The general ledger and reporting system (GLARS) primarily collects and organizes data to update general ledger

accounts and to prepare reports that summarize results of the organizations activities. This system normally uses data coming from each of the accounting subsystems, the treasurer, the budget department and the controller. The accounting subsystems provide summary entries of routine activities in those cycles; the treasurer on the other hand, deals with non-routine activities; the budget department provides estimates; and the controller provides adjusting entries. The system must be designed to produce regular periodic reports and to support real-time inquiries in order for the information to meet the needs of its users.

THE BASIC ACTIVITIES IN GLARS:

1. Update the general ledger. It involves posting of the journal entries from journal vouchers, which consists of entries of routine transactions from accounting subsystems, and the general journal that contains individual journal entries for non-routine information from the treasurer. After updating the general ledger (GL), journal entries are stored in a journal voucher file.

2. Post adjusting entries. The controller provides adjusting entries at the end of accounting period and before the preparation of initial trial balance. The trial balance lists the balances for all GL accounts. Journal vouchers for adjusting entries should be stored in the journal voucher file. An adjusted trial balance is to be prepared after adjusting entries are recorded. The adjusted trial balance serves as the basis for the preparation of financial statements.

There are five types of adjusting entries: a. Accrual event occurred for which related cash flow has not taken place Accrued revenue is the revenue earned for which payment is yet to be received. Accrued expense is expenses incurred without actual payment for such. Deferrals cash flow has taken place before revenue is earned or expense is incurred

y y
a.

y Deferred revenue/ unearned revenue refer to the receipt of payment for services or goods which are not yet rendered. y
Deferred expense refers for products already paid which are not yet used.

a. Estimates expenses not directly related to revenue but must be allocated systematically, such as depreciation and bad debt expenses b. Re-evaluations result from comparing actual and recorded values, and recording changes in accounting principles c. Error corrections

1. Prepare financial statements. This stage produces useful documents for the information users such as the income statement which reflects the results of operations of the business. In this third activity, the Income Statement is prepared first. The Balance Sheet is prepared next. And the Cash Flow is prepared last.
The values presented in the income statement must be closed for retained earnings account using closing entries. The retained earnings are accumulated and this will be a component for the statement of stockholders equity. Another report prepared is the balance sheet, which reflects the companys financial position showing the assets, liabilities and equity. Statement of cash flows regarding the operating, investing, and financing activities of the company is also prepared.

2. Produce managerial reports. This is the final activity in the GLARS, where the output of the processes mentioned above is communicated to the users in the form of financial statements and other reports. This step includes verifying the accuracy of the posting process, budgeting for planning and evaluating performances.
The two main categories of managerial reports: (a) General ledger control reports These involve lists of journal vouchers by numerical sequence, account number, or date listing of general ledger account balances. (b) Budgets Budgets come in the form of: operating budget which depicts planned revenues and expenses; capital expenditure budget which shows planned cash inflows and outflows for each project; and, cash flow budget which refers to the anticipated cash inflows and outflows for use in determining borrowing needs. Budgets and reports should be developed on the basis of responsibility accounting. This concept passes the accountability of reporting to the manager responsible by breaking down financial results by sub-units, showing actual costs and variances of the sub-unit controlled, including the cost of the sub-unit as a single line item on the report for the next level management. Contents of the budgetary performance report should be based on the nature of the unit being evaluated. In the case of cost centers, such as production, service and administrative departments, present costs are compared to budgeted costs, focusing only on controllable costs. For revenue centers, example of which is sales department, present actual and forecasted sales are being compared based on the product, geographical category, etc. Profit centers, which includes IT and utilities that charge other units for their services, compare actual and budgeted revenues, expenses and profits. Lastly, for investment centers (plants, divisions, and other autonomous operating units) provide calculations for return on investment. The method used to calculate the budget standards is crucial. Fixed targets are used and are compared with actual results. The problem, however, is that unforeseen changes in operating environment may not be adjusted, and managers may be penalized for factors beyond their control. To prevent this, theres a need to develop a flexible budget by identifying fixed and variable components of each items.

XBRL: REVOLUTIANIZING THE REPORTING PROCESS Extensible Business Reporting Language (XBRL) is a variant of XML designed specifically to communicate the contents of financial data. It is the proposed solution to the underlying problem of lack of standards for identifying the results of data leading to inefficiencies in disseminating financial reports. The problem arises because users required the information in a variety of formats which was time-consuming, and the necessity of re-entry of information makes it prone to errors. XBRL create tags for each item much like HTML tags. Software vendors are working on automatically generating XBRL codes so accountants wont need to write codes.

XBRL provides two major benefits. First, organizations can publish financial statements on time in a format that anyone can use. Second, recipients will no longer need to manually reenter data. XBRL is a great example of how accounting and IT are interrelated. CONTOL: OBJECTIVES, THREATS AND PROCEDURES The following are the objectives of controlling well-designed AIS such as the general ledger and reporting system: y y y y y y y y All transactions are properly authorized All recorded transactions are valid All valid and authorized transactions are recorded All transactions are recorded accurately Assets are safeguarded from loss or theft Business activities are performed efficiently and effectively The company is in compliance with all applicable laws and regulations All disclosures are full and fair Actions to reduce threats of errors and irregularities must be considered. To enhance accuracy and reliability, simple and easy-to-complete documents may be used, using appropriation control such as field checks and validity checks may also help. For proper authorizations and accountability, provide space on forms for signatures of those who completed and reviewed the form. Pre-numbering documents encourages recording only valid transactions, and restricting access to blank documents reduces risk of unauthorized transactions.

THREATS IN THE GLARS: THREAT 1: Errors in Updating the General Ledger and Generating Reports Problem - Can lead to poor decisions based on incorrect information Controls Input edit in processing control Reconciliations and control reports Audit trail THREAT 2: Loss, Alteration, or Unauthorized Disclosure of Financial Data Problem - Can result in leaks of confidential data. Can conceal a theft of assets. Controls Back- up and recovery procedures All disks should have external and internal file labels Access controls (user IDs and passwords, compatibility matrices, logs)

Default settings on ERP systems usually allow users far too much access to data, so these systems must be modified to enforce proper segregation of duties. Sensitive data should be encrypted in storage and in transmission.

Parity checks, acknowledgment messages, and control totals should be used to ensure transmission accuracy. THREAT 3: Poor Performance Problems - The company might provide tainted or late information to government agencies, regulatory bodies, investors, creditors, etc.. May not get internal reports on a timely basis. Reduces profitability. Controls - Prepare and review performance reports. Implement XBRL. Redesign business procedures SUPPORTING MANAGEMENTS INFORMATION NEEDS Decision making of management requires the following tools: balanced scorecard, data warehouses, and proper design of graphs of financial data. A report called balanced scorecard provides a multidimensional perspective on organizational performance. It contains organizations goals and measures to attain these goals for each of the following: financial, customer, internal operations , and innovation and learning, also termed as the four perspectives of an organization. Balanced scorecard provides a more comprehensive overview of organizations performance than financial measures alone, it also measures key aspects of the organizations strategy and reflects important casual links. The use of industry benchmarks in designing balanced scorecards limits the performance of the company in relation to its competitors. Management must constantly monitor and reevaluate the organizations financial and operating performance and must be able to alter plans quickly when the environment changes. ERP systems and integrated AIS systems may be adopted to facilitate these activities. However, these systems are designed primarily to support transaction processing needs, and typically contain data only for the current fiscal year and maybe an extra month which may not be useful in strategic decision making that uses historical data. Separate databases called data warehouses which contain detailed and summarized data for a number of years fill the need for historical data. They are separate from the AIS. Data marts are separate and smaller warehouses used for individual functions such as finance or human resources. Data warehouses and data marts are updated periodically to reflect the results of transactions that have occurred since the last update. They are designed differently than transaction processing databases. The latter are designed to minimize redundancy and maximize efficiency of updates, while data warehouses are designed to be redundant to maximize query efficiency. Data warehouses uses a star schema where the center is a single fact table representing the most important variable of interest. The fact table contains multiple views or measures of a variable and a number of foreign keys that link it to the factors that influence it. Purchases of raw materials in units and in dollars, location of storage, item, purchasing agent, department, supplier, and time period are also contained here. Many stars- one for each important set of data- make up a data warehouse.

USING DATA WAREHOUSES FOR BUSINESS INTELLIGENCE Data in a warehouse are being accessed to be used in strategic decision making. This process is called business intelligence, and has two techniques. The Online Analytical Processing (OLAP) requires it users to employ queries to investigate hypothesized relationships in the data wherein each query can drill down to deeper levels. The other technique, data mining, uses sophisticated statistical analysis and artificial intelligence techniques such as neural networks to discover unhypothesized relationships in the data. Proper controls are needed for data warehouses. Data validation controls are essential to ensuring data accuracy. Scrubbing, a process of verifying the accuracy of data, is often the most time consuming and expensive step. Information should be protected from competitors or from destruction by using access controls, encryption, and backup provisions. The third tool useful in decision making is the proper design of graph of financial data. It involves the presentation of data through graphs that highlight and summarize important facts. Welldesigned graphs make it easy to identify and understand trends and relationships while poorlydesigned graphs can impair decision making.

D D

Pie charts show the relative size of sub components. Bar charts are the most common type and are used to display trend.

PRINCIPLES OF GRAPH DESIGN For bar charts to be easily read, it is suggested to use titles that summarize the basic message. It would also help to include data values with each element instead of labeling the vertical axis. This practice facilitates mental calculation and analysis. The use of 2-dimensional,instead of 3dimensional, bars makes it easier to accurately assess magnitude of changes and trends. Different shades of gray or colors, instead of patterns, dot, and stripes are suggested to use because they are easier to distinguish. The ultimate value of graphs is to support decision making. Two principles are essential to accurate interpretation. Begin vertical axis at zero, and for graphs that depict time-series data, order the x-axis chronologically from left to right. There are no authoritative guidelines in GAAP or auditing standards that prohibit the violation of these principles, even though the results can be deceptive.

WAYS ON HOW INFORMATION TECHNOLOGY CAN PROVIDE OPPORTUNITIES FOR IMPROVING THE EFFICIENCY AND EFFECTIVENESS OF GLARS: 1. The timing of general ledger updates. Modern AIS systems often use on-line processing to update the subsidiary ledgers as each transactions occurs. This immediate updating keeps the subsidiary ledger balances current and can improve the quality of subsequent decisions. 2. The monthly closing process. Many organizations are interested in finding ways to speed up the monthly closing process. One way to speed up such is to consolidate overlapping AIS subsystems. Client server systems provide another way to improve the closing process.

3. The financial reporting. Communication technology can also be used to reduce both the time and costs of preparing and disseminating financial statements. Controllers can access public financial reporting data bases.

REFERENCES: http://www.slidefinder.net/g/general_ledger_reporting_system_chapter/25881454

Accounting Information System Chapter 14 General Ledger and Reporting System by Romney/Steinbart 2006 Prentice Hall Business Publishing