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Quick Guide On Fundamentals of Accounting With Analytics v2024-1

The document serves as a quick guide to Smartbooks Fundamentals of Accounting with Analytics, detailing its cloud-based ERP system designed for small and medium-sized enterprises. It covers essential topics such as cloud computing, user interface navigation, accounting principles, and the accounting cycle, along with practical exercises. Additionally, it introduces business analytics and reporting tools, including Microsoft Power BI, to enhance data visualization and decision-making in accounting.
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0% found this document useful (0 votes)
57 views126 pages

Quick Guide On Fundamentals of Accounting With Analytics v2024-1

The document serves as a quick guide to Smartbooks Fundamentals of Accounting with Analytics, detailing its cloud-based ERP system designed for small and medium-sized enterprises. It covers essential topics such as cloud computing, user interface navigation, accounting principles, and the accounting cycle, along with practical exercises. Additionally, it introduces business analytics and reporting tools, including Microsoft Power BI, to enhance data visualization and decision-making in accounting.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 126

Quick Guide on Smartbooks Fundamentals of

Accounting with Analytics

Smartbooks
Fundamentals of
Accounting with
Analytics
Quick guide on ERP and PBI

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Quick Guide on Smartbooks Fundamentals of
Accounting with Analytics

TABLE OF CONTENTS

Table of Contents
TABLE OF CONTENTS ............................................................................................................. 2
Chapter 1: Smartbooks on a Cloud Platform ........................................................................... 6
What is an ERP System? .................................................................................................................6
What is Cloud Computing? .............................................................................................................6
Types of Cloud Deployment .......................................................................................................................... 7
Key Features of Cloud Computing ................................................................................................................ 7
Smartbooks on Cloud Performance .................................................................................................8
Technical Specifications ................................................................................................................................ 8

Chapter 2: Getting Started with Smartbooks .......................................................................... 9


Challenges for SMEs .......................................................................................................................9
Smartbooks Framework ............................................................................................................... 10
Basic Navigation ........................................................................................................................... 11
Logging-in .................................................................................................................................... 11
Smartbooks User Interface ........................................................................................................... 14
Header......................................................................................................................................................... 14
Modules Menu / Main Menu ...................................................................................................................... 14
User Info...................................................................................................................................................... 16
Extension Button......................................................................................................................................... 16
Theme Button ............................................................................................................................................. 16
Logout Button ............................................................................................................................................. 16
Operation Modes in Smartbooks ................................................................................................................ 16
Functions in a Form..................................................................................................................................... 16
Customize User Credentials ........................................................................................................................ 16
Exercises ...................................................................................................................................... 18

Chapter 3: Introduction to Fundamentals of Accounting ....................................................... 19


Accounting Defined ...................................................................................................................... 19
Brief History of Accounting ........................................................................................................... 19
Types of Business Organizations ................................................................................................... 20

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Service Business ............................................ 20
Merchandising Business................................ 20
Manufacturing Business.............................................................................................................................. 20
Hybrid Business ............................................................................................................................ 21
Double Entry Bookkeeping ........................................................................................................... 21
Basic Accounting Principles ........................................................................................................... 21
Accrual Principle ......................................................................................................................................... 21
Conservatism Principle................................................................................................................................ 21
Cost Principle .............................................................................................................................................. 22
Economic Entity Principle ........................................................................................................................... 22
Full Disclosure Principle .............................................................................................................................. 22
Going Concern Principle.............................................................................................................................. 22
Matching Principle ...................................................................................................................................... 22
Materiality Principle.................................................................................................................................... 22
Monetary Unit Principle.............................................................................................................................. 22
Time Period Principle .................................................................................................................................. 23
Computerized Accounting System ................................................................................................. 23
Special Features of Computerized Accounting ............................................................................... 23
Advantages of Computerized Accounting ...................................................................................... 24
Chart of Accounts ......................................................................................................................... 25
Levels of Chart of Accounts......................................................................................................................... 25
Type of Chart of Accounts........................................................................................................................... 25
Navigation & Viewing.................................................................................................................................. 26
Exercise ....................................................................................................................................... 26

Chapter 4: Subsidiary Ledgers and Special Journals .............................................................. 27


Purpose of Control Accounts......................................................................................................... 27
Purpose of Subsidiary Ledgers ...................................................................................................... 27
Navigation & Viewing ................................................................................................................... 28
Exercise ....................................................................................................................................... 29

Chapter 5: The Accounting Cycle .......................................................................................... 30


A. Journalizing .............................................................................................................................. 30
General Journal ........................................................................................................................................... 30
Exercise ....................................................................................................................................... 36
Exercise ....................................................................................................................................... 40
Special Journal ............................................................................................................................................ 41

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Quick Guide on Smartbooks Fundamentals of
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B. Ledger ................................................... 57
General Ledger Defined ................................ 57
Exercise ....................................................................................................................................... 60
Subsidiary Ledger Defined .......................................................................................................................... 61
Exercise ....................................................................................................................................... 62
C. Trial Balance............................................................................................................................. 63
Trial Balance Defined .................................................................................................................................. 63
Navigation & Viewing.................................................................................................................................. 63
Exercise ....................................................................................................................................... 65
D. Adjusting Entries ...................................................................................................................... 66
Adjusting Entries Defined ........................................................................................................................... 66
Accruals ....................................................................................................................................................... 66
Deferrals...................................................................................................................................................... 67
Navigation & Viewing.................................................................................................................................. 67
Exercise ....................................................................................................................................... 70
E. Financials Statements ............................................................................................................... 71
Financial Statements Defined ..................................................................................................................... 71
Types of Financial Statement ...................................................................................................................... 71
Navigation and Viewing .............................................................................................................................. 72
Exercise ....................................................................................................................................... 78
F. Closing Entries: Period-End Closing ............................................................................................ 79
Closing Entry Defined .................................................................................................................................. 79
Temporary Accounts vs. Permanent Accounts ........................................................................................... 79
Navigation & Viewing.................................................................................................................................. 80
Exercise ....................................................................................................................................... 83
G. Reversing Entries ..................................................................................................................... 84
Reversing Entry Defined.............................................................................................................................. 84
Navigation & Viewing.................................................................................................................................. 84
Exercise ....................................................................................................................................... 86
H. Journal Entry List ...................................................................................................................... 87
Navigation & Viewing.................................................................................................................................. 87

CHAPTER 6: Introduction to Business Analytics ..................................................................... 87


What is Business Analytics ............................................................................................................ 88
Metrics and KPIs.......................................................................................................................................... 89
Enterprise Dataflow .................................................................................................................................... 91
Enterprise Data Warehouse ........................................................................................................................ 93

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Quick Guide on Smartbooks Fundamentals of
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Reporting Tools ............................................. 94
Data Visualization ......................................... 95
Representing Data with Charts ................................................................................................................... 96
Effective Visualization ............................................................................................................................... 102
Microsoft Power BI..................................................................................................................... 106
What is Microsoft Power BI? .................................................................................................................... 106
Ways to access Microsoft Power BI .......................................................................................................... 106
Capstone Activity ...................................................................................................................................... 110
Exercise ..................................................................................................................................... 126

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Quick Guide on Smartbooks Fundamentals of
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Chapter 1: Smartbooks on a Cloud Platform


At the end of this chapter, students will be able to:
• Know what is an ERP System
• Understand the difference between on premise and on cloud system experience.
• List the benefits of cloud computing
• Know the Smartbooks on cloud performance

What is an ERP System?


ERP stands for Enterprise Resource Planning, and an ERP system is a type of software that integrates a
variety of business processes and functions into a single system. An ERP system typically includes modules
for areas such as accounting, human resources, customer relationship management, supply chain
management, inventory management, and production planning.

Image from: www.projectline.ca

The primary objective of an ERP system is to provide a single source of truth for all business data, making
it easier for companies to manage their operations more efficiently and effectively. By consolidating data
from different departments, an ERP system can eliminate the need for multiple, disconnected software
applications, and help to streamline business processes, improve collaboration between departments,
and increase data accuracy and consistency.

What is Cloud Computing?


Cloud computing represents a new way to deploy computing technology to give users the ability to access,
work on, share, and store information using the internet. The ideal way to describe Cloud Computing
would be to term it as 'Everything as a Service' (abbreviated as XaaS). The cloud itself is a complex network
of data centers, each composed of thousands of computers working together that can perform and
achieve the functions of a software on a personal or business computer units by providing users access to
a vast number of applications, platforms and services delivered over the Internet.

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Quick Guide on Smartbooks Fundamentals of
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Types of Cloud Deployment

PRIVATE CLOUD
Private Cloud, also known as Internal Cloud, is a cloud-based infrastructure operated exclusively for a
single organization with all data protected behind an internal firewall. This is usually physically located at
the company's on-site data center or can also be managed and hosted by a third-party provider.

PUBLIC CLOUD
Public Cloud, also known as External Cloud, is available to the public where data are created and stored
on third-party servers. Service infrastructure belongs to service providers that manage them and
administer pool resources. The need for user companies to buy and maintain their own hardware is
eliminated. It is based on a shared cost model for all the users or in the form of a licensing policy such as
pay per use.

HYBRID CLOUD
Hybrid Cloud encompasses the best features of the above-mentioned cloud computing deployment
models. It allows companies to mix and match the facets of public and private cloud that best suit their
requirements.

Key Features of Cloud Computing


The characteristics of Cloud Computing express its significance in the current business market. It has
already been proven that Cloud Computing is a model for enabling universal, convenient, and on-demand
network access. Below are the key features of Cloud Computing:

• Agility -helps in rapid and inexpensive re-provisioning of resources

• Location Independence - resources can be accessed anywhere (except on limitations set by


company's internal control)

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Quick Guide on Smartbooks Fundamentals of
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• Multi-Tenacity - resources are shared amongst a large pool of users

• Reliability - dependable accessibility of resources and computation

• Scalability - dynamic provisioning of data helps in avoiding various bottleneck scenarios

• Ease of Maintenance - users (companies/organizations) have less work in terms of resource


upgrades and management, handled by service providers of cloud computing

Smartbooks on Cloud Performance


Smartbooks is a purely web-based ERP system for small and medium sized enterprises. Smartbooks is a
software easy to use, has deep functionality, is accessible, and is compliant with BIR reporting
requirements. It is best for small- and medium-sized companies with their unique qualities and special
needs.

And because Smartbooks is based in the cloud, other IT costs are eliminated, such as the cost of putting
up and maintaining servers, hiring and maintaining an IT team, and upgrading the software and spending
for other support expenses.

Technical Specifications
Smartbooks has minimal requirements when it comes to technical specifications so it can offer a simpler,
more cost-effective, and more reliable solution for businesses. The following are the technical
specifications needed in order to access Smartbooks:

Can be accessed on various operating systems like:

Through web browsers like:

The optimal performance of the system is on an internet speed of 5 mbps and higher but can be accessed
on a minimum speed of 1 mbps.

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Chapter 2: Getting Started with Smartbooks

At the end of this chapter, students will be able to:


• Learn how to use the various user interface components of Smartbooks
• Familiarize and visualize the illustration to Smartbooks Framework
• Learn to value of information in scaling up businesses
• Identify the basic functionalities inside an ERP System (Interface, Operation
Modes, Functions in a document, Credentials Changing and Master Record) using
Smartbooks.

Challenges for SMEs


SME companies often acquire multiple solutions to meet specific needs as business expands; for example,
an accounting application to manage general ledgers and invoices, or a Storage Location management
solution to keep track of inventory.

Keeping this combination of applications up to date, integrated, and running seamlessly can be
challenging. To get a picture of what is happening in every part of the business, it takes a lot of time and
effort to extract and reconcile data across many solutions. While such applications may be effective for a
time, ultimately your business needs a more flexible and integrated solution.

With SMARTBOOKS, it is now possible to have a complete and real-time picture of your financial position.
Having this information readily available gives you more time to focus on growing your business.

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Quick Guide on Smartbooks Fundamentals of
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Smartbooks Framework

Smartbooks Cloud ERP system is composed of multiple modules. The above illustration shows the
structure of the system. Smartbooks accepts data entry, called transactions, which are converted through
various processes into output information that goes out to the users. Sales of products from customers,
purchases of inventory from Suppliers, and cash disbursements and receipts are the common type of
transactions.

Smartbooks is composed of three major units:

1. Transaction Processing
This supports daily business operations with numerous reports, documents, and messages from users
throughout the organization. Transaction processing consists of three different cycles: the revenue, the
expenditure, and the project management. Each cycle captures and processes different types of financial
transactions;

2. General Ledger/Financial Reporting


This produces the traditional Financial Statements, such as Income Statement, Balance Sheet, Statement
of Cash Flow, Tax Returns, Reports / Schedules, and other reports mandated by the government.

3. Management Reporting
This provides internal management reports needed for decision making.

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Basic Navigation
Smartbooks was designed with the most comprehensive User Interface in mind. You don’t need expert’s
technical knowledge to navigate through the portal because it was designed with utmost simplicity.

Logging-in
1. Go to https://portal.fitacademy.ph

2. Click Register > Fill-out the registration form > ”University Code” will be provided by instructor >
Click Register
3. Check your email for account activation and activate your account.

4. Input your credentials (email and password) and login.

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5. Go to Dashboard. “Section Code” will be provided by your instructor.


6. Click Add Code.

7. Once the code has been added, your user ID and password will appear.
8. Click Open Smartbooks URL to access Smartbooks.
9. Click Reset Password should you forgot your password.

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10. Input the User ID and Password provided by the portal on Smartbooks Login Page.

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Smartbooks User Interface

Header
The header of the Smartbooks User Interface contains the name of the company and its logo when
modules menu is unhidden.

Modules Menu / Main Menu


Navigation in Smartbooks is done using the Modules Menu/Main Menu. This portion can be
hidden/unhidden. It arranges the functions of the individual process and applications in a tree-like
structure. This menu contains a list of all modules with their related options.

The features for this menu:


1. Are arranged accustomed to per user basis and need of access.
2. May be inactive for unauthorized users and will not modify some of the transactions.

The following modules are the primary content of the system:

Favorites

▪ This feature displays the most commonly-used transactions of certain items, content, or actions
by clicking the star button beside each submodule.

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Admin

▪ This is used for setting-up and customization of the database. In this module, we can use this for
modifying user credentials, branches and company details, and other general settings.

Financials & Accounting

▪ Generate different financial reports


▪ Inquire about any account over any period
▪ Post transactions automatically without undergoing a separate process
▪ Generate BIR Reports
▪ Other features include: producing journal narratives, posting journals to any number of periods,
reversal of journal entries

Inventory Management

▪ Maintain unlimited number of warehouses and stock quantities


▪ Set selling prices, even for specific branched or individual customers
▪ Manually maintain standard costs or automatically determine weighted average costs
▪ Other features include: allowing the invoicing, pricing and costing of dummy service or stock
items without recording them, maintaining maximum and minimum stock level quantities and
unlimited user-defined field specific to each inventory category for additional important
information required to be stored item

Sales & Distribution

▪ Enter and maintain customer orders and reference back to the order numbers
▪ Invoice orders directly with little or no additional input
▪ Give the user information and options on inventory location
▪ Present a full analysis of outstanding balance and aging of receivables
▪ Other features include: showing transactions settled at any given month or outstanding
transactions, calculating discounts across a range of products, viewing sequence of invoices,
credit notes & receipts entered in the transaction inquiries & processing collection applied to
specific invoice.

Purchasing

▪ Covers complete procurement cycle from PO generation to goods receiving


▪ Show comprehensive subsidiary ledger on supplier’s account
▪ Show an aged listing of accounts payable balances
▪ Enable payment run to create payment transactions

And other modules for the day-to-day business activities.

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User Info
Displays the information of user’s profile (user name and ID, options to change password and logout).

Extension Button
It displays other features of Smartbooks such as theme color, change password, and messages.

Theme Button
Allows the users change the theme color of Smartbooks easily.

Logout Button
Lets the user sign out from Smartbooks.

Operation Modes in Smartbooks


FIELD USAGE
Copy From Copy records from another module to current module
Preview Preview the record in pdf, excel, or crystal report viewer
First Navigate to first recorded document
Previous Navigate to previously recorded document
Next Navigate to next recorded document
Last Navigate to last recorded document
Add Add a new record / document
New Open a new document to make a new transaction
Update Modify the data of an existing record / document

Functions in a Form
These functions provide you with extensive support in searching for objects.

1. Document Link
This function is normally linked with the master data and documents. Using it will open the
detailed information.

2. Selection List
While entering data into a document, user can easily look-up for customer/supplier data, or
item data using this button, or simply place your cursor on the field which has SL button and
then press Tab key.

Customize User Credentials


For a more personalized experience when using the system, you can change your user name and
password in Smartbooks.

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1. Go to Admin module > Setup > Define Users

2. User Listing will appear on your window. Click edit or double click the assigned student number
to you. User Profile will appear on your window.
3. Take note that User ID is not editable. This is what you use when logging in. On the User Name
field, input your name.
4. On the Password field, input your preferred new password then repeat your new password on
the re-enter password field.
5. On the lower right, click Update.

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Exercises
Refer to Exercise on the workbook provided by your instructor.

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Chapter 3: Introduction to Fundamentals of Accounting

At the end of this chapter, students will be able to:


1. Familiarize to theoretical concepts related to Accounting
2. Manipulate the Chart of Accounts according to the requirement

Accounting Defined
Accounting is a systematic process of identifying, recording, measuring and classifying, verifying,
summarizing, interpreting, and communicating financial information. It provides feedback to
management regarding the financial results and status of an organization. It may be handled by a
bookkeeper or an accountant at small firms or by sizable finance departments.

Brief History of Accounting


The first name that might come to mind when referencing early accounting history is “Luca Pacioli”. Fra
Luca Bartolomeo de Pacioli, an Italian mathematician and a Franciscan friar, described double-entry
bookkeeping in his “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” back in 1494.

The first record of accounting occurred thousands of years ago in Mesopotamia and has evolved into the
intricate element of business and life that it is today. Earliest accounting records were found over 7,000
years ago among the ruins of Ancient Mesopotamia. At the time, people relied on accounting to keep a
record of crop and herd growth. They used accounting techniques that are still used today to determine
if there was a surplus or shortage after crops were harvested each season.*

In Pacioli’s book, he detailed a system of financial recordkeeping in which every “debit” (latin word for
“he owes”) was matched to a “credit” (latin word for “he trusts”). In his system, he included asset, liability,
capital, income and expense accounts—exactly those categories you would find on your own Balance
Sheet and Income Statement.

* https://fremont.edu/history-of-accounting/

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Types of Business Organizations


A business entity is an organization that uses economic resources or inputs to provide goods or services
to customers in exchange for money or other goods and services. Business organizations come in
different types and different forms of ownership.

Three major types of businesses:

Service Business
A service type of business provides intangible products (no physical form). Service type firms offers
professional skills, expertise, advice, and other similar products.
Example(s):
✓ Salon
✓ Repair shops
✓ Schools
✓ Banks
✓ Accounting and law firms

Merchandising Business
This type of business buys products at wholesale price and sells the same at retail price. They are known
as “buy and sell” businesses. They make profit by selling the products at prices higher than their purchase
costs. A merchandising business sells a product without changing its form.
Example(s):
✓ Grocery stores
✓ Convenience stores
✓ Distributors and other resellers

Manufacturing Business
Unlike a merchandising business, a manufacturing business buys products with the intention of using
them as materials in making a new product. Thus, there is a transformation of the products purchased. A
manufacturing business combines raw materials, labor, and factory overhead in its production process.
The manufactured goods will then be sold to customers.
Example(s):
✓ Furniture shops
✓ Gardenia
✓ Car dealers

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Hybrid Business
Hybrid businesses are companies that may be classified in more than one type of business. A restaurant,
for example, combines ingredients in making a fine meal (manufacturing), sells a cold bottle of wine
(merchandising), and fills customer orders (service). Nonetheless, these companies may be classified
according to their major business interest. In that case, restaurants are more of the service type – they
provide dining services.

Double Entry Bookkeeping


Double entry is the fundamental concept underlying present-day bookkeeping and accounting. Double-
entry accounting is based on the fact that every financial transaction has equal and opposite effects in at
least two different accounts, in which each entry is recorded to maintain the relationship.

The fundamental concept of double entry derives from the use of debit and credit to record business
transactions. The total debits always equal the total credits. Customarily, in bookkeeping and accounting,
the asset, expense and loss accounts are listed on the left side of a bookkeeping sheet, and the liability,
equity, revenue and gain accounts are listed on the right side, with the two sides maintaining the same
total balance. A debit to one or more accounts must be accompanied by a credit to at least one account,
equally increasing or decreasing the balance on each side. Other times, a debit to either side is balanced
out by an equal credit to the same side.

Basic Accounting Principles


A number of basic accounting principles have been developed through common usage. They form the
basis upon which modern accounting is based. The best-known of these principles are as follows:

Accrual Principle
This is the concept that accounting transactions should be recorded in the accounting periods when they
actually occur, rather than in the periods when there are cash flows associated with them. This is the
foundation of the accrual basis of accounting. It is important for the construction of financial
statements that show what actually happened in an accounting period, rather than being artificially
delayed or accelerated by the associated cash flows.

Conservatism Principle
This is the concept that you should record expenses and liabilities as soon as possible, but to record
revenues and assets only when you are sure that they will occur. This introduces a conservative slant
to the financial statements that may yield lower reported profits, since revenue and asset recognition
may be delayed for some time. Conversely, this principle tends to encourage the recordation of losses
earlier, rather than later.

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Cost Principle
This is the concept that a business should only record its assets, liabilities, and equity investments at
their original purchase costs. This principle is becoming less valid, as a host of accounting standards
are heading in the direction of adjusting assets and liabilities to their fair values.

Economic Entity Principle


This is the concept that the transactions of a business should be kept separate from those of its owners
and other businesses. This prevents intermingling of assets and liabilities among multiple entities, which
can cause considerable difficulties when the financial statements of a fledgling business are first audited.

Full Disclosure Principle


This is the concept that you should include in or alongside the f inancial statements of a business all of
the information that may impact a reader's understanding of those financial statements. The
accounting standards have greatly amplified upon this concept in specifying an enormous number of
informational disclosures.

Going Concern Principle


This is the concept that a business will remain in operation for the foreseeable future. This means
that you would be justified in deferring the recognition of some expenses, such as depreciation, until
later periods. Otherwise, you would have to recognize all expenses at once and not defer any of them.

Matching Principle
This is the concept that, when you record revenue, you should record all related expenses at the same
time. Thus, you charge inventory to the cost of goods sold at the same time that you record revenue
from the sale of those inventory items. This is a cornerstone of the accrual basis of accounting. The cash
basis of accounting does not use the matching the principle.

Materiality Principle
This is the concept that you should record a transaction in the accounting records if not, doing so might
have altered the decision-making process of someone reading the company's financial statements. This
is quite a vague concept that is difficult to quantify, which has led some of the more picayune controllers
to record even the smallest transactions.

Monetary Unit Principle


This is the concept that a business should only record transactions that can be stated in terms of a unit
of currency. Thus, it is easy enough to record the purchase of a fixed asset, since it was bought for a
specific price, whereas the value of the quality control system of a business is not recorded. This concept
keeps a business from engaging in an excessive level of estimation in deriving the value of its assets and
liabilities.

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Time Period Principle


This is the concept that a business should report the results of its operations over a standard period
of time. This may qualify as the most glaringly obvious of all accounting principles, but is intended to
create a standard set of comparable periods, which is useful for trend analysis.

Computerized Accounting System


While some firms still do their bookkeeping by hand, most firms generally have too many transactions to
sustain a manual accounting system. The more complicated the financial activities of your business are,
the more likely it is that you'll need a computerized accounting system to ensure effective financial
reporting. Computerized accounting systems are software programs that are stored on a company's
computer, network server, or remotely accessed via the Internet.

Computerized accounting systems allow you to set up income and expense accounts, such as rental or
sales income, salaries, advertising expenses, and material costs. They also can be used to manage bank
accounts, pay bills, and prepare budgets. Depending upon the program, some accounting systems also
allow you to prepare tax documents, handle payroll, and manage project costing. You can generally
customize the software to meet the needs of your business. It's important to make sure that your staff are
trained and understand how to use the system correctly so that your company can successfully use your
accounting program.

Special Features of Computerized Accounting


1. It leads to quick preparation of accounts and makes the accounting statements and records available on
time.
2. It ensures control over accounting work and records.
3. Errors and mistakes would be at minimum in computerized accounting.
4. Maintenance of uniform accounting statements and records is possible.
5. Easy access and reference of accounting information is possible.
6. Flexibility in maintaining accounts is possible.
7. It involves less clerical work and is very neat and more accurate.
8. It adapts to the current and future needs of the business.
9. It generates real-time comprehensive MIS reports and ensures access to complete and critical
information instantly.

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Advantages of Computerized Accounting


1. Better Quality Work
The accounts prepared with the use of computers are usually uniform, neat, accurate, and more legible
than manual job.

2. Lower Operating Costs


Computer is a labor and time saving devise. Hence, the volume of job handled with the help of computers
results in economy and lower operating costs.

3. Improved Efficiency
Computer brings speed and accuracy in preparing the records and accounts and thus, increases the
efficiency of employees.

4. Facilitates Better Control


From the management point of view, greater control is possible and more information may be available
with the use of computer in accounting. It ensures efficient performance in accounting work.

5. Greater Accuracy
Computerized accounting ensures accuracy in accounting records and statements. It prevents clerical
errors and omissions.

6. Relieve Monotony
Computerized accounting reduces the monotony of doing repetitive accounting jobs, which are tiresome
and time consuming.

7. Facilitates Standardization
Computerized accounting facilitates standardization of accounting routines and procedures. Therefore,
standardization in accounting is ensured.

8. Minimizing Mathematical Errors


While doing mathematics with computers, errors are virtually eliminated unless the data is entered
improperly in the first instance.

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Chart of Accounts
The organization of the Chart of Accounts follows a separate “category” for accounts representing Assets,
Liabilities, Capital, Revenues, Cost of Sales, Expenses and Other Income and Expenses. These accounts are
arranged in a logical fashion appropriate to user’s financial accounting and reporting processes.

Levels of Chart of Accounts

Type of Chart of Accounts


1. Title Account

Also called as parent account, this account serves as a grouping of active accounts. In reports, a title
account summarizes all the balances of each active account below it.

2. Active Account

Also called as postable account, this account are the source on entries and transactions, because these
accounts are the one that can be only posted in Smartbooks. And as a practice, it is good to keep all the
accounts at the same level as possible.

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Navigation & Viewing


To view the system’s Chart of Accounts:
• Go to Financials > Chart of Accounts.
• You will be shown the first level of account which are the parent accounts. If you wish to view the
postable accounts inside the system, you can click the expand button on the left side of each
parent account.

• After clicking expand on the parent account, you can also click an expand button again to the
postable accounts to show more the accounts Smartbooks have.

Exercise

Please refer to the exercise workbook provided by your instructor.

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Chapter 4: Subsidiary Ledgers and Special Journals

At the end of this chapter, students will be able to:


1. Determine and familiarize to the purpose of Control Accounts and Subsidiary
Ledgers

Purpose of Control Accounts

The purpose of the control account is to keep the general ledger free of details, yet have the correct
balance for the financial statements. For example, the Accounts Receivable account in the general ledger
could be a control account. If it were a control account, the company would merely update
the account with a few amounts, such as total collections for the day, total sales on account for the day,
total returns and allowances for the day, etc.

Purpose of Subsidiary Ledgers


A subsidiary ledger is a ledger designed for the storage of specific types of accounting transactions. Once
information has been recorded in a subsidiary ledger, it is periodically summarized and posted to an
account in the general ledger, which in turn is used to construct the financial statements of a company.

By having the details of the accounts receivable activity in a subsidiary ledger, a company can better
control its financial information. For example, the credit manager and others in the credit department of
a company will have access to any and all of the credit sales information through the subsidiary ledger
without having access to any other account in the company’s general ledger.

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Navigation & Viewing


To show you more a detailed process how a subsidiary ledger works, the following steps will be a good
help to you:
• Go to Financials > Reports > Subsidiary Ledger.

• In the S/L Type field, you can select what type of business partner you are trying to generate a
report with.

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• After selection of S/L Type, click the selection list to either S/L Account No. or S/L Account Name.
Select the business partner by performing double click or clicking the ‘OK’ button at the below
portion.

• For the reference date, you can set the period in which you can generate the details of the
report. In the Reference Date field, click the calendar icon to set the period. Once complete,
click ‘Search’.

Exercise

Please refer to the exercise workbook provided by your instructor

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Chapter 5: The Accounting Cycle

At the end of this chapter, students will be able to:


1. Understand the theories and concepts related to Journals and Special Journals
2. Perform draft entries and manual journal entries in Smartbooks
3. Obtain a clear view of the transactions made based on a generated report inside
Smartbooks
4. Familiarize to the banking process related to incoming and outgoing payments in
Smartbooks
5. Perform disbursement and collection transactions using Smartbooks
6. Understand the theories and concepts related to Subsidiary Ledgers
7. Generate an automated ledger report for transactions posted
8. Understand the theories and concepts related to a trial balance report
9. Know how to use and generate a trial balance report in Smartbooks
10. Understand the theories and concepts related to what adjusting entries are
11. Create and perform adjusting entries using Smartbooks
12. Generate financial reports for presentation using Smartbooks
13. Analyze reports generated through Smartbooks
14. Understand the theories and concepts related to what closing entries are
15. Create and process closing entries using Smartbooks
16. Understand the theories and concepts related to what reversing entries are
17. Create and perform reversing entries using Smartbooks

A. Journalizing
In accounting and bookkeeping, a journal is a record of financial transactions in order by date. A journal
is often defined as the “book of original entry”. The definition was more appropriate when transactions
were written in a journal prior to manually posting them to the accounts in the general ledger or subsidiary
ledger.

General Journal
General Journal is the master journal that all company transactions or journal entries are recorded in. A
typical general journal has at least five columns:

✓ One for the date


✓ Account title
✓ Posting reference
✓ Debit column
✓ Credit column

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The majority of journal entries in Smartbooks comes from one of the other modules: Sales, Purchasing,
Treasury and Inventory documents post transaction automatically to the G/L. However, in GAAP accrual-
based accounting, you sometimes need to make manual journal entries for certain transactions such as
depreciation, accruals, correcting entries, and the like.

When a journal entry is added manually, it is recorded immediately and cannot be deleted- only reversed.

The purpose of manual journal entries is to record transactions that are not automatically initiated from
a sub-ledger or from another process within Smartbooks.

Creating/Posting Manual Journal Voucher


• Go to Financials > Journal Voucher.
• In the Journal Date and Creation Date field, enter the period you are going to post the voucher.
As standard, the date will be shown in those fields as to date of the system, also known as date
today.
• In the Type column of the General tab, click the dropdown list and select the G/L Account
option.

• After selecting the type, click the selection list in the G/L Account No. column, a list of accounts
you can will appear. You can choose it by performing double-click or clicking the “OK’ button.

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• Once account has been selected, you may now enter an amount on either Debit or Credit column
to reflect the amount to be posted on the created transaction. Click the ‘Add’ button.

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• Please take note that there should be an equal amount that will represent the Debit and Credit
column for you to save the whole document. Once done and complete, click ‘Save’ in the lower
left portion of the document.

• A system message will appear to confirmation of the entry to be included in the system. Click
“OK”, to confirm.

• You will know that it has been saved when there is a system message that the operation ended
successfully. There is also a ‘POSTED’ status at the top right most of the screen.

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Saving Journal Voucher as a Draft


• Following the steps above, you may now create entries for each transaction.
• One good thing about Journal Voucher Draft is that you can save it without even considering the
balance/variance as per the Debit and Credit column. Just click “Save As Draft” and then it will
be saved in the system as a draft record of entry.

• The system will enter it with the status “Operation completed successfully”. After which, you may
now have the choice to update or remove the said draft.

• You will determine if the journal voucher is saved as draft if the status on the upper right corner
indicated ‘Draft’.

• To remove or update the draft, click the triangle button in the ‘Update Draft’ on the lower right
corner then choose the action to be taken.

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Exercise
Please refer to exercise workbook provided by your instructor.

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Making Recurring Entry

Some transactions recur monthly or weekly. Most often, this document is used for recording recurring
transactions such as depreciation expense, equipment lease payments, payroll, office rent and utility
expenses.

• Go to Financials > Recurring Postings


• Input the Code and Description
• Set the entry that will be used as a recurring entry, by selecting G/L Account on the Type column;

• After selecting the type, click the selection list in the G/L Account No. column, a list of accounts
will appear. You can choose it by performing double-click or clicking the ‘OK’ button.

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• Once account has been selected, you may now enter an amount on either Debit or Credit column
to reflect the amount to be posted on the created transaction. Click the ‘Add’ button.

• Do the same process for the credit side

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• Please take note that there should be an equal amount that will represent the Debit and Credit
column in order for you to save the whole document. You can check the total amount per column
in the Total Debit and Total Credit field.
• The next step will be the setup of time being for the transaction. In the Frequency field, you can
set the manner of recurrence of entry. (e.g. Monthly)
• In the Start/End Date, you can set the time of start and if there’s an end to the recurring entry, if
there’s any.
• Click ‘Add’ to finalize the entry.

• A message of ‘Operation ended successfully’ will appear after saving it.

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The system will duplicate the original posting each time the date arrives, and will allow you to either add
the posting as is, or modify it before the final posting to the general ledger.

Exercise
Please refer to exercise workbook provided by your instructor.

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Special Journal

Special Journals Defined


Special journals are all accounting journals except for the general journal. These journals are used to
record specific types of high-volume information that would otherwise be recorded in and overwhelm the
general ledger. The total amounts in these journals are periodically transferred to the general ledger in
summary form. Transactions are recorded in special in chronological order, making it easier to research
transactions.

Examples of special journals are:

✓ Purchases Journal
✓ Cash Disbursements Journal
✓ Sales Journal
✓ Cash Receipts Journal

Document Structure
Each purchasing document in Smartbooks has nearly identical header and footer areas and tabs named
Details and Journal. This structure helps to ensure that all relevant data are captured as the A/P Process
initiated.

1. Header Area
The upper area of a purchasing document. You enter supplier data and delivery dates here, if Smartbooks
does not fill it in automatically as part of the process flow.

2. Footer Area
The lower area of a payable document and contains the calculated totals for the purchase, including tax.

3. Details tab
The part where all the specific information about the ordered items or services entered such as quantity,
price, item number and item name.

4. Journal tab
Contains the relevant general ledger (G/L) account information for the purchase pulled from the
financial accounting master data

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Navigation & Viewing

Purchases Journal
The purchases journal lists all credit purchases of merchandise. Entries in this journal usually include the
date of the entry, the name of the supplier, and the amount of the transaction. Some companies include
columns to identify the invoice date and credit terms, thereby making the purchases journal a tool that
helps the companies takes advantage of discounts just before they expire. The purchases journal to the
right has only one column for recording transaction amounts. Each entry increases (debits) purchases and
increases (credits) accounts payable.

Each day, individual entries are posted to the accounts payable subsidiary ledger accounts. Creditor
account numbers (or check marks if the creditor accounts are not numbered) are placed in the purchases
journal’s reference column to indicate that the entries have been posted. At the end of the accounting
period, the column total is posted to purchases and accounts payable in the general ledger.

To access:

• Go to Purchases > AP Voucher

• In the Supplier No/Supplier Name field, click the selection list to view the list of supplier to select
with and address the transaction with.
• In the Journal Date, Due Date, and Creation Date, the user can change the date based on the
specified date.

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• Change the Input dropdown from Record to G/L if the transaction is a purchase of service.
• In the Contents tab, select the G/L Account by clicking the selection list on the G/L Account No.
column. Select the G/L account by double clicking or selecting it then click the ‘OK’ button.
• Input the VAT inclusive amount on the Price column field, then click the dropdown on the VAT
Code field to select the applicable VAT code (IS means input tax for services).
• Input a description on the Particulars column to specify the nature of the transaction then click
‘Add’ once the details are complete
• On the notes field, you may input the ‘Name’ of the user to easily determine the creator of the
transaction.

• Final amount subject for payment is reflected on the Balance Due field. After completing the
details, click ‘Save’ on the lower left.

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• A system message will appear to verify if you are certain with the transaction since this can’t
be directly deleted. Click ‘OK’.

• You can verify if the process was completed successfully if a message containing ‘Operation
ended successfully’ has prompted and the stated is ‘POSTED’.

• To view the system-generated entry, go to Accounting tab then click the selection list button,
a pop-up window will appear containing the journal entry of the transaction created. The
Accounts Payable account is linked to the subsidiary ledger account of the supplier.

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Exercise
Please refer to exercise workbook provided by your instructor.

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Cash Disbursements Journal


Cash disbursements occur in business when a company makes a payment. A number of different
transactions can incur a cash disbursement. Companies record these transactions, as every disbursement
results in a lower cash balance. Disbursements will either result in a use or exchange of assets. Many
companies report disbursements in a separate accounting journal.

Companies usually will maintain a cash disbursement journal as part of their general ledger. Frequent cash
disbursements can quickly fill the general journal, resulting in this subunit of the overall accounting ledger.
Only cash disbursements go in this journal. Companies that initially purchase goods on credit will record
the entry into the purchases journal. Once the payable is due, the company must disburse cash. This entry
is part of the cash disbursements journal.

To access:

• Go to Treasury > Cash Outflows > Cash Outflows- Supplier

• In the Supplier No, field, click the selection list to view all list of suppliers for processing of payment.
Select one by performing double-click on the supplier or clicking the ‘OK’ button.

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• You can see all open invoices in the Documents for Payment tab. Select the invoice you are about to
process for payment by clicking the checkbox.

• After selecting the AP voucher, setup payment means by clicking one of these tabs:
Cash/Check/Bank/Deposits. On the G/L Account dropdown, select the account to be used on
payment.

• Input amount due in the Amount field. As the main reference for the collection, you can check the
Total Amount Due on the lower right portion of the document. You can also put some remarks in the
document which will reflect both in the system, through the Notes field.
• Once done, click now the ‘Save’ button.
• A system message will appear, click ‘OK’.

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• You can verify if the process was completed successfully if a message containing ‘Operation
ended successfully’ has prompted and the stated is ‘POSTED’.

• To view the system-generated entry, click the selection list button beside Journal Entry, a
pop-up window will appear containing the journal entry of the transaction created. The
Accounts Payable account is linked to the subsidiary ledger account of the supplier.

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Exercise
Please refer to exercise workbook provided by your instructor.

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Sales Journal
The sales journal lists all credit sales made to customers. Sales returns and cash sales are not recorded in
this journal. Entries in the sales journal typically include the date, invoice number, customer name, and
amount. Invoices are the source documents that provide this information. In its most basic form, a sales
journal has only one column for recording transaction amounts. Each entry increases (debits) accounts
receivable and increases (credits) sales.

Notice the dates and posting references applied to each entry in the illustration to the right. Each day,
individual sales journal entries are posted to the accounts receivable subsidiary ledger accounts so that
customer balances remain current. Customer account numbers (or check marks if customer accounts are
simply kept in alphabetical order) are placed in the sales journal's reference column to indicate that the
entries have been posted. At the end of the accounting period, the column total is posted to the accounts
receivable and sales accounts in the general ledger. Account numbers are placed in parentheses below
the column to indicate that the total has been posted.

Many companies use a multi-column (columnar) sales journal that provides separate columns for specific
sales accounts and for sales tax payable. Each line in a multi-column journal must contain equal debits
and credits. For example, the entries in the sales journal to the right appear below in a multi-column sales
journal that tracks hardware sales, plumbing sales, wire sales, and sales tax payable. Individual entries are
still posted daily to the accounts receivable subsidiary ledger accounts, and each column total is posted
at the end of the accounting period to the appropriate general ledger account.

To access:

• Go to Sales > Invoice

• In the Customer No/Customer Name field, click the selection list to view the list of customer to
select with and address the transaction with.
• In the Journal Date, Due Date, and Creation Date, the user can change the date based on the
specified date.

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• Change the Input dropdown from Record to G/L if the transaction is a sale of service.
• In the Contents tab, select the G/L Account by clicking the selection list on the G/L Account No.
column. Select the G/L account by double clicking or selecting it then click the ‘OK’ button.
• Input the VAT inclusive amount on the Price column field. VAT Code is already set. (OV means
output tax for sale of services).
• Input a description on the Particulars column to specify the nature of the transaction then click
‘Add’ once the details are complete
• On the notes field, you may input the ‘Name’ of the user to easily determine the creator of the
transaction.

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• Final amount subject for payment is reflected on the Balance Due field. After completing the
details, click ‘Save’ on the lower left.
• A system message will appear to verify if you are certain with the transaction since this can’t
be directly deleted. Click ‘OK’.

• You can verify if the process was completed successfully if a message containing ‘Operation
ended successfully’ has prompted and the stated is ‘POSTED’.

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• To view the system-generated entry, go to Accounting tab then click the selection list button,
a pop-up window will appear containing the journal entry of the transaction created. The
Accounts Receivable account is linked to the subsidiary ledger account of the customer.

Exercise
Please refer to exercise workbook provided by your instructor.

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Cash Receipts Journal


A cash receipts journal is a special record used in accounting, usually by retailers. It involves recording the
details of sales in a specific manner. In turn, the cash receipts journal gathers together the relevant
information in a way that makes it easier to copy across, in aggregate, to traditional double-entry
accounts.

• Go to Treasury > Cash Inflows > Cash Inflows-Customer

• In the Customer No, field, click the selection list to view all list of customers for processing of
collection. Select one by performing double-click on the customer or clicking the ‘OK’ button.

• You can see all open invoices in the Documents for Payment tab. Select the invoice you are about to
collect the payment by clicking the checkbox.

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• After selecting the invoice, setup payment means by clicking one of these tabs:
Cash/Check/Bank/Deposits.
• Select the Transfer Date and input the Reference and amount due in the Amount field. As the main
reference for the collection, you can check the Amount Due on the lower right portion of the
document. You can also put some remarks in the document which will reflect both in the system,
through the Notes field.
• On the Bank dropdown, select the Bank and its corresponding Bank Account No., and the Bank
Branch will be filled automatically.
• Once done, click now the ‘Save’ button.
• A system message will appear, click ‘OK’.

• You can verify if the process was completed successfully if a message containing ‘Operation
ended successfully’ has prompted and the stated is ‘POSTED’.

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• To view the system-generated entry, click the selection list button beside Journal Entry, a
pop-up window will appear containing the journal entry of the transaction created. The
Accounts Receivable account is linked to the subsidiary ledger account of the customer.

Exercise
Please refer to exercise workbook provided by your instructor.

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B. Ledger
General Ledger Defined
A general ledger is the master set of accounts that summarize all transactions occurring within an entity.
There may be a subsidiary set of ledgers that summarize into the general ledger. The general ledger, in
turn, is used to aggregate information into the financial statements of a business; this can be done
automatically with accounting software.*

The general ledger contains a debit and credit entry for every transaction recorded within it, so that the
total of all debit balances in the general ledger should always match the total of all credit balances. If they
do not match, the general ledger is said to be “out of balance” and must be corrected before reliable
financial statements can be compiled from it.*

*https://www.accountingtools.com/articles/2017/5/9/general-ledger

Navigation & Viewing


• Go to Financials > Reports > General Ledger
• Modify the period as to date the report will reflect. Click the calendar icon to both From and To
field and the select the time period.

• If you want to generate a report for specific G/L Account only, click the selection list button then
double click the account you will generate or select the account then click ‘OK’.

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• After changing the parameters, you are now ready to view and generate the general ledger.
a) click the Preview button to have a crystallize view of the report just before you download it or;
b) click the Arrow button to show the list of export to files to download it directly. You may choose either PDF or Excel.
• A pop-up window will appear, click the ‘Details’ then click ‘Select’.
Note:
You can choose either of the two options: (a) or (b). To check what option you are performing, you can verify
it when the highlight per button will be color white as illustrated in the photo below.

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Sample report if option A is selected.

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Sample report if option B is selected.

Exercise
Please refer to exercise workbook provided by your instructor.

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Subsidiary Ledger Defined


A subsidiary ledger stored the details for a general ledger control account. Once information has been
recorded in a subsidiary ledger, it is periodically summarized and posted to a control account in the
general ledger, which in turn is used to construct the financial statements of a company.

Most accounts in the general ledger are “not” control accounts; instead, individual transactions are
recorded directly into them. Subsidiary ledgers are used when there is a large amount of transaction
information that would clutter up the general ledger. This situation typically arises in companies with
significant sales volume. Thus, there is no need for a subsidiary ledger in a small company.*

*https://www.accountingtools.com/articles/what-is-a-subsidiary-ledger.html

Navigation & Viewing


• Go to Financials > Reports > Subsidiary Ledger
• In the S/L Type field, click the dropdown list and select the type of business partner you want to
see the account.

• After selecting the business partner type, select the specific business partner by clicking the
selection list in the S/L Account No. or S/L Account Name field. Highlight it then double-click or
click ‘OK’ button.

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• Click the calendar icon in the Reference Date field then input desired range of date.

• Once details are complete, click the ’Search’ button and the details of the S/L account will appear.

Exercise
Please refer to exercise workbook provided by your instructor.

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C. Trial Balance
Trial Balance Defined
A trial balance is a bookkeeping or accounting report that lists the balances in each of an
organization's general ledger accounts. (Accounts with zero balances will likely be omitted.) The debit
balance amounts are listed in a column with the heading "Debit balances" and the credit balance amounts
are listed in another column with the heading "Credit balances." The total of each of these two columns
should be identical.

In a manual system a trial balance was commonly prepared by the bookkeeper in order to discover
whether math errors and/or some posting errors were made. Today, bookkeeping and accounting
software has eliminated those clerical errors. This means that the trial balance is less important for
bookkeeping purposes since it is almost certain that the total of the debit and credit columns will be equal.

However, the trial balance continues to be useful for auditors and accountants who wish to show
1. the general ledger account balances prior to their proposed adjustments;
2. their proposed adjustments, and
3. all of the account balances after the proposed adjustments.

These final balances are known as the adjusted trial balance, and these amounts will be used in the
organization's financial statements.

Navigation & Viewing


• Go to Financials > Reports > Trial Balance
• Modify the period as to date the report will reflect. Click the calendar icon to both From and To
field and the select the time period.

• Click the calendar icon in the As Of field to select the time period.

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• After changing the parameters, you are now ready to view and generate the general ledger.
a) click the Preview button to have a crystallize view of the report just before you download it or;
b) click the Arrow button to show the list of export to files to download it directly. You may choose either PDF or Excel.
• A pop-up window will appear, click the ‘bi_trialbalance’ then click ‘Select’.
Note:
You can choose either of the two options: (a) or (b). To check what option you are performing, you can verify it
when the highlight per button will be color white as illustrated in the photo below.

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Sample report if option A is selected.

Sample report if option B is selected.

Exercise
Please refer to exercise workbook provided by your instructor.

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D. Adjusting Entries
Adjusting Entries Defined
Adjusting entries are journal entries made at the end of an accounting cycle to update certain revenue
and expense accounts and to make sure you comply with the matching principle. The matching
principle states that expenses have to be matched to the accounting period in which the revenue paying
for them is earned. There are four main types of accounts that need to be adjusted: prepaid expenses,
accrued expenses, unearned revenues, and accrued revenues.

The two major types of adjusting entries are:

a. Accruals are for revenues and expenses that are matched to dates before the transaction has been
recorded.

b. Deferrals are for revenues and expenses that are matched to dates after the transaction has been
recorded.

Accruals
Accruals are adjustments for 1) revenues that have been earned but are not yet recorded in the accounts,
and 2) expenses that have been incurred but are not yet recorded in the accounts. The accruals need to
be added via adjusting entries so that the financial statements report these amounts.

Some accrued items for which adjusting entries may be made include:
• Salaries
• Past-due expenses
• Income tax expenses
• Interest income
• Unbilled revenue

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Deferrals
In accounting, this means to defer or to delay recognizing certain revenues or expenses on the income
statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account
until they are earned in a later period. When the revenues are earned they will be moved from the balance
sheet account to revenues on the income statement.

Some deferred items for which adjusting entries would be made include:

• Prepaid insurance
• Prepaid rent
• Office supplies
• Depreciation
• Unearned revenue

Navigation & Viewing


• Go to Financials > Journal Voucher
• In the Journal Date and Creation Date field, enter the period you are going to post the adjusting
voucher. As standard, the date will be shown in those fields as to date of the system, also known
as date today.
• In the Notes field, enter a remark to take note of the adjusting entry
• In the Type column of the General tab, click the dropdown list and select the G/L Account option.

• After selecting the type, click the selection list in the G/L Account No. column, a list of accounts
will appear. You can choose it by performing double-click or clicking the ‘OK’ button.

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• Once account has been selected, you may now enter an amount on either Debit or Credit column
to reflect the amount to be posted on the created transaction. Click the ‘Add’ button.

• Please take note that there should be an equal amount that will represent the Debit and Credit
column for you to save the whole document. Once done and complete, click ‘Save’ in the lower
left portion of the document.

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• A system message will appear to confirmation of the entry to be included in the system. Click
“OK”, to confirm.

• You will know that it has been saved when there is a system message that the operation ended
successfully. There is also a ‘POSTED’ status at the top right most of the screen.

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Exercise
Please refer to exercise workbook provided by your instructor.

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E. Financials Statements
Financial Statements Defined
Financial Statements are reports that summarize important financial accounting information about your
business. There are three main types of financial statement: the balance sheet, profit and loss
statement, and cash flow statement.

Together they give you and outside people like investors, a clear picture of your company’s financial
position.*

Types of Financial Statement


Balance Sheet
A balance sheet shows the financial position of a business as of the report date (so it covers a specific
point in time). The information is aggregated into the general classifications of assets, liabilities and
capital/equity. Line items within the asset and liability classification are presented in their order of
liquidity, so that the most liquid items are stated first. This is a key document, and so is included in most
issuances of financial statements.

Profit and Loss Statement


Also known as Income Statement, a profit and loss statement reveals the financial performance of an
organization for the entire reporting period. It begins with sales, and then subtracts out all expenses
incurred during the period to arrive at a net profit or loss. This is usually considered the most important
financial statement, since it describes performance.

Statement of Cash Flows


This report reveals the cash inflows and outflows experienced by an organization during the reporting
period. These cash flows are broken down into three classifications: operating activities, investing
activities, and financing activities. This document can be difficult to assemble and so is more commonly
issued only to outside parties.

Statement of Changes in Equity


This report documents all changes in equity during the reporting period. These changes include the
issuance or purchase of shares, dividends issued and profits/losses. This document is not usually
included when the financial statements are issued internally, as the information in it is not overly useful
to the management team.

*https://www.accountingtools.com/articles/types-of-financial-statements.html

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Navigation and Viewing


➢ For Balance Sheet
• Go to Financials > Reports > Balance Sheet

• In the Branch field, click the dropdown list to select your option as to what branch you are
generating the report (specific or as a whole)
• In the As of field, click the calendar icon to put the desired date range to the report you are
generating with
• After changing the parameters, you are now ready to view and generate the general ledger.
a) click the Preview button to have a crystallize view of the report just before you download it or;
b) click the Arrow button to show the list of export to files to download it directly. You may choose either PDF or Excel.
• A pop-up window will appear, click the ‘All levels’ then click ‘Select’.

Note:
You can choose either of the two options: (a) or (b). To check what option you are performing, you can verify it
when the highlight per button will be color white as illustrated in the photo below.

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Sample report if option A is selected.

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Sample report if option B is selected.

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➢ For Income Statement


• Go to Financials > Reports > Profit or Loss

• In the Branch field, click the dropdown list to select your option as to what branch you are
generating the report (specific or as a whole)
• In the From and To field, click the calendar icon to put the desired date range to the report you
are generating with
• After changing the parameters, you are now ready to view and generate the general ledger.
c) click the Preview button to have a crystallize view of the report just before you download it or;
d) click the Arrow button to show the list of export to files to download it directly. You may choose either PDF or Excel.
• A pop-up window will appear, click the ‘All levels’ then click ‘Select’.

Note:
You can choose either of the two options: (a) or (b). To check what option you are performing, you can verify it
when the highlight per button will be color white as illustrated in the photo below.

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Sample report if option A is selected.

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Sample report if option B is selected.

Exercise
Please refer to exercise workbook provided by your instructor.

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F. Closing Entries: Period-End Closing


Closing Entry Defined
A closing entry is a journal entry made at the end of an accounting period to transfer balances from a
temporary account to a permanent account.

Companies use closing entries to reset the balances of temporary accounts—accounts that show balances
over a single accounting period—to zero. By doing so, the company moves these balances into permanent
accounts on the balance sheet. These permanent accounts show a company’s long-standing financials.*

Temporary Accounts vs. Permanent Accounts


Temporary Accounts
Temporary accounts are accounts in the general ledger that are used to accumulate transactions over a
single accounting period. The balances of these accounts are eventually used to construct the income
statement at the end of the fiscal year.

When the income statement is published at the end of the year, the balances of these accounts are
transferred to the income summary, which is also a temporary account.

The income summary is used to transfer the balances of temporary accounts to capital/retained earnings,
which is a permanent account on the balance sheet.©

Permanent Accounts
Permanent Accounts are accounts that show the long-standing financial position of a company. Balance
sheet accounts are permanent accounts. These accounts carry forward their balances throughout multiple
accounting periods.©

*https://corporatefinanceinstitute.com/resources/knowledge/accounting/closing-entry/

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Navigation & Viewing


To close the journal period,

• Go to Admin > System Configuration > Journal Period

• Change the status of each month by clicking the document link button on the left side of
the period you need to close. On the pop-up window, click the dropdown button, then
select ‘Closed’. Once done, click ‘Update’ button.
• Make sure that all the previous periods are closed up to the period that you are closing.

After closing the journal period,

• Go to Financials > Closing Period

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• Click the selection list beside the Period field, then a list of periods will appear. You can choose a
period by performing double-click or clicking the ‘OK’ button.

• Accounts that are subject for closing will appear, for your viewing and checking.
• The Closing Balance field will let you see the final balance for closing, which will be reflected and
closed to the Income Summary account in the system.
• You may now close the accounts by clicking the ‘Add’ button at the right lower portion of the
document.

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• A system message will appear, click ‘OK’.

• You can verify if the process was completed successfully if a message containing ‘Operation
ended successfully’.

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• To view the system-generated entry, click the selection list button beside Remarks, a pop-up
window will appear containing the journal entry of the transaction created.

Exercise
Please refer to exercise workbook provided by your instructor.

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G. Reversing Entries
Reversing Entry Defined
A reversing entry is a journal entry made in an accounting period, which reverses selected entries made
in the immediately preceding period. The reversing entry typically occurs at the beginning of an
accounting period. It is commonly used in situations, when either revenue or expenses were accrued in
the preceding period, and the accountant does not want the accruals to remain in the accounting system
for another period.*

*https://www.accountingtools.com/articles/what-is-a-reversing-entry.html

Navigation & Viewing


• Go to Financials > Journal Voucher.
• In the Journal Date and Creation Date field, enter the period you are going to post the voucher. As
standard, the date will be shown in those fields as to date of the system, also known as date today.
• On the lower left corner, click the triangle on the Copy From button then select ‘Journal Vouchers
– Reverse’.

• A pop-up window will appear. Select the transaction you are going to reverse by double clicking or
selecting it then click the ‘OK’ button.

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• After selecting the transaction, the reversal will appear on the journal voucher. You can determine
on the Notes that the transaction is a reversal.
• Once everything is complete, click ‘Save’ on the lower right corner.

• A system message will appear to confirmation of the entry to be included in the system. Click
“OK”, to confirm.

• You will know that it has been saved when there is a system message that the operation ended
successfully. There is also a ‘POSTED’ status at the top right most of the screen.

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Exercise

Please refer to exercise workbook provided by your instructor.

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H. Journal Entry List


Navigation & Viewing
To generate all the system-generated journal entries as well as the manual journal entries in Journal
Voucher,
• Go to Financials > Reports > Journal Entry List
• Double click the line of the entry you want to view.

CHAPTER 6: Introduction to Business Analytics


Everyone makes decisions. A graduating Senior High School might want to decide on what
college to enroll to. He might choose to forego college for now and find a part-time job. He might even
decide to have a “gap” period to collect his thoughts and plan out his future more. Not every decision is
as potentially life-altering as the above example. A mother will be making groceries and is torn between
two milk brands. Which should she choose? An office worker has the choice to use Grab to hail a ride to
work or he can commute to work using public transportation. He might even opt for a taxi, whichever
might come first. Whichever he chooses would be the result of a quick opportunity cost analysis in his
head: he might go for Grab if he has an urgent meeting, for example.

Everyone makes decisions. This is doubly so for businesses. Businesses fail and prosper with the
decision making of its leaders. The question then becomes: How would the leaders make the best,
most sound decision? There was a time when managers and executives just went with decision-making
using their “gut feeling” based off their past experiences. Wouldn’t it be better when decisions are made
based off quantifiable parameters, supported by facts? This way, the ability to create decisions is always
backed by the company’s numbers: past, present, and projected future. This venture, while sound, is
easier said than done. A company in today’s internet-connected world generates tons of data daily. How
do you make sense of it all? What is relevant, and what is unnecessary noise? How do you cut the wheat
from the chaff? This is where Business Analytics comes in.

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What is Business Analytics


Business Analytics, or just analytics, is the use of data, information technology, statistical
analysis, quantitative methods, and mathematical or computer-based models to help managers gain
improved insight about their business operations and make better, fact-based decisions1. The term is
often used interchangeably with Business Intelligence. In some cases, Business Intelligence is used to
refer to the overall practice of data analysis in a business context, while Analytics refers to the deeper,
more advanced methods of analyzing data. Either way, it is a process that involves data, the tools to
gather and interpret it. In practice, the tool to properly disseminate the information to the key
stakeholders is also included.

Business Analytics is primarily a decision-making tool. Some common decisions include:


1. Pricing Decisions
2. Decisions to target consumer segments (age, gender, etc.)
3. Merchandising Decisions (what brands, quantity to buy, etc)
4. Location Decisions (where to establish a new branch, for example)

And many others that affects a business’ operations, supply chain, distribution, finance, human
resources, and more2.

Business Analytics is used to gather data and churn it into actionable items to create strategic and
tactical decisions. Here are some uses of Business Analytics:
1. Measure the “Customer Service Level” of a distribution firm. It measures the company’s
ability to service their customers from the moment the sales order has been placed, up to the
moment the goods arrive at their doorstep.
2. Measure the “Overall Equipment Efficiency”. It measures the effectiveness of a production
line of machines.
3. Quantify the abilities of athletes to make a championship-ready team.

The above is a list of just some examples where data is taken and transformed into a measurable and
quantifiable markers with which to base strategies off. These measurable and quantifiable items are
called Metrics.

1
James Evans, Introduction to Business Analytics, (Pearson Education, 2013), 3.
2
Evans, Intro to BA, 4

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Metrics and KPIs
As described in the previous section, Metrics are measures of quantitative assessment
commonly used for assessing, comparing, and tracking performance or production3. Simply put, it takes
whatever Measure in the organization’s data and applies calculations and comparisons to them.
Measures, in turn, are the raw numerical data. Any data item that can be subject to the four basic
arithmetic operations is considered a measure. This is an important distinction, as data can come in
many forms, and even if a piece of data is purely numerical, it does not automatically mean that it is a
measure. For example, Employee Codes can be purely numerical to denote hiring order. Even if it is
purely numerical, it makes no sense to add up Employee Numbers.

Metrics come in a wide range and can vary between companies and industries. There are some
that are industry standards, but more often than not, they are customized to an individual company’s
specific needs and outcomes. Executives, and managers, in particular, use them to create strategic and
tactical decisions in order to achieve their goals. Because a metric can come from nearly any data point
in an enterprise, its ability to state a quantifiable target, and the company’s position in relation to that
target at any given point in time is one of the most important characteristics a metric should have.

Generally, executives and managers seek to have a dashboard, where different Key
Performance Indicators are gathered in the same place. These are specific metrics that help measure a
company’s success. This helps simplify analysis and opens up discussions in strategy meetings by having
a single interactive page displaying all the relevant metrics.

Examples of Commonly Used Metrics


1. Sales vs. Targets – one of the most universal basic metrics. It simply shows the difference
between actual sales numbers against the target figure. If the Sales Figure is below the Target
Figure, then something needs to be done.

2. Current Period Sales vs. Previous Period Sales – used as a measure of sales over various
periods of time. Due to economic forces like inflation, Sales Figures are usually expected to
grow over time to counter act it, however, it still depends on the targets set during the
planning meeting usually done near the start of the company’s year. Examples include Year-
to-Date Sales vs. Year-to-Date Last Year Sales and Year-on-Year Sales Analysis.

3. Sales vs. Returns – when a product that has been sold is returned at an unsellable state (rat
bites, packaging is too deformed, water damaged, etc.) it will automatically count as a loss to
the company. This metric will allow the company to monitor how much of the products sold
actually get delivered without issue to its customers. Too many returns on a particular product
make and model might point to a problem from the supplier/warehouse/delivery process or
too many returns from a particular customer might indicate a problem with that customer.
This is separate from the Returns vs Target Returns metric.

3
Julie Young, ‘Metrics’, Investopedia.com, https://www.investopedia.com/terms/m/metrics.asp, (accessed 6th May,
2019).

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4. Sales vs. Invoice – for large companies, the sales process is more than just the face-to-face
exchange of money and goods between two parties. In this way, we can think of the Sales
numbers as the “expected sales” value, while the Invoice numbers are the “actual sales” value
that will count towards the company’s profits. There is usually a time difference between the
time an order is placed and the actual billing of said order. Because billing will only be counted
for actual goods/services delivered, there will be instances where only partial billing will be
done while the remaining goods/services will be delivered on a later date. This metric will
help keep track of those partial billings so that 100% fulfillment can be achieved.

5. Truck Utilization – distribution companies deliver products from their warehouse to their
clients. Using a truck for deliveries represent an expense in terms of labor, vehicle
maintenance, and fuel. Each truck has its own rated dimensions and maximum weight rating.
This metric will help maximize how each truck is used: making sure that it is close to full
capacity (in terms of dimensions and weight) and have routes that will serve the most
customers coming to and from the distribution center.

6. Customer Segmentation – knowing the customer is one of the quickest ways to expand a
business’ earning potential. This metric will enable the business to know which of their
customers make up the bulk of sales. Customers can be segmented by Gender, Age, Location,
Industry, etc. Knowing the customer segmentation and the performance of each segment will
help create a more focused marketing campaign.

7. Hiring Rates – Hiring Managers and Staff are usually evaluated at the rate they are able to
process applicants from initial interview to final contract signing. This metric will help them
monitor applicants and how they get past each stage of hiring to figure out if new hiring
practices should be relaxed or be more stringent.

8. Occupancy Rate – measures the rate at which rooms are reserved in Hotels. This helps the
management figure out just how much of their rooms are used by customers. At the same
time, if expressed as a function of time, it will help determine lean and peak seasons for the
business, which helps set expectations and help ease preparations when a sudden influx of
occupants appear.

9. Service Level Agreement – SLA’s are used in IT Support Organizations to keep track of support
tickets and team utilization. It gives an idea of how effective the organization is by getting the
number and kind of tickets (from low priority to show stopper) and the average response
time. Each kind of ticket has its own window wherein it will need to be solved. An effective
organization is one where each kind of ticket is resolved within this window. Any misses will

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open up discussion on what exactly happened
and what will need to be done to avoid such
misses in the future.

10. Lead Summary – a marketing campaign will have different ways to generate leads when trying
to drum up interest on a product and/or brand awareness. Methods include internet ads,
television ads, print ads, on-premise events, etc. Knowing which method yields the most
responses will help focus company resources in the method with most impact.

These metrics will typically be expressed from the Top Level, that is, the total number for the
whole company. They can then be drilled down to multiple levels. For example, the Sales vs. Target
Metric can be drilled down to a Per Brand level to evaluate the performance of account managers, then
drilled down again to Per Item to see which items or SKU (Stock Keeping Unit, pronounced “skew”) are
actually turning a profit.

Enterprise Dataflow
While we have so far discussed the importance of the analytical/analysis aspect of Business
Analytics, we must not forget that it is only a part of the whole process. As the saying goes, “The
numbers don’t lie”. But what if they can? One thing that should be kept in mind, especially when
working with computers is this: Garbage In, Garbage Out. When you input a garbled mess, expect
output that will be less than useful. In our end goal of data analysis, this basically means putting the
veracity of our data to the test. How sure are we that the data we are analysing is correct? It may seem
to be an obvious concept, but in the real world, making sense of what data is needed in our analysis and
whether that data is correct is not 100% guaranteed, and thus we should take a bird’s eye view of how
data travels inside an enterprise. This can be easily done through the use of a basic System Landscape
Diagram:

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While ultimately the focus of this courseware is going to be on the analysis aspect, it still would be a
good idea to learn about the data’s journey through the enterprise. As you can see, a lot has to happen
even before we can attempt analysis. Let us now walk through each part of the landscape, starting from
the left:

Data Sources
An enterprise’s data needs grow bigger and bigger as the business scales up. Due to this, the
machines (servers and clients) bought to address data needs a few years ago might no longer be enough
to address the need today, yet they are system-critical that taking them offline even for a bit could
create an operational scenario where the business users won’t be able to transact, which makes the
data for reporting to the higher ups no longer accurate or no longer available. There are three main
categories of data sources in an Enterprise.

ERP Systems
In an ideal world, ALL of an enterprise’s data is fed into its ERP System and all reports are
obtained directly from it. However, the real world makes it difficult because in the end, ERP Systems are
still just machines, with their limited (not infinite) capacity and processing power. An ERP System might
also not be able to address an enterprise’s needs as the company grows larger. This means that the
company will then have to procure a new ERP System, or upgrade its current one, which requires a
significant investment.

An ERP System makes extensive use of Master Data to help keep track of Business Partners and
Items. Usually the maintenance of these is assigned to key people, who will be the ones to manage the
creation of new Master Data or the updating of such. Lastly, when new equipment is bought or an
existing ERP System is upgraded, the company might need to schedule a little bit of down time to
implement them. The ERP System is unavailable at these times, so these will need to be scheduled

ahead of time, and concerned parties will need to be informed so they can work around it (adding
System Memory, for example, requires for the system to be shut down first before new Memory
Modules can be installed).

Other Databases
Sometimes, due to geographical or cost constraints, a branch of the company might be
physically impossible to connect to the corporate network. This means that they can’t use the ERP
System without resorting to workarounds. One such workaround is to maintain a separate database that
records all transactions for the day. At the end of the day, the database will upload the collected data to
the ERP system.

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In other instances, databases might be
part of a legacy system that is still being used.
It might be integrated into a Business Process that is system-critical, and current Cost/Time/Technical
constraints mean that they can’t be assimilated to the ERP system just yet. In order to be able to
decommission these systems, the business process and the data they produce must be integrated to the
ERP. If this is impossible, then an Enterprise Data Warehouse will be required to consolidate their data.
This will require additional cost in time and manpower, as it is a project that will require specialized
knowledge in both the legacy system AND the ERP/EDW (This is an example of Data Migration).

Flat Files
As mentioned before, in a perfect world, all of an enterprise’s data is going to be present in the
ERP, for instant extraction and reporting. However, in reality, there is a process in place so that data
within it cannot be tampered with. Transactions will usually have an approval process to help keep out
doubtful and fraudulent records, while Master Data is managed by key employees. However, there are
some instances where a branch is in such a remote location that an internet connection is not available.
This is where Flat Files come in. Transactions for that branch will be recorded in a flat file, later to be
sent to the Head Office for processing and consolidation.

Flat files are usually Excel or delimited text files that business users create in order to make their
own reports when needed. Delimited text files are usually either tab-delimited or comma-separated
value (CSV) files. These files can still be opened in Excel, though tab-delimited files might need a few
extra steps before it can be read (though because they are text files, Notepad will also do). In order to
keep an accurate enterprise-wide report, these will have to be formatted in such a way that it can be
uploaded back into the ERP or Enterprise Data Warehouse.

Enterprise Data Warehouse


While the ERP system has some built-in reporting functionality, it is far from a complete
solution. The most obvious limitations are the fact that custom reports are difficult to create, and data
visualization capabilities are lacking, if present at all. What’s more, the reporting functionality will also
consume system memory in order to be processed. This can have an adverse impact on its ability to
transact, especially if large, detailed reports (per customer or per item, or worse, both) are needed. An
Enterprise Data Warehouse is needed in order to work around these limitations.

The Enterprise Data Warehouse is built in order to consolidate the disparate data sources so
that only the data necessary for reporting will actually be used. Consolidating data is an important

aspect of Business Analytics, because first and foremost, above even facilitating data analysis, is
concerned with delivering “a single version of the truth”. That is, an accurate representation of the
business, from any view point. From an implementation standpoint, this will require the following:

1. New hardware that will become the server hosting the Data Warehouse. It must be connected
to the corporate network.
2. A dedicated project team from the Enterprise Side made up of Business Users.
3. A dedicated project team either from the Enterprise IT Team or an external organization who
will be responsible for setting up the environment.

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Building an Enterprise Data
Warehouse is a massive undertaking that can
take weeks, months, even years to complete, depending on how large the target scope is. In order to
build an Enterprise Data Warehouse:

1. The Business Users will need to determine the reports they want to derive from their data
sources.
2. The Business Users will then convene with the IT Team in order to iron out the technical
requirements (Blueprinting). This includes providing information on business processes and
where the data can be obtained. This could take a few days to a few weeks.
3. Once the IT Team has worked out the actual requirements needed by the Business Users, it is
time to implement the EDW to those specifications.
4. Testing will follow for data accuracy with the help of the Business Users.

Because it is on separate hardware, it usually follows a daily “load schedule” during off-peak
hours, usually midnight or very early morning, where the previous day’s transactions will be loaded into
it. It is scheduled during off-peak hours because those times are usually the ones where the ERP
especially, is not being used.

Note that the EDW is at its core a large database. If the scope starts becoming too large, it may
be advisable to create another one that will have its own purpose, but uses the same Data Sources.
Hardware may be powerful enough to host multiple Data Warehouses in the same machine.
SMARTBOOKS Warehouse is a tool to help build Data Warehouses, as is SMARTBOOKS Data Services.
Note that the actual implementation is highly technical, so the Business Users are not expected to
actually help build the EDW, rather the IT Team might defer to them occasionally to ensure correctness
and accuracy, and clarify some other things that did not come up during Blueprinting.

Reporting Tools
Once the Enterprise Data Warehouse has consolidated and sorted out the individual data
elements required by the Business Users, it is time to recombine them into a report that will then allow
analysis by the Business Users to help keep track of the status of the business. Because the Enterprise
Data Warehouse is essentially a large Database, it is likely that technical column names are still used
instead of more common, Business-friendly terms. For example, a database column that represents a
Business Partner’s last name is called “INDIV_FNM” or some such. This doesn’t really make sense from
the Business User’s perspective, as the name doesn’t immediately make sense. To help alleviate this, a

Semantic Layer is set up as a sort of “translator” so that the Business User can immediately understand
what the data is, by allowing them to see technical terms as business terms.

One other bottleneck in reports creation and Data Analysis is the complexity of extracting data
from the EDW for analysis. It used to be that the Business User will have to request data from the IT
Team. This provides a lot of delays in information. For one, the actual extraction might take some time,
and the fact that the IT person may not be all that well-versed in Business Lingo, which will affect the
quality of data. If it’s wrong, he will have to re-extract the data. All of those delays, and that’s not even
counting the delays from having to wait for response E-mails!

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One of the defining features today in


Business Analytics Tools is what’s called Self-Service BI. In addition to the Semantic Layer, reporting
tools are created with an easy to understand interface (usually drag-and-drop actions make up the
majority of interactions) so that the Business User will be empowered to create their own reports. It
covers easy extraction from the Data Warehouse to Report Creation to Publishing, without or with
minimal help from IT. This helps with the timely flow of information, as reports can be created in an
instant by the Business User alone.

Another aspect of Business Intelligence is the quick dissemination of reports to their intended
audiences. It is for this reason that specialized tools also usually come with the ability to log in to a
platform where reports can be published.

Data Visualization
A typical company will process a lot of data, and because of that, the ability to sift through a lot
of data in order to be able to do timely analysis and from that analysis bring forth insights to steer the
company into making the best decision at any impasse. As we have seen in the previous topic, the
enterprise’s data can essentially be displayed like so:

The above table contains 72 individual data points that shows GPU Sales by the brands that we are
carrying in our shops. In preparation for a business strategy meeting, you were tasked with finding out
the following information:

1. The brand with the highest sales and when


2. The brand with the lowest sales and when
3. The bottom 3 brands in terms of sales in February

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How long did it take you to come up
with the answers? Were you immediately able
to discern the information at 100% accuracy? Now contrast the difficulty and timeliness when analyzing
something like the following:

Take note, as well: the GPU Sales table only contains 72 data points. A real company, even the
smallest one, will generate a whole lot more. Now with that said, we should take care on how we
visualize data, as there are a lot of different charts and graphs we can use, but not everything is
universal. Some charts lend themselves to better convey a specific type of information or message than
others.

Representing Data with Charts


Using charts allows users to transform tabular data into a graphical representation. It makes
analyses easier to digest and helps retain audience’s attention. There are many different types of charts,
and not all of them are created equal. Some are more suited to display certain types of information
compared to others. For example, a chart best for monitoring trends over time might not be the best
choice to show contributions to a whole. The following are just some of the different charts that can be
used to display data:

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Bar/Column Charts

Bar charts represent data using horizontal rectangles. They are invaluable for quickly conveying
a comparison between values of a series of data. In the above example, we can infer at least two
important pieces of information: which genre of movie generates the most revenue relative to other
genres (going by the size of the bar), and on which state relative to other states (going by the color of
the bar). Column charts convey the same information, only the orientation is different:

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Stacked Bar/Column charts display the
contribution of each data point to the total
value:

In the above example, the revenue is expressed as a 100% value for each genre, and shows the
contribution of each genre to the total.

Line Charts

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Line Charts provide a useful means for displaying data over time4. You may put more than one line in the
chart to monitor multiple data sets in the same time frame. Be sure to do so sparingly because it can
make the chart look cluttered, and defeat the purpose of simplifying data analysis.

Combination Column-Line Charts

The Combination Column-Line Chart combines the properties of both line charts and column
charts. They allow for analyzing trends and comparisons at the same time. The most common usage is

4
Evans, Intro to BA, 56

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to monitor sales performance over time. In the example above, the target is expressed as a line chart
while the revenue is expressed as a column chart. If the column exceeds the line chart, then the
performance was great because the target was surpassed.

Pie Charts
For any given set of data, we are usually interested in finding out the relative proportion of each
data source to the total5. For this Pie Charts are used. This is done by expressing the total as a circle,
then partitioning it into different slices. The bigger the slice, the greater the contribution to the whole.

Be very particular with the data being analyzed when using a pie chart. If there are too many
slices, it will look cluttered, and you will also have to factor data labels if necessary.

Scatter Charts
Scatter Charts show the relationship between two variables. To construct a scatter chart, we
need observations that consist of pairs of variables (numeric data points)6. For example, a college
student will have different grades per semester per subject, midterms and finals, in particular. The chart
will show if the grade for the midterms is an indication of the grade in the finals.

5
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6
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Bubble Charts
Bubble Charts are a type of scatter chart, in which the size of the data marker corresponds to
the value of a third variable. It is a way to plot three variables in two dimensions. 7

There are many other kinds of charts used for analyses. Some charts even use geographical data
so that any of the other kinds are laid out on a map to see a quick summary for the different regions

7
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used by the business. Some of these charts will be seen in the later topic, which is the hands-on
activity on how to use Microsoft Power BI.

Effective Visualization
Now that we have the building blocks on how we can visualize data, how can we make good use
of them? Let’s go back to the saying: “The numbers don’t lie”. Even if after all of the data
transformations in the System Landscape has been tested for accuracy and we are 100% sure that the
data is correct, the presentation of data can have a huge impact on how insights can be derived from it.
That is to say, the way we present our findings have an effect on how the “objective truth” that the raw
numbers dictate. In this topic, we will see some examples on what to avoid so that we can build
effective visuals. Take for example the following column charts:

Objectively speaking, they tell the same thing. The Blue Column is not as high as the Orange
column. The chart on the right says that the gap is not really that big. However, if we go with the chart
on the left, it seems that the gap is astronomical at first glance. That is, until you take a look at the axis
labels and see that the right chart starts at zero, and the one on the left starts at 50. As you can see, the
way we present our data can have an impact on the conclusion that we can obtain or present. The chart
on the left did not technically lie, but it manipulates the “severity” of the message in order to mislead its
audience.

The above is not the only reason to be careful with our data presentation. Keep in mind that
nowadays, enterprise data is used to create “stories” that will be used on Business strategy meetings
and even marketing materials. It is in our best interest to make sure that the way data is presented
promotes easy readability while making sure that the messaging is accurate and does not mislead. When
it comes to readability, take note of the following:

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1. Keep it simple. Use a uniform color
scheme to minimize items having the same
shade and avoid using 3-d versions of charts when 2-d ones will suffice. 3-d charts usually
skew the perspective and may present inaccuracies. Take the example below.

Item Sales

Item A Item B Item C Item D

The blue slice seems to be smaller than the green slice due to the 3-d effect, but if we turn
on data labels or convert the chart into its 2-d equivalent, we’ll see that it not the case:

Item Sales
25
50

30

20

Item A Item B Item C Item D

Item Sales
25

50

30

20

Item A Item B Item C Item D

Simple is almost always better than fancy.

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2. Speaking of data labels, they can also
affect readability. Make sure to use readable
fonts (usually ones without serifs). Also, the location of the labels are important. Take the
following example:

The labels are supposed to be inside the slices, but because there are slices that are close in
value, there are places in the chart where it is hard to discern which label corresponds to
which slice. Finally, the formatting of the label Number, Percent with the number
portion using comma separators is confusing. This type of information might have been
better preserved as a table instead of forcing it into a pie chart.

In enterprise reporting, individual charts are rarely used to convey information. Usually, multiple
analyses and KPIs are monitored in one page known as the Dashboard. Dashboards are single-page
interactive documents used to track different aspects of the business. Note that when you create a
dashboard, keep in mind the direction people read. People read from left to right, top to bottom. As
such, on top of the above considerations, we must also mind the way we lay these visualizations out to
ensure maximum readability. You can’t just lay individual charts haphazardly:

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This means that effective design involves placing the most important KPI’s near the top left of the page,
such as below. Another thing to keep in mind is to keep the interactive elements near the top of the
page in a single location. Make sure to group together KPI’s that deal with the same business aspect
together as well.

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Microsoft Power BI
What is Microsoft Power BI?
Microsoft Power BI is a Self-Service BI Solution developed by Microsoft. It was first released in 2011 and
is now one of the premier BI Solutions in the world, implemented across over 35,000 companies all over
the world spanning multiple different industries. It offers a lot of flexibility of access to report creation,
data analysis, and report publication.

It is a collection of software services, apps, and connectors that work together to turn your
unrelated sources of data into coherent, visually immersive, and interactive insights. Whether your data
is a simple Microsoft Excel workbook, or a collection of cloud-based and on-premises hybrid data
warehouses, Power BI lets you easily connect to your data sources, visualize (or discover) what's
important, and share that with anyone or everyone.

Ways to access Microsoft Power BI


There are multiple ways to use Power BI:

1. Power BI Desktop – the application is installed in the local machine, either by using a dedicated
installer or downloading from the Microsoft Store. It offers some advanced utilities such as data
clean up, data modelling, and other advanced analysis options (such as the usage of DAX functions

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to enable more advanced Statistical Analysis) and the like. All of these on top of the ability to
create and publish reports.

2. Power BI Service – the application is accessed via the Power BI Portal. The user will need to log
on using his/her account and from there access the report creator. It is cloud-based, so for as long
as the user has an internet connection, he can access his work through a web browser (even
mobile devices). This is also where the main collaborative functions, such as Workspaces are
found.

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3. Power BI Mobile App – a free-to-download app (available in both iOS and Android platforms)
where the user can log in using the same account he uses for Power BI Service. This mobile app
is one of the main ways users can consume (not create) published reports. This will allow
managers and other employees of an enterprise to be able to check up on different reports even
if their computer is unreachable

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For this courseware, we will be using Power BI Service and the Mobile App.

Getting Started
In order to start using Power BI Service and its collaboration options, you will need a Power BI
Account with a Pro License (this should have already been provided via e-mail). For a Power BI Business
user, there are 5 building blocks they will need to get familiar with. These are:

1. Visualizations – a type of chart built in Power BI.


2. Data Sets – a container of data. These can come from a variety of sources, including files and
databases.
3. Reports – one or more pages of interactive visuals, text, and graphics. A single page is often
dedicated to answering a central area of interest.
4. Dashboards – a single page that uses visualizations to tell a story. It contains much of the
same elements as a Report. However, t is different from a Report in that the single page can
contain visuals from different separate reports. This allows different key areas from different
reports to be much more easily seen in a single page.
5. Apps – a way to bundle and share related dashboards and reports together.

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Collectively, these building blocks are referred to as Content. Report creation in Power BI
Service usually has the following workflow:

A typical workflow will usually involve all the building blocks. A designer
(yellow boxes) collects data from a dataset and creates a report. After
which, the designer will publish the findings via creation of dashboards
and apps so that the business user (black box) can take action.

It is important to note that designer and business user in this context refer
to roles as seen from Power BI. The designer is responsible for the
creation of content and the business user is responsible for its
consumption and analysis. In most cases, the business user relates
requirements to the designer so that the report can be built to certain
specifications. In some cases, employees in an organization are trained on
how to use Power BI so that said employees can act as BOTH designer and business user.
This allows the enterprise to save up a bit on licensure expenses.

Screenshot and Mobile Device Disclaimer


Please note that because Power BI is under continuous development by Microsoft so that new
features will be implemented, there might be some discrepancies with the screenshots and there might
not be an exact match with what can be seen on-screen. The screenshots are taken using Google
Chrome web browser, so when following along, it would be best to use it on the user’s end as well (be it
on a computer or mobile device). Also, please note that the user experience was designed for usage
with a computer’s web browser in mind. There will be some differences in usability when Power BI
Service is accessed via the browser on a mobile device. If a mobile device will be used for creating
reports, it will have to be used in landscape mode, and please note that for almost all mobile devices,
right-click is mapped to the tap-and-hold gesture, with the right-click menu appearing after the user lets
go of the screen.

Capstone Activity
We will now be using Microsoft Power BI to create our reports and analyses based on our
sample data.

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Setting up your account


# Activity Expected Outcome
1 Check your e-mail for the
message about your Power BI
Account

2 Open your browser and go to the


following link:
https://powerbi.microsoft.com

Click on “Power BI Service” and


log in using your credentials

2.1 For Mobile Users, click on the


button with three horizontal
lines then select “Power BI
Service” and log in using your
credentials.

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2.2 It is also advisable to request the


desktop version of the site. Go to
the browser settings and turn on
Desktop site.

Notes:

This is to try and make the on-screen elements adjust


automatically.

The exact name and location of this option might change


depending on the make and model of the device, the
browser used, and the version of the browser.

3 After supplying your username


and password, you will
encounter this message. Click on
Next.

Notes:

The next steps will involve using both the browser and the
Authenticator App.

4 You will be redirected to the


“Keep your account secure”
page.

On your mobile phone,


download and install Microsoft’s
Authenticator App.

After the app is installed in your


phone, click next on the web
browser.

Notes:

The bottom screenshot is from Google Play Store. The


phone used for the screenshot already has Authenticator
installed, which is why there is no “install” option.

If you are having trouble finding the app, simply search for
“Microsoft Authenticator”, without the quotes.

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5 In the Authenticator App, click


on the three dots on the upper
right hand corner of the screen,
then set up a “Work or School”
Account, then click Next on the
browser.

6 You will be presented with a QR


code on the browser.

On the Authenticator App, select


“Scan a QR Code”. Scan the QR
Code on the screen, then once
the scan is complete, click Next
on the browser.

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6.1 If you can’t scan the QR Code for


any reason, there should be an
option to enter the code
manually at the bottom of the
Authenticator App.

You will then be prompted to


manually type a Code and URL.

The Code and URL can be found


in the Web Browser, by clicking
the Can’t Scan Image? Button.

Click Next on the browser when


you are done inputting the code
and URL.

7 You will then be testing the sign


in. Approve the sign in on the
mobile app in order to get the
following screenshot.

Click on Next

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8 Click on Done

9 If an error is encountered, simply


restart the browser, then try
logging in again.

Creating a Sample Report


Logging In and Creating a Workspace
# Activity Expected Outcome
1 Launch your web browser

Notes:

Majority of log in steps are a repeat of the initial account


setup process in the previous section. Ignore this section if you
are already logged in.

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2 Go to the following link:


https://powerbi.microsoft.com

Click on “Sign In” and log in using


your credentials

2.1 For Mobile Users, click on the


button with three horizontal lines
then select “Power BI Service” and
log in using your credentials.

2.2 It is also advisable to request the


desktop version of the site. Go to
the browser settings and turn on
Desktop site.

Notes:

This is to try and make the on-screen elements adjust


automatically.

The exact name and location of this option might change


depending on the make and model of the device, the browser
used, and the version of the browser.

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3 After logging in, you should be


redirected to the Home Page on a
new browser tab.

Note: what you see on your screen will differ from the
screenshot here. If it is the first time you logged in, you will
not see any Favorites + frequents entries, for example.

4 We will now start the report


creation process by making a
Workspace.

On the left-hand side of the


screen, click on “Workspaces”
then click on “New Workspace”

The workspace feature will require a PRO License. Accounts


given to students will have a PRO License attached. Power BI
has many different licensing schemes that are out of the scope
of the discussion in this courseware.

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5 A new panel will open to the right


of the screen. On this new panel,
give the Workspace a Name and
Description. You can also give it an
optional icon, which may help you
identify the workspace by sight
when you start managing multiple
of them.

Click Save once done.

This will redirect us to the


Workspace itself.

The Workspace is a place for multiple users to collaborate with each other. All content inside a
workspace can be interacted with by all the different users that are granted access to it. The kind of
interaction users have available to them will depend on the kind of membership that has been granted
to them by the Workspace Creator.

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Uploading a Data Set


# Activity Expected Outcome
6 We need to upload the data
that we will analyze into Power
BI.

In the Workspace, click on New


then click on Dataset

7 We can upload either an Excel


or CSV File, or manually paste
the data. In this case, we will be
uploading a Sample File.

Click on Excel

8 A new window will open.


Navigate to where you saved
the sample file, then select
Smartbooks with BA sample
data.xlsx file. Click on Open

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9 A message will appear in the


upper right hand corner of the
screen. Wait for the data upload
to finish.

You will know that the upload is


finished when you get
redirected to a “Summary Page”
of sorts regarding the statistics
of the uploaded data.

Click on the Workspace Link to


go back to the workspace.

10 You should now see the


uploaded data set. A report can
now be created based on this
uploaded data. Hover the
mouse on the Smartbooks with
BA Sample Data dataset, click
on the More Options Button,
then click Create Report

11 The Report Creation Interface


should appear

Before proceeding with the creation of the sample report, let us familiarize ourselves with the
different parts of the interface.

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1. Menu Bar – save the report using the File option, and the ability to change how the report is
being viewed, along with allowing the user to insert some other elements in the report such
as text boxes and editing how the different visualizations interact with each other.
2. Report Canvas – this is where visualizations are laid out and formatted.
3. Filters Pane – sets options on limiting the displayed data in the report.
4. Visualizations Pane – contains two parts: The first one is where the user can select
visualizations to put into the Report Canvas. The bottom part is where the properties of the
selected visualizations can be changed. This bottom part is context-sensitive (options change
depending on the selected Visualization). It can contain up to three tabs: Fields, Format, and
Analytics.
5. Data Pane – contains all the data fields that were in the dataset. Power BI automatically
assigns the field names as they appear in the top row of the data source.
6. Page Options – allows to add, delete, rename, and duplicate pages.
7. Workspace Link – allows the user to quickly go access the currently selected workspace.

The report creation process is as follows:

1. Select the visualization by clicking on the desired type in the Visualizations Pane.
2. Select data to be included in the visualization by ticking the checkbox in the Fields Pane. If
the user needs more control over the order of fields, drag and drop the Field from the Fields
Pane to the Field Tab of the Visualizations Pane.
3. Resize and format the visualization.
4. Repeat steps 1 to 3 until all desired visualizations are complete. Be sure to save often!
5. Publish the Report.

Let’s now proceed with creating a sample report with two visualizations.

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s

Creating the Sample Report


# Activity Expected Outcome
12 First, we want to see the
contribution of each Sub Revenue
Stream to for the month of May.

For this, we will need to add a Pie


Chart.

In the Visualizations Pane, select


Pie Chart.

A chart template should appear in


the report canvas.
Notches on the sides of the template indicates that the visual is
selected.

13 In the Data Pane, put a check on


the Revenue Streams and May
(Actual) Fields.

This should update the chart


template in the canvas with the
proper visuals.

14 Resize the Visualization so that it


takes up roughly 1/2 of the canvas,
positioned at the right.

You will sometimes see dotted red lines while resizing and
moving visualizations around. This helps in getting the proper
alignment of the report’s visual elements.

15 Click on any empty space in the


canvas to make sure that there are
no visuals selected, then add a Line
and Clustered Column Chart. A
Chart Template should appear on
the left side of the canvas.

This Graph will show the compare the Actual Revenue Stream
on the Month of April and May

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16 Move this chart to the lower left


quadrant of the canvas then check
the Data Revenue Stream,
April (Actual) and May (Actual).

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17 Click on any empty space in the


canvas to make sure that there are
no visuals selected, then add a (3)
three Cards. Position the 3 cards at
the upper left part of the canvas.

18 While the 1st card is selected,


check the May (Actual) then select
the 2nd card, check April (Actual)
lastly select the 3rd card, check
Difference.

19 The final report should look like


this.

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20 With the sample Report


completed, click on File in the
Menu Bar and then click on Save.
A new window should open up.
Give it a name, then click on Save.
This is the only time in this guide that you will be explicitly
instructed to save your report. As Power BI Service has no auto-
save function at the time of writing, make sure to save often to
minimize the risk of lost progress.

21 Because this is the first time we


saved, the report will be redirected
into the Reading View. In order to
continue working on and editing
the report, on the Menu Bar, click
on Edit.

22 Identify Patterns and Trends on the See Sample Analysis Below


Report and conduct a more in-
depth analysis then finally draw a
conclusion or recommendation on
each visualization.

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Exercise

Please refer to the exercise workbook provided by your instructor.

***Nothing follows***

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