ais report (chapter 8)

8/22/2019 AIS Report (Chapter 8)

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8.2 Conventional FinancialStatements


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Basic Reporting Requirements in

the Financial Process

1. Balance Sheet

2. Income Statement

3. Statement of cash flows


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Data comparisons, absolute changes and

percentage changesfacilitates the readers

understanding of the present financial position

of the company


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Comparative Analysis

Horizontal Analysis

Common-dollar statements/Vertical Analysiseach item is shown as a percentage of some

base amount (e.g., Total assets-balance sheet;

Sales-income statements)


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Three parts of a Cash Flow Statement

that complies with Statement ofFinancial Accounting Standard

1. Cash flow from operating activities

2. Cash flow from investing activities

3. Cash flow from financing activities


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8.4 Account Coding for theFinancial Purposes


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Chart of Accounts

the listing of account names stored in the

financial process along with the codes

assigned to the accounts Some packages provide account number

structures with overall fixed lengths, a fixed

number of fields, and fixed field lenghts


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Coding Scheme Example

01 Current assets

02 Tangible long-term assets

03 Intangible long-term assets

04 Current liabilities

05

Long-term liabilities06 Equity

07 Revenue

08 Cost of goods sold

09 Selling expenses

10 Administrative expenses11 Other revenues and expenses

12 Income taxes


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Immediately following the block code in the

account identifier is a sequence code that

specifies the order of accounts within each

goup.

E.g.

0901 Sale salaries expense

0904 Travel expense

0907

Advertising expense0912 Sale literature expense


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Extensible Business Reporting

Language (XBRL)

A new standard for communication offinancial information among businesses andthrough the Internet.

Allows financial information to e reported in acontext, a sort of bar code for financialinformation

Facilitates the handling of financial data, whilereducing the potential for errors and permitsthe automatic checking of information


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Types of Accounts

1. Master account

2. Sub-accounts

3. Normal Accounts accounts that have no sub-

accounts

01100.00 Cash

01100.01 Petty Cash01100.02 Checking account

01100.03 Payroll cash account


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8.6 Budgeting


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Some of the more sophisticated AIS packagesinclude a comprehensive budgeting module

that encompasses sales, production,

purchasing, and human resources, as well asthe financial process

Such budgeting model permits you to project

amounts


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8.8 Posting in the GL Module


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The transfer of data to the GL module fromother modules can be made in summary or in

detail, depending on the software design andthe available user options

An advantage of detail data transfers is that a

complete audit trail is available in the GLmodule

Disadvantages of detailed transfers are: (1)increased processing time (2) additional

storage space required (3) Difficulty locatingunusual entries due to large amounts of datain the GL master file records


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Batch posting versus Real-time posting

General rule: Posting must occur frequently

enough that data are current when required

for reporting or making inquiries


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Provisional Posting

Sometimes called pencil posting

Applies only when batch posting is used

Permits a user to change recorded

transactions only so long as they have not

been permanently posted


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8.10 Controls in Financial Process


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Transaction Risks

Unauthorized transactions

Incorrect, nonrecorded, and/or fictitious transactions

Unauthorized or incorrect adjusting entries

Incomplete information

Incorrect transfer of information

Information transferring errors

Improper allocation

Transaction activity not being reported in the properaccounting period

Incorrect reported account balances

Improper tax calculations


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Performance Reviews

Budget Tracking and Performance Evaluation

Internal Audit

External Reporting


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Physical Controls The financial reporting

function should be separated from the day-to-

day recording of routine accounting

transactions, and file maintenance functions,

with proper oversight by management.

Segregation of Duties File maintenance and

recording of adjusting and closing entries should

be separated from the routing transactionprocessing


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Information Processing

Authorization Controls

Data Verification Controls Processing Controls


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8.12 End-of-Period Processing


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At the end of each interim fiscal period, an

interim closing occurs The more popular designs now retain

transaction detail for the entire year or even

longer

Soft closings subject to proper controls,

entries can still be made in the earlier interim

periods

ais report (chapter 8)

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