Chapter 1

1. Chapter 1 General Ledger And Business Reporting (GL/BR) Introduction to Accounting Information Systems

2. Learning Objectives • See how various business processes feed data required for GL updates • Understand how GL/BR supports external & internal reporting functions • Recognize limitations of traditional GL approach in contemporary systems • Appreciate how client/server hardware/software platforms can be used to implement GL/BR • Examine control issues and potential problems

3. Functions of GL/BR • GL process • accumulating data, classifying data by GL accounts, recording data in GL accounts • fueling FR, BR and other reporting subsystems with information • BR process • preparing general-purpose, external financial statements • ensuring that F/S conform to GAAP • generating web-based forms • generating ad hoc & predetermined business reports

4. Horizontalperspective VPFinance Controller Treasurer Businessreporting department Budgetingdepartment Financial reportingofficer Managerial reportingofficer

5. Horizontal information flows • Business process feeders send updates to business reporting department • Treasurer notifies BR of investing transactions • Treasurer notifies BR of financing transactions • Controller notifies BR of adjusting entries • Budgeting dept. send finalized budget figures to BR • BR accounting dept. sends Adjusted T/B to financial reporting officer

6. Horizontal information flows (2) • BR sends actual & budget figures to budgeting department • BR sends actual & budget figures to managerial reporting officer • Financial reporting officer sends GAAP-based financial statements to Treasurer, Controller, and outside parties (owners, banks, SEC) • Managerial reporting officer sends performance reports to various managers.

7. Internal & External Business Reporting Flows

8. Responsibility Accounting Performance Reporting

9. Horizontal & Vertical Information Flows

11. GL/FR - level 0 DFD

12. GL Coding • 1113 Cash in Bank • 1xxx = assets • x1xx = current assets • xx1x = cash accounts • xxx3 = cash in bank • -------------------------------------------------- • 1111 might mean petty cash1112 might mean change fund1121 might mean trade accounts receivable1122 might mean receivables from officers

13. Charts of Accounts • Must be flexible to meet the firm’s financial and managerial reporting needs • For a multi-entity firm, there is need to code for departments, geographical regions, product lines, divisions, and special reporting entities • Should accommodate “rolling up” or consolidating accounts into statements using different forms

14. Limitations of GL Approach • Disjoint stores of data for financial and non-financial information • Eliminate of source (operating) data business event information has been added to account summaries • Detailed business event data eventually are purged from the system after year-end closing of GL account balances • Inflexibility of the coding system used for Chart of Accounts

15. Technology-enabled Issues in BR • FR modules in ERP systems • Balanced Scorecard • Business Intelligence • Business Reporting via the Internet ( use of Extensible Business Reporting Language – XBRL) • Public Databases • Object-oriented databases

16. FR modules in ERP systems • Many options available for processing business events that affect multiple processes • Options controlled to permit only users with pertinent interest to record events • User access to ERP database also restricted to “need to know” basis

17. Balanced Scorecard • Methodology for assessing organization’s business performance via • Financial • Internal business processes • Customers • Innovation and improvement activities • Functionality included in applications by all major ERP vendors

18. Business Intelligence • Integration of statistical and analytical tools with decision support technologies • Facilitates complex analyses of data warehouses by managers and decision makers • Typical module in ERP systems

19. 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 many software packages • Can be easily searched by web browsers • Enables easy uploading and downloading of information to other software packages for update, analysis, etc.

20. Public Databases • Aid to financial reporting officers in determining BR treatments • National Automated Accounting Research System (NAARS) • The Internet may be viewed as one huge public database

21. Object-oriented Databases • Widely used in ERP systems • Permit rapid and flexible summarization of database information into various reports • Can easily specify predetermined report forms and see automatic reports in predetermined format

22. Controls in Networked Workstation (Multiuser) Environment • User ID and password; Access control by dividing files into “partitions” • Review of system access logs • Call-back procedures • Diskless workstation and network computers (no storage capability) • Data encryption and digital signatures • File and record locking to resolve contention or concurrency problem • Front-end workstation to protect the centralized database

23. Summary • Business processes feed data required for GL updates and subsequently for internal and external reporting • Limitations of traditional GL approach in contemporary systems • Technology-enabled initiative for BR • Control issues in networked workstation environment