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
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