Question

As noted at the beginning of our accounting cycle study, we discussed how important each cycle is, especially the general ledger and reporting system. In what ways do you see your newfound knowledge helpful in intermediate accounting? What do we mean by reporting system? Why are these concepts important?

Answer 1

The general ledger is a master accounting document providing a complete record of all the financial transactions of your business.

Some reasons to maintain them are as follows:

1. It provides an accurate record of all financial transactions
2. It makes filing tax returns easy because you have expenses and income is in one place
3. It helps you identify (and stop) fraud
4. It aids in compiling key financial statements which are crucial for evaluating your profitability, liquidity, and overall financial health. These include the cash flow statement, income statement and balance sheet.

The general ledger and reporting system (GLARS) includes the processes in place to update general ledger accounts and prepare reports that summarize results of the organization’s activities.

•Identify the major threats in general ledger and reporting activities and evaluate the adequacy of various control procedures for dealing with them.•  Understand the implications of new IT developments, such as XBRL, and changes in external reporting requirements, such as IFRS, for the design and operation of the general ledger and reporting system. Discuss how tools like responsibility accounting, balanced scorecards, and graphs can be used to provide information managers need to effectively monitor performance.

•Although financial statements appear electronically in a variety of formats, until recently disseminating this information was cumbersome and inefficient.–Recipients (SEC, IRS, etc.) required the information in a variety of formats which was time-consuming. Also conducive to errors, because re-entry of the information was often necessary.

•Solution: Extensible Business Reporting Language (XBRL)

–A variant of XML designed specifically to communicate the contents of financial data.

–Creates tags for each data item much like HTML tags.

•Tag names specify line items in financial statements.

•Other fields in the tag provide information such as the year, units of measure, etc.

•Major software vendors are developing tools to automatically generate XBRL codes so accountants won’t need to write code.

Use of these methods make the information more viable and dependable for both the internal and external users which are almost error free. The advanced techniques used to prepare the accounts set an benchmark in the industry to provide simple, accurate and brief informations as per requirements.

• Increased Communication
• Increased Productivity
• Increased Accuracy
• Increased Timeliness