AIS Ch. 3: The General Ledger

What is the benefit of tags in XBRL?

they can be saved in AIS and re-applied to next years' set of financial statements. They can also be exported to another AIS easily.

When does the close process occur?

Between financial year-end and finalization of financial statements

XBRL

Extensible Business Reporting Language: designed for use in communicating the content of financial data. It creates tags for each data item (e.g. revenue), similar to that used by HTML. The SEC requires that XBRL formatted data is filed quarterly and annually.

How often should GL data be backed up?

It depends. Things that happen frequently should be backed up more frequently. - transactions: very often - chart of accounts: not often

Common activities in the close process

- resolving known errors - adjusting the cash balance when performing the bank reconciliation - accruing for employee payroll - booking JE's for estimates - Clearing GL suspense accounts

Adjusting entry types

1. Accruals 2. Deferrals 3. Estimates: entries that reflect a portion of expenses that occur over a number of accounting periods 4. Revaluations: entries made to reflect either differences between the actual and recorded value of an asset or a change in accounting principle 5. Corrections: counteract erros

General Ledger Documents

1. Chart of Accounts 2. General Ledger 3. Journals 4. Subsidiary Journals (sub-ledger)

Ongoing Processing Integrity Controls (types)

1. Validity 2. Field (format) 3. Zero-balance 4. Completeness 5. Sign check 6. Adjusting entry template

General Ledger Risks

1. inaccurate, incomplete, or fraudulent general ledger data exists, which may result in incorrect financial statements or reports 2. unauthorized disclosure of General Ledger data would result in difficulty restoring past reports

Who should access to view GL data be restricted to?

People who run financial reports: finance or accounting departments

Types of journals

Specialized: records large numbers of repetitive debits/credits General journal: records infrequent JE's

What do closing entries update?

The General Journal and the Adjusted GL

Who closes the books?

The person right below the CFO

Audit trail

a traceable path of a transaction from a point of origin through its final output

Validity check

check to ensure that the GL account exists in the chart of accounts for each account number referenced in a JE

Sign check

checks to ensure that accounts have the appropriate balance (debit or credit)

Field (format) check

checks to ensure that the amount or value field in the journal entry contains the right kind of data

Zero-balance check

checks to verify that the total debits equal total credits in the JE

Ongoing process integrity controls (definition)

controls that are automatically performed by the AIS and address the risk of inaccurate/incomplete/fraudulent GL data.

Subsidiary ledger (sub-ledger)

individual JE activity for one GL account broken into sub-accounts

Journals

individual JE activity, grouped by coming from a similar source/cycle. It is an AIS-specific document that stores all information when JE's are posted.

Genral Ledger

keeps track of the financial transactions from the five business process cycles and generates reports on this information for users. "Ending balance" financial data for every asset, liability, equity, revenue, and expense GL account.

Chart of Accounts

listing of all GL accounts and a brief description

Adjusting entry template

made for recurring adjusting entries made each period in the same amount (like depreciation)

Who should create master data?

someone with authoritative duties

Completeness check

test to ensure that all pertinent data is entered, especially the source of the JE