Week Nine – The General Ledger and Financial Reporting Cycle (Financial Cycle) PDF

Preview

Summary

Download Week Nine – The General Ledger and Financial Reporting Cycle (Financial Cycle) PDF

Description

Week Nine – The General Ledger and Financial Reporting Cycle (Financial Cycle) Learning Objectives -

Reflect on the key objectives and strategic implication of the general ledger and financial reporting cycle Evaluate common technologies underpinning the general ledger and financial reporting cycle. Recognise general ledger and financial reporting cycle data and key general ledger and financial reporting business decisions Summarise and prepare documentation synthesising the primary activities in the general ledger and financial reporting cycle and the data produced by these activities Assess risks and compose control plans pertinent to the primary activities in the general ledger and financial reporting cycle. Justify metrics to monitor general ledger and financial reporting cycle performance.

Integrated Process Perspective

General ledger and financial reporting cycle overview and key objectives

-

The GL and financial reporting cycle summarises, adjusts and reports on data from all the previous operational cycles. The objective of this cycle is to synthesise and report data. Comparisons are made to budgets.

Organisational units in the GL & Financial Reporting cycle:

Documentation flowing through the general ledger:

General ledger and financial reporting cycle overview and key objectives

-

Strategic implications of the GL and financial reporting cycle: o High-quality decision making requires good data and comprehensible reports.  Reported data is valid, timely, accurate or complete.  Report design: data properly arranged, readable, understandable, aesthetics and avoid information overload. o If management replies upon poor reports, decision-making performance will be compromised, which can lead to eventual business failure. o Errors in financial reporting distributed to external users can lead to problems such as incorrect market pricing of company shares, inequitable increases in the cost of capital, inability to access capital markets and the potential for prosecution if corporate laws are breached.

Technologies underpinning the general ledger and financial cycle -

ERP (Enterprise Resource Planning): improves the integration of enterprise-wide data. Online banking. XBRL (eXtensible Business Reporting Language): a data standard used when generating financial reports.

Data and decisions in the general ledger and financial reporting cycle -

-

The GL and financial reporting cycle extract transactional data from: o Accounts receivable o Accounts payable o Payroll data o Production cycle data Key business decisions relate to: o Budgetary considerations o Accounting policies and procedures o Chart of accounts establishes the basis for report generation

General ledger and Financial Cycle activities and related risks and controls 1. 2. 3. 4.

Prepare budgets Update the general ledger Record general ledger adjustments Produce reports

1. Prepare budgets: Key activities: - Determine budget values - Record budget details

2. Update the general ledger: Key activities: - Extract and validate data - Post transactions.

3. Record general ledger adjustments: Key activities: - Prepare adjustment journals - Post adjustment journals

4. Producing reports – Key Activities: - Produce management reports - Produce financial reports.

Measuring general ledger and financial reporting cycle performance Objective To accurately and completely determine and record budget estimates

To validate and correctly transfer all relevant transactional data

To ensure all adjusting journal entries are accurately prepared and independently authorised

To ensure all reports generated are well designed and contain relevant and accurate data Summary

Example KPI - Number of budget variances reported - Cycle time to create budgets - Operational manager complaints received regarding budget errors - Number of data errors detected - Reconciled balances in subsidiary ledger control accounts - Number of uncleared transactions in suspense accounts - Number of erroneous adjustments detected - Level of unadjusted balances in asset and liability accounts - Degree of compliance with accounting policy - Number of complaints received from report users - Number of data errors identified in reports

-

The objectives and strategic implications of the GL and financial reporting cycle were established Technologies that underpin the GL and financial reporting cycle activities were identified. GL and financial reporting cycle business decisions were outlined The primary activities in the GL and financial reporting cycle were identified and discussed. Risks and ways of mitigating these risks were considered. The importance of establishing KPIs were emphasised....