Chapter 16. General Ledger and Reporting System Flashcards
(Info) Chapter 16 discusses the information processing operations involved in updating the general ledger and preparing reports that summarize the results of an organization’s activities.
(Info) 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 organizations 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.
Mention what does the General Ledger and Reporting System Process consist of
Tip: 1) update, 2) adjusting, 3) prepare, 4) produce
- Update general ledger
- Post adjusting entries
- Prepare financial statements
- Produce managerial reports
Give examples of threats to General ledger and reporting system
Examples are unauthorized disclosure of sensitive information and loss or destruction of data etc.
Give examples of control to General Ledger and reporting system
Control to general Ledger and reporting system is access control, encryption, backup and disaster recovery procedures etc.
Explain 1) update general ledger from General Ledger and Reporting System Process
Tip: Subsystems updating
The accounting subsystems updates the general ledger. They are the revenue cycle, the expenditure cycle and the human resources management and payroll cycle, all of them creates a journal entry to updating the general ledger.
The general ledger updates in summary level while the subsystems for detailed information? This creates the audit trails i think
Explain 2) Post adjusting entries from General Ledger and Reporting System Process
Tip: accruals, deferrals, estimates, revaluations and correction.
Adjusting entries fall into five basic categories, which each will be explained. They are Accruals, Deferrals (prepayment), Estimates, Revaluations and Corrections.
Explain a) accruals/ periodeafgrænsningsposter
from 2) Post adjusting entries from General Ledger and Reporting System Process
a) 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. Examples include the recording of interest revenue earned and wages payable
Danish: a) periodeafgrænsningsposter er indtægter foretaget ved regnskabsårets afslutning for at afspejle begivenheder, der er indtruffet, men for hvilke kontanter endnu ikke er modtaget eller udbetalt. Eksempler omfatter optagelse af renteindtægter og løn
Explain b) deferrals (prepayment)
from 2) Post adjusting entries from General Ledger and Reporting System Process
b) Deferrals (prepayment) are entries made at the end of the accounting period to reflect the exchange of cash prior to performance of the related event. Examples include rent and insurance as prepaid assets.
Explain c) Estimates
from 2) Post adjusting entries from General Ledger and Reporting System Process
c) Estimates are entries that reflect a portion of expenses expected to occur over a number of accounting periods. Examples include depreciation
Explain revaluations
from 2) Post adjusting entries from General Ledger and Reporting System Process
d) Revaluations are entries made to reflect either differences between the actual and recorded value of an asset or a change in accounting principle.
Explain corrections
from 2) Post adjusting entries from General Ledger and Reporting System Process
e) Corrections are entries made to counteract the effects of errors found in the general ledger.
What does step 3) Prepare financial statements from General Ledger and Reporting System Process means?
Most organizations ‘’close the books’’ to produce financial statements monthly, quarterly, and annually.
There are new standards and technology that affect financial reporting from 3) Prepare financial statements from General Ledger and Reporting System Process, what are those?
IFRS and GAAP
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 communication financial data, required by SEC if it’s a public company. The main purpose of XBRL is to help investors understand information in a user-friendly format
What are the difference between IFRS and GAAP
Tip: major differences is in how fixed assets are recorded and reported
IFRS VS GAAP
¬ The differences on IFRS and GAAP affect how data is collected in an accounting information system
¬ One of the major differences is in how fixed assets are recorded and reported
¬ IFRS requires that fixed assets to be reported on a component basis meaning that different elements of a fixed asset may have different lives. = ligesom vi kender det fra skatteret med forskellige afskrivningsperioder på komponenter af et aktiv.
What does step 4) Produce managerial reports from General Ledger and Reporting System Process means?
Evaluating performance including
¬ 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 non-financial performance
¬ Graphs, data visualization and proper graph design
