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MODULE 15 Financial Reporting and Management

This document discusses different types of coding systems used in accounting information systems (AIS). It describes sequential codes, block codes, group codes, and mnemonic codes. For each type of code it provides examples of their uses and advantages/disadvantages. It also summarizes the key functions and files of a general ledger system, including the general ledger database and the financial reporting process.

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Euli Mae Somera
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76 views5 pages

MODULE 15 Financial Reporting and Management

This document discusses different types of coding systems used in accounting information systems (AIS). It describes sequential codes, block codes, group codes, and mnemonic codes. For each type of code it provides examples of their uses and advantages/disadvantages. It also summarizes the key functions and files of a general ledger system, including the general ledger database and the financial reporting process.

Uploaded by

Euli Mae Somera
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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MODULE 15

FINANCIAL REPORTING AND MANAGEMENT

Uses of Coding In AIS


 concisely represent large amounts of complex Information that would otherwise be
unmanageable
 provide a means of accountability over the completeness of the transactions processed
 Identify unique transactions and accounts within a file
 Support the audit function by providing an effective audit trail
Sequential Codes
 Represent Items In sequential order
 Used to prenumber source documents
 Track each transaction processed
 Identify any out-of-sequence documents
 Disadvantages:
o Arbitrary Information
o hard to make changes and Insertions

Block Codes
 Represent whole classes by assigning each class a specific range within the coding
scheme
 Used for chart of accounts
o The basis of the general ledger
 Allows for the easy Insertion of new codes within a block
o Don’t have to reorganize the coding structure
 Disadvantage:
o Arbitrary Information

Group Codes
 Represent complex Items or events Involving two or more pieces of data using fields with
specific meaning
 For example, a coding scheme for tracking sales might be 04-09-476214-99, meaning:
Store No. Dept. No. Item No. Salesperson
04 09 476214 99
 Disadvantages:
o Arbitrary Information
o Overused

Mnemonic Codes
 Alphabetic characters used as abbreviations, acronyms, and other types of combinations
 Dot not require users to memorize the meaning since the code Itself Is Informative - and
not arbitrary
o NY = New York
 Disadvantages:
o limited usability and availability

IS Functions of GLS
 General ledger systems should:
o Collect transaction data promptly and accurately
o Classify/code data and accounts
o Validate collected transactions/ maintain accounting controls (e.g., equal debits
and credits)
o process transaction data
 post transactions to proper accounts
 update general ledger accounts and transaction files
 record adjustments to accounts
o store transaction data
o generate timely financial reports

GLS Database
 general ledger master file
o principal FRS file based on chart of accounts
 General ledger history file
o Used for comparative financial support
 Journal voucher file
o All journal vouchers of the current period
 Journal voucher history file
o Journal vouchers of past periods for audit trail
 Responsibility center file
o Financial data by responsibility centers for MRS
 Budget master file
o Budget data by responsibility centers for MRS

The process begins with a clean state at the start of a new fiscal year. Only the balance sheet
(permanent) accounts are carried forward from the previous year. From this point, the following
steps occur:
1. Capture the transaction. Within each transaction cycle, transactions are recorded In the
appropriate transaction file.

2. Record In special journal. Each transaction Is entered Into the journal. Recall that
frequently occurring classes of transactions, such as sales, are captured In special journals.
Those that occur Infrequently are recorded In the general journal or directly on a journal
voucher.
3. Post to subsidiary ledger. The details of each transaction are posted to the affected
subsidiary accounts.

4. Post to general ledger. Periodically, journal vouchers, summarizing the entries made to
the special journals and subsidiary ledgers, are prepared and posted to the general ledger
accounts. The frequency of updates to the general ledger will be determined by the degree of
system Integration.

5. Prepare the unadjusted trial balance. At the end of the accounting period, the ending
balance of each account In the general ledger Is placed In a worksheet and evaluated In total
for debit-credit equality.

6. Make adjusting entries. Adjusting entries are made to the worksheet to correct errors and
to reflect unrecorded transactions during the period, such as depreciation.

7. Journalize and post adjusting entries. Journal vouchers for the adjusting entries are
prepared and posted to the appropriate accounts In the general ledger.

8. Prepare the adjusted trial balance. From the adjusted balance, a trial balance Is prepared
that contains all the entries that should be reflected In the financial statements.

9. Prepare the financial statements. the balance sheet, Income statement, and statement of
cash flows are prepared using the adjusted trial balance.

10. Journalize and post the closing entries. Journal vouchers are prepared for entries that
close out the Income statement (temporary) accounts and transfer the Income or loss to
retained earnings. Finally, these entries are posted to the general ledger.
11. Prepare the post-closing trial balance. a trial balance worksheet containing only the
balance sheet accounts may now be prepared to Indicate the balances being carried forward to
the next accounting period.

ACTIVITIES
1. the coding scheme most appropriate for a chart of accounts Is
a. Sequential code
b. Block code
c. group code
d. mnemonic code

2. A common use for sequential coding Is


a. creating the chart of accounts
b. Identifying Inventory Items
c. Identifying documents
d. Identifying fixed assets

3. the most Important advantage of sequential coding Is that


a. Missing or unrecorded documents can be Identified
b. The code Itself lacks Informational content
c. Items cannot be Inserted
d. Deletions affect the sequence

4. When a firm wants Its coding system to convey meaning without reference to any other
document, It would choose
a. An alphabetic code
b. A mnemonic code
c. A group code
d. A block code

5. the most Important advantage of an alphabetic code Is that


a. Meaning Is readily conveyed to users
b. Sorting Is simplified
c. The capacity to represent Items Is Increased
d. Missing documents can be Identified

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