Chapter 6: The General Ledger and Financial

Reporting Cycle
Accounting Information Systems: Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-Wing
Transaction Processing System Architectures

A firm’s transaction processing systems may either be manual or

computerized
Benefits & Differences of a Computer-Based General Ledger
System
• Transaction Data may be captured by electronic devices and
stored on magnetic media, rather than on hard-copy
documents
• Transaction Data can be verified by programmed edit checks,
in order to detect and prevent errors, rather than by human
clerks
• Transactions can be quickly posted directly to ledgers, rather
than being laboriously entered into journals and then posted
 Benefits & Differences of a Computer-Based General Ledger
System
• Transaction Processing, including summarizing of journals and
ledgers and computing trial balance totals, can be done faster
with fewer errors
• Financial Statements and other financial summaries can be
prepared at any time during the accounting period, rather than
being delayed until the end of the period; furthermore, the
ledgers can be kept in balance at all times
Benefits & Differences of a Computer-Based General Ledger
System

• Detailed listings of journals and ledgers, reflecting all

individual transactions rather than summaries, can be
printed for thorough review

• Required Stewardship Reports can be prepared quickly and

easily from stored transaction data, using stored computer
programs
Objectives of the General Ledger System
• To record all accounting transactions promptly and
accurately
• To post these transactions to the proper accounts
• To maintain an equality of debit and credit balances among
the accounts
• To accommodate needed adjusting journal entries
• To generate reliable and timely financial reports pertaining
to each accounting period
Potential Sources of Data Input
• Routine external transactions
• Routine internal transactions
• Non-routine transactions
• Adjusting entries
• Accruals
• Deferrals
• Re-evaluations
• Corrections
• Reversing entries
• Closing entries
Forms of Data Input
• Journal Vouchers
• A non-routine, adjusting, reversing, or correcting transaction
• A summarization of a batch of
routine transactions
• Computer-oriented inputs
• The Batch-entry journal voucher
• A pre-formatted data-entry screen
• Individual non-routine journal entries
Data Processing
• Daily Processing
• High volume transactions
• sales
• cash receipts
• purchases
• cash disbursements
• payroll
• End of Period Processing
• Standard entries
• Nonrecurring adjusting entries
Information Output
• General Ledger Analysis
• General journal listing
• General ledger change report
• Financial Statements
• Balance sheet
• Income statement
• Statement of cash flows
• Managerial Reports
• Account-oriented analyses
• Responsibility-oriented reports
The General Ledger’s Risk Exposures
1) Incorrect journal entries
2) Incorrect posting of journal entries
3) Transactions not recorded or not posted
4) Control accounts out-of-balance with subsidiary ledgers
5) Imbalances between debit and credit balance accounts
6) Defects or breaks in the audit trail
7) Interception of data transmitted via the web
8) Unauthorized access to and viewing of confidential data via the
Web
9) Unauthorized alterations to the company’s financial data via the
Web
10) Breakdown of the Web server
Reference:
Accounting Information Systems: Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-Wing