General Ledger and Reporting

System
Chapter 16

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 Learning Objectives
• 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

• 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. Inaccurate updating of
general ledger
2. Unauthorized journal entries
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Controls
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
c. Audit trail 16-5
 Adjusting Entries
• Accruals
▫ Made at end of accounting period to reflect events that have
occurred but are not in the financial statements (e.g., wages payable)
• Deferrals
▫ Made at end of accounting period to reflect exchange of cash prior to
performance of related event (e.g., rent)
• Estimates
▫ Portion of expenses expected to occur over a number of accounting
periods (e.g., depreciation)
• Revaluations
▫ Entries made to reflect differences between actual and recorded
value of an asset or change in accounting principle
• Corrections
▫ Entries made to counteract effects of errors found in the general
ledger
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 Post Adjusting Entries

Threats Controls
1. Inaccurate adjusting entries 1 a. Data entry processing
2. Unauthorized adjusting integrity controls
entries b. Spreadsheet error protection
controls
c. Standard adjusting entries
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail creation and
review
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 Prepare Financial Statements
Produce Managerial Reports

Threats Controls
1. Inaccurate financial 1 a. Processing integrity controls
statements b. Use of packaged software
2. Fraudulent financial c. Training and audits
reporting 2 a. Audits
3. Poorly designed reports and 3 a. Responsibility accounting
graphs b. Balanced scorecard
c. Training on proper graph
design

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 New Standards and Technology That Affect
Financial Reporting
• International Financial Reporting Standards
(IFRS)
▫ Understand the systems implications due to the fact
that the IFRS is different in financial reporting than
Generally Accepted Accounting Principles (GAAP)
• eXtensible Business Reporting Language
(XBRL)
▫ Specifically used for communicating financial data
(required by the Securities and Exchange Commission
(SEC) if public company)

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 Evaluating Performance
• Responsibility accounting
▫ Reporting results based upon managerial
responsibilities in an organization
• Flexible budget
▫ Budget formula based upon level of activity (e.g.,
production levels)
• Balanced scorecard
▫ Measures financial and nonfinancial performance
• Graphs
▫ Data visualization and proper graph design
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 Key Terms

• Journal voucher file • Schema

• Trial balance • Linkbases
• Audit trail • Style sheet
• XBRL • Extension taxonomy
• Instance document • Responsibility accounting
• Element • Flexible budget
• Taxonomy • Balanced scorecard

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