GL Flow of Processing

Flow of Processing – General Ledger

Overview

The Flow of Processing section helps you learn how to operate the software for the first time and provides a guideline for operating the General Ledger module after it is installed. The best way to understand this section is to study it in conjunction with the Operations section of this manual.

Flow of Daily Processing

Daily Processing refers to the procedures performed each day when using the General Ledger module. During daily operation, transactions are recorded in supporting modules (e.g., Accounts Payable, Accounts Receivable, Payroll, Sales Order etc.). These transactions are updated from data entry files to more permanent storage files within each specific module and to the General Ledger Daily Detail file. Within the general ledger itself, journal entries may be made that also post to the General Ledger Daily Detail Register.

To audit the flow of daily processing, registers are printed for each batch of transactions before the update takes place. Also, a Daily Detail Register is printed listing all general ledger account postings from all sources. The Daily Detail Register may include postings for several days, and is printed and reviewed before the final posting to the general ledger takes place.

Follow these steps at the end of each processing day:

Collect all audit reports and registers for modules linked to the General Ledger. Use the totals on these reports to compare against the totals on the Daily Detail Register.
Run the Daily Detail Register.
Before updating, check the Daily Detail Register to verify that the posting dates correct and the amounts are reasonable. Also, do the posted amounts balance with corresponding audit reports and registers from the other application modules?
Before updating, use the audit reports from each module to find errors. These errors can be corrected through the appropriate modules. Corrections can also be made using journal entries if necessary. Print the Daily Detail Register as many times as needed before updating.
When the Daily Detail Register is correct, proceed with the update. Remember that it is easier to correct an error before the update. After the update, corrections can be made through: a) Subsidiary ledgers (if correcting Accounts Receivable, Accounts Payable, etc., accounts) and b) Journal entries.
Label the updated register "Posted to Computer" and file in a folder marked "Daily Detail Register." The update posts transactions to the Transaction History and Summary Activity reports. As the update proceeds, it clears the Daily Detail file.

NOTE: If more than one Daily Detail Register was printed before update, dispose of all except the last one to avoid confusion.

Period End Processing

Period end processing refers to the software operations performed at the end of each accounting period to close the period. At the end of the period, additional journal entries should be made. The Transaction History Report on the General Ledger Reports Menu is run and used as an audit check for the period being closed.

After financial reports for the period are processed, the accounting period may be closed. It is not necessary to close the period to print the financial reports. Financial reports may also be printed for closed periods.

General ledger processing for the next accounting period can proceed without closing the current period. To do this, make sure that the date for all transactions falls within the next period (or beyond the end of the current period) so that general ledger postings are not included in the current open period.

Use the following procedures to close the accounting period:

Make all necessary journal entries and recurring journal entries

In this procedure, all recurring, allocating, special, reversing, and adjusting entries for the period are made and updated to the Daily Detail file.

Verify completion of all activity affecting this period in all modules.
Enter journal entries at the close of the period to reflect transactions not processed through the supporting modules. Keep in mind that journal entries should be entered in groups reflecting associated transactions (e.g., enter all expense-related journal entries together), and that the Journal Entry Date determines the appropriate accounting period to post the journal entry. Also remember that a reversing date can be specified for a journal entry to cause an automatic reversal of the same transaction in a future period.
Enter recurring journal entries if applicable. These reflect recurring activity that is not processed through the supporting modules. Run the Recurring Journal Entry Register. Check to make sure all recurring journal entries are present and accurate on the Register. The Recurring Journal Entry Register update creates entries directly into the Journal Entry file, where they become a part of the regular journal entry process. They may be further modified if necessary before final updating.
Determine any special or adjusting journal entries to be made and enter them through the Journal Entry task. Run the Journal Entry Register. Make sure that all recurring, special, reversing, and adjusting entries were made. Make any changes necessary. When the Journal Entry Register is correct, proceed with the update. The journal entries are updated to the General Ledger Daily Detail file.
Label the recurring and updated register “Posted to General Ledger” and file it in a folder marked “Journal Entry Registers.” This is your hard copy record that provides an essential audit trail for future reference.

NOTE: If more than one Journal Entry Register was printed before updating, keep only the most current version.

Run the Daily Detail Register

In this procedure, the Daily Detail Register is printed and checked for accuracy. Information from the Daily Detail file is updated to the General Ledger Transaction History file and a GL summary file; or it is cleared, depending on the setting of the Post Detail Transactions parameter within the General Ledger module.

Run the Daily Detail Register but do not update it.
Check the Daily Detail Register for the same items listed in step three of Daily Processing. When you are satisfied with the Daily Detail Register, proceed with the update. When the Post Detail Transactions checkbox is marked, the update process will clear the Daily Detail file and post only to the Summary Activity file.

Perform Account Allocation Entry/Account Allocation Register (optional)

In this procedure, each source general ledger account you want to allocate must be assigned to one or more destination general ledger accounts on a percentage basis. The total of the percentages must equal 100 percent. When the register is run and updated, the source account balance for the selected period is distributed to the destination accounts according to percentages assigned. A contra entry equal to the sum of the transactions is posted to the source account.

Be sure that all postings to accounts to be allocated have been made and updated through the Daily Detail Register.
Run the Account Allocation Register.
The Account Allocation Register should be checked to be certain that all postings are correct. To make corrections to any percentages, use the Account Allocation Entry task to make the changes.
Update the Account Allocation Register.
Run the Daily Detail Register again and update it after you are satisfied that it is correct.

Print the General Ledger Trial Balance Report

In this procedure, the Trial Balance Report is printed and checked to make sure everything necessary is included in the period. The trial balance provides a summary of general ledger activity for each account. Remember the Trial Balance Report may be run at any time prior to or after closing the period.

Run the Trial Balance Report.
Check the Trial Balance Report to be certain that everything in the period was included.
Make any necessary changes through the Journal Entry task. (Repeat the procedures for making journal entries and recurring journal entries, steps 1 through 5, and for the Daily Detail Register, steps 1 and 2).
If year end processing is started and in process (the last period of the year is closed; Year End Update has not been run), and any transactions were posted to the incomplete year, it is important that the Update Beginning Balances task be completed before running the Trial Balance Report or the Financial Reports. See Closing the Last Accounting Period of the Year below.

Print the Transaction History Report

The Transaction History Report is printed and checked. Make any necessary changes using journal entries.

Run the Transaction History Report. The Detail option prints all transactions for each account posted during the selected periods. Selecting the Summary option prints a summary of all transactions in the period for each account, grouped by journal ID.
Check the reports to verify inclusion of all necessary transactions.
Make any necessary corrections using the Journal Entry task until the report is correct. (Repeat these procedures for making journal entries, producing the Daily Detail Register, and running the Trial Balance).
When correct, update the Daily Detail Register.

Produce the Financial Reports

The standard Profit and Loss Statement and Balance Sheet (available on the GL Reports Menu), and custom formatted reports created in Financial Report Master can now be printed. The period does not need to be closed to run these reports.

Print the financial reports.
Check the financial reports carefully and make any necessary adjustments using the Journal Entry task. Update and reprint the financial reports.
When all reports are correct, save a copy of the financial reports in a folder marked for the appropriate period.

Closing the Accounting Period

Closing the accounting period causes the period and year to be advanced and the last period to be closed. The Locked checkbox for that period is marked and eliminates any additional transactions.

After all financial reports are printed, run Period End Update for the accounting period to be closed.

NOTE: The GL Period End Update should only be run after all subsidiary ledger period end processes have been run for the fiscal period.

Closing the Last Accounting Period of the Year

If closing the last period of the year, you may continue to process into the next year without closing the current year. Run the Update Beginning Balances task. This task will bring forward the ending balance of all balance sheet accounts and will calculate the retained earnings balance. Subsequently, rerun the Update Beginning Balances task following any transactions posted to the incomplete year, to reflect those changes.

NOTE: Once the last period has been closed, only Journal ID codes with the Year End Adjustments (Y/E Adjs?) checkbox marked in Journal ID Codes Maintenance may be used to post transactions to the incomplete year.

Making Postings to Closed General Ledger Periods

General ledger postings may be made to closed periods when the Post to Locked Periods (Post to Locked?) checkbox in the Journal ID Codes maintenance task is marked for the journal ID being used. In other words, it is possible to make postings with transaction dates falling into a particular accounting period for which the General Ledger period-end process has already run.

Such postings are reported along with the current period postings, and are noted as having a prior period date. When the Daily Detail Update is run, any prior period postings are summarized in their particular period. Remember that this affects the balances of general ledger accounts and the printed financial reports for previously closed periods. It may be necessary to reprint the Trial Balance and financial reports if they have significantly changed.

NOTE: Posting to prior periods is restricted to making adjustments to prior periods within the current year or next year.

Reconciling Your Accounts

Reconciling a bank account involves comparing the bank’s record of the account balance and activity for a designated period against the company’s record of the account balance and activity over the same period. The bank’s record of the account is shown on a bank statement that is provided periodically (usually monthly). A company’s record of the bank account balance is represented by a general ledger account and the detail transactions are maintained in the Bank Reconciliation files.

Some Bank Reconciliation detail transactions are updated automatically from the Accounts Payable, Payroll*, Accounts Receivable modules and some information is entered manually (service charges, interest, etc.). Discrepancies between the bank’s and the company’s records must be identified and adjusted. To be successful, reconciliation requires a review of all the transactions involving the bank account.

Preparing for Reconciliation

The first step in reconciliation is to get the bank statement for the period to be reconciled. The next step is to determine the balance of the corresponding general ledger account as of the statement ending date and whether all transactions are recorded in the module. This step requires that you gather the receipts and records pertaining to the bank account during the period.

Determining the Reconciliation Date

The bank reconciliation date is the same as the period-ending date shown on the bank statement. If you reconcile at the end of a month, it does not matter if the general ledger has already been closed for that period.

If the bank statement date (and thus reconciliation) is other than month end, the bank account must be reconciled before the general ledger is closed for that period. With the General Ledger module, processing can continue into future periods without having to close the current period. The module calculates the general ledger bank balance as of a date in an unclosed month and allows overriding of the computer’s calculation.

Bringing Transactions Up to Date

The general ledger cash account must be up-to-date, and the postings that affect the account balance must be entered. All computer-generated transactions with a posting date up to and including the reconciliation date must be completed and updated. These transactions include both manual and computer-dated checks processed through the Accounts Payable and Payroll modules, and all deposits processed through the Accounts Receivable module. In addition, adjustments to the general ledger accounts that are not automatically posted (such as service charges, counter checks, interest, etc.) must be added using journal entries and manually entered through the Check Processing or Other Transaction Processing option of the Bank Reconciliation task.

Marking Transactions as Paid or Posted

Mark transactions on the bank statement for the period as Paid (for checks) or Posted (for other transactions) using the Check Processing and Other Transaction Processing options of the Bank Reconciliation task. If some valid transactions on the statement have not been recorded in the module, enter them. This step is important because it brings the company’s record of bank transactions up to date with the bank’s record.

Comparing Balances

Use the Balance Check Book option of the Bank Reconciliation task to enter the bank statement date, statement balance and corresponding general ledger account balance (as determined above) for the bank account being reconciled. The bank statement ending balance, adjusted by open (unposted and unpaid) transactions, is compared to the general ledger account balance that is automatically calculated and displayed on the screen. In comparing the balances, the Balance Check Book option considers only transactions that have dates up to and including the bank statement date.

Reconciling Discrepancies

When a discrepancy exists between the bank’s records and the company’s records, identify and correct the error. If the error is in the company’s records for the account, adjust either the general ledger account, the bank reconciliation detail transactions or both. To adjust the general ledger, make a general ledger journal entry; adjust the record of detail transactions manually using the Check Processing and Other Transaction Processing options.

Printing the Detail Transaction Listing

The Detail Listing Report is an aid in reconciliation. It is a copy of bank account transactions that can be printed showing all transactions or only open transactions. When a bank account is reconciled to the general ledger for a period, print the listing as a permanent record. Print it before performing the reconciliation update.

Year End Processing

Year End Processing refers to the procedures performed at the end of the last accounting period that closes the fiscal year. After checking to make sure that all periods are closed, including the last period, the Year End Update task should be run. During the update, the general ledger accounts are cleared or reset with the appropriate beginning balance.

General ledger processing may continue into the next fiscal year without closing the current one. Make sure that the processing date for the next year is entered correctly (i.e., is beyond the current fiscal year) so that any future general ledger posting is not actually included in the previous year.

Closing the Accounting Year

Before beginning year-end processing, be certain that all journal entries were made, including year-end adjustments, before closing the year. Check that the final accounting period of the year is closed and that all reports are printed.

Run the GL Transaction History Report (optional). This step is necessary only if the Post Transactions History checkbox was marked in Application Parameters maintenance.
Run Year End Update. Several transactions are automatically carried out during the update. Income and expense account balances are set to zero. Ending balances of asset, liability, and capital accounts for the fiscal year being closed will become the beginning balances of the new fiscal year. An Update Beginning Balances register will generate automatically. The Prior Fiscal Year Closed? checkbox in parameters Fiscal Calendar is marked. Once this is done, it is no longer necessary to Update Beginning Balances.

Processing Checklist

Daily Processing

____ Daily Detail Register

Period End Processing

____ Recurring Journal Entry Register

____ Journal Entry Register

____ Daily Detail Register

____ Account Allocation Register

____ Daily Detail Register

____ Trial Balance

____ Transaction History Report

____ Bank Reconciliation

____ Financial Reports

____ Period End Update

____ Update Beginning Balances (last period only)

Year End Processing

____ Transaction History Report (optional)

____ Year End Update

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