in
those accounts.
Fueling FR, BR and
other reporting
subsystems.

Functions of GL/BR (Contd.)


BR
Preparing generalpurpose, external
financial statements.
Ensuring that F/S
conform to GAAP.
Generating webbased forms.
Generating ad hoc &
predetermined
business reports.
4

Horizontal Perspective of the


GL/BR Process
Flow 1.
Business
processes
(feeder
processes)
send
updates to
the business
reporting
department.
5

Horizontal Perspective of the


GL/BR Process
Flow 2.
The treasurer
notifies the
business
reporting
department of
investing and
financing
transaction
activities.
6

Horizontal Perspective of the


GL/BR Process
Flow 3.
The
controller
notifies the
business
reporting
department
of various
adjusting
entries.
7

Horizontal Perspective of the


GL/BR Process
Flow 4.
Adjusted trial
balance
figures are
sent from the
business
reporting
manager to
the financial
reporting
officer.
8

Horizontal Perspective of the


GL/BR Process
Flow 5.
Actual results are
sent from the
business reporting
manager to the
budgeting and
managerial
reporting managers;
the actual results
will be one of the
inputs used in
formulating next
periods budgets.
9

Horizontal Perspective of
the GL/BR Process
Flow 6.
The financial reporting
officer sends GAAPbased financial
statements to the
treasurer, controller,
and various external
constituencies (e.g.,
owners, potential
investors, banks,
potential lenders).
10

Horizontal Perspective of the


GL/BR Process
Flow 7.
The managerial
reporting officer
sends
performance
reports to
various cost
centers, profit
centers, or
investment
centers.
11

Responsibility
Accounting/Reporting System
Responsibilities of the managerial reporting
officer:
Similar to those of the financial reporting
officer.
Prepares performance reports comparing
actual performance with budgeted
expectations.

12

Responsibility Accounting
Performance Reporting

13

Horizontal and Vertical


Information Flows

14

GL/BR
Process:
Context
Diagram

15

GL/BR Process: Level 0 DFD

16

Coding the GL Chart of Accounts


1113 Cash in Bank
1xxx
x1xx
xx1x
xxx3

=
=
=
=

assets
current assets
cash accounts
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
17

Limitations of the GL Approach


Most GL systems only capture the chart of
account number and debit or credit.
Other information about a business event is
generally discarded.
After closing, detailed event-level data are
purged from the system.
Changing account numbers /account
structures raises a problem with comparability.

18

Technology-Enabled Initiatives in
Business Reporting
ERP Financial Module Capability
Balanced Scorecard
Business Intelligence
eXtensible Business Reporting
Language (XBRL)

19

ERP Financial Module


Wide range of options available.
For security reasons and ease of use, limit
users access to menu items needed to
perform his or her responsibilities.
ERP security can become detailed and
complex due to different privilege levels for
different users.
Users can be assigned different access
levels: view access, write access, entry
access, and/or change access.
20

Financial Reporting Menu


for Microsoft Dynamics GP

21

Balanced Scorecard
Methodology for assessing organizations business
performance via 4 components:
Financial: Traditional methods of business performance
Internal business processes: Capacity to identify core
competencies and assess performance
Customers: How customers perceive the organization in terms of
value.
Innovation and improvement activities: How the organization is
improving and creating additional value.

Functionality included in applications by all major ERP vendors.

22

Business Intelligence
Integration of statistical and analytical tools
with decision support technologies.
Facilitates complex analyses of data
warehouses by managers and decision
makers.
Modules use highly complex analytical
techniques to search for relationships that will
provide insight for decision making.

23

eXtensible Business Reporting


Language (XBRL)
XML-based language consisting of a set of
tags used to unify presentation of business
reporting information into a single format.
Easily read by almost any software package.
Easily searched by web browsers.
Several regulators have begun accepting or
requiring filings be done in XBRL format.
24

An Example of XBRL

25

The Sarbanes-Oxley Act

Section 302

Requires CEO and CFO to


certify that financial
statements neither contain
material untrue facts nor
omit material facts and that
they have established and
evaluated internal controls.
Penalty for violation of
section 302 up to 20 years
prison and $5 million in fines

Section 401
Covers disclosures in
financial reporting, including
off balance sheet items.

Section 404
Mandates the SEC set rules
defining a report on internal
control that must be
included with annual report.
Must include responsibility
of management and an
attestation to the control
relative to internal control.

Section 409
Requires rapid and current
disclosure of information
regarding material changes
in financial conditions or
operations.

Report should clearly reflect


the economic reality of
business events.
26

Current Environment for


External Financial Reporting
Users demand immediate information.
For many, email has replaced overnight delivery and fax.
Investors want more information faster.
Sarbanes-Oxley demands rapid and current disclosures.
SEC has shortened the time companies have for reporting
certain events.
Real-time reporting of events is likely just over horizon.
Continuous assurance (continuous auditing) provides
assurance through monitoring automated controls and
business events in real or near-real time.

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