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The general ledger and reporting system performs four key activities: 1. Updating the general ledger by posting journal entries from accounting subsystems and the treasurer. 2. Posting adjusting entries from the controller for accruals, deferrals, estimates, revaluations, and corrections. 3. Preparing the key financial statements - income statement, balance sheet, and cash flows statement. 4. Producing managerial reports such as general ledger control reports, budgets, and responsibility accounting reports to help managers plan and evaluate performance.

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160 views8 pages

AIS Paper

The general ledger and reporting system performs four key activities: 1. Updating the general ledger by posting journal entries from accounting subsystems and the treasurer. 2. Posting adjusting entries from the controller for accruals, deferrals, estimates, revaluations, and corrections. 3. Preparing the key financial statements - income statement, balance sheet, and cash flows statement. 4. Producing managerial reports such as general ledger control reports, budgets, and responsibility accounting reports to help managers plan and evaluate performance.

Uploaded by

Tarra Aulia
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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GENERAL LEDGER AND REPORTING SYSTEM

ACCOUNTING INFORMATION SYSTEMS

Nining Nur’aeny 175020307141008


Gracyella Natalie Putri Karo Karo 175020307141006

FACULTY OF ECONOMICS AND BUSINESS


BRAWIJAYA UNIVERSITY
MALANG
2019
INTROFUCTION
The general ledger and financial reporting system integrate and summarizes the results of the
various accounting subsystems for the revenue, expenditure, production, and human resources
cycles. The general ledger is the central master file in the accounting system. Consequently, it is
important to implement control procedures to ensure its accuracy and security. Important controls
include data processing integrity checks of the journal voucher records posted to the general ledger,
access controls, an adequate audit trail, and appropriate backup and disaster recovery procedures.

AIS AND ITS SUBSYSTEM INTEGRATED ERP SYSTEM

The general ledger cycle consists of posting of entries from special journals, subsidiary ledgers,
and general journal to general ledger; as well as generating financial, managerial and special
reports. Accounting transactions are first recorded in special and general journals from source
documents and posted to subsidiary and general ledgers. At the end of the accounting period, an
unadjusted trial balance is prepared. Then adjusting entries are made based on information from
the controller and treasurer. The general ledger can then be used to generate required reports. Once
the financial statements are finalized, accounting books are closed via closing entries, and a post-
closing trial balance is prepared. The traditional use of a general ledger has been for generating
financial reports for investors.
This chapter discusses the information processing operations involved in updating the general
ledger and preparing reports that summarize the results of an organizations activities. The general
ledger and reporting system play a central role in a company’s accounting information system.

 Each of the accounting cycle subsystems provides information about regular transactions.
 The treasurer provides information about financing and investing activities, such as the
issuance or retirement of debt and equity instruments and the purchase or sale of investment
securities.
 The budget department provides budget numbers.
 The controller provides adjusting entries.

GENERAL LEDGER AND REPORTING SYSTEM

Typical design of online general ledger and reporting system


It shows that the individual journal entries used to update the general ledger are stored in the
journal voucher file (a file that stores all journal entries used to update the general ledger).
 Process
The centralized database must be organized in a manner that facilitates meeting the varied
information needs of both internal and external users. Managers need timely detailed
information about the results of operations in their particular area of responsibility.
Investors and creditors want periodic financial statements and timely updates to help them
assess the organization’s performance. Various government agencies also mandate specific
information requirements. To satisfy these multiple needs, the general ledger and reporting
system not only produces periodic reports but also supports online inquiries.
 Threats and controls

GENERAL LEDGER AND REPORTING SYSTEM ACTIVITIES


There are four basic activities in the general ledger and reporting system:
1. Updating the general ledger
2. Posting adjusting entries
3. Preparing financial statements
4. Producing various managerial reports

● The basic activities performed in the general ledger and reporting cycle. The first three
activities represent the basic steps in the accounting cycle, which culminate in the
production of the traditional set of financial statements. The fourth activity indicates that,
in addition to financial reports for external users, an organization’s accounting system
produces a variety of reports for internal management.
UPDATING GENERAL LEDGER
The first activity in general ledger system. (circle 0.1)
 Process
Updating general ledger consist of posting journal entries that originate from two sources:
1. Accounting subsystems
2. Treasurer
 Threats and controls

Error made in updating the general ledger can lead to poor decision making based on
erroneous information in financial performance report. Control procedures fall into three
categories:
1. Input edit and processing control
There are two sources of journal entries for updating the general ledger:
- Summary journal entries from other AIS cycles
- Direct entries made by the treasurer or controller
Journal entries made by the treasurer and controller are original data entry. Several
types of input and processing controls are needed to ensure that they are accurate and
complete:
1. Validity check, to ensure that general ledger accounts exist for each account number
referenced in a journal entry
2. Zero-balance check, to verify that total debits equal total credits in a journal entry
3. Closed-loop verification, matching account numbers with account descriptions, to
ensure that the correct general ledger account is being accessed
4. Calculation run-to-run totals to verify accuracy of journal voucher batch processing
5. Field (format) checks, to ensure that the amount field in the journal entry contains
only numeric
6. Completeness test, to ensure that all pertinent data are entered, especially the source
of the journal
7. Sign check of the general ledger account balance, once updating is completed, to
verify that the balance is of the appropriate nature (debit or credit)
2. Reconciliations and control reports
Reconciliations and control reports can detect if any errors were made during the
process of updating the general ledger. Example:
a. Preparing of the trial balance (a report listing the balances of all general ledger
accounts)
b. Comparing the general ledger control account balances to the total balance in the
corresponding ledger
3. Maintenance of an adequate audit trail
The audit trial is the path of a transaction through the accounting system, the audit trail
facilitates these three tasks:
- Trace any transaction from its original source document to the general ledger and
to any report or other document using data
- Trace any item appearing in a report back through the general ledger to its original
source document
- Trace all changes in general ledger accounts from their ending balance

POSTING ADJUSTING ENTRIES


The second activity involves posting various adjusting entries. (circle 2.0)
 Process
Adjusting entries originate from the controller’s office, after the initial trial balance has
been prepared. Adjusting entries fall into five basic categories:
1. Accruals are entries made at the end of the accounting period to reflect events that have
occurred but for which cash has not yet been received or disbursed. (recording of
interest revenue earned and wages payable)
2. Deferrals are entries made at the end of the accounting period to reflect the exchange
of cash prior to performance of the related event. (recognizing advance payments from
customers as a liability and recording certain payments e.g., rent, interest, and insurance
as prepared assets.
3. Estimates are entries that reflect a portion of expenses expected to occur over a number
of accounting periods. (depreciation and bad-debt expenses)
4. Revaluations are entries made to reflect either differences between the actual and
recorded value of an asset or a change in accounting principle. (change in method used
to value inventory, reducing the value of inventory to reflect obsolescence, or adjusting
inventory records to reflect the results noted during a physical count inventory)
5. Correction are entries made to counteract the effects of errors founds in the general
ledger
 Threats and controls
PREPARING FINANCIAL STATEMENTS
The third activity in general ledger and reporting system. (circle 3.0)
 Process
1. The income statement is prepared first
2. The balance sheet is prepared second
3. The cash flows statement is prepared last

 Threats and controls

PRODUCING MANAGERIAL REPORTS


The final activity to produce various managerial reports. (circle 4.0)
There are two main categories of managerial reports:
1. General ledger control reports. Example:
- List of journal vouchers by numerical sequences, account number, or date
- Listing of general ledger account balance
2. Budgets. Example:
- Operating budget
- Capital expenditures budget
Budgets and performance reports should be developed on the basis of responsibility
accounting. Responsibility accounting is involves reporting financial results on the basis
of managerial responsibilities within an organization.
ERP system can produce a number of budgets to help managers plan and evaluate performance.
 Process

 Threats and controls

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