GROUP 3'S PRESENTATION

FINANCIAL &
MANAGEMENT
REPORTING SYSTEM
 MEMBERS
ARGUELLES, MARC AINSLEY

COBAL, ROSIEL

GABRIEL, GRACIELLE

LAYACAN, CLEOFE

NEGRO, ELYSSA RICA

SEVILLA, JEREMI
 01. THE GENERAL LEDGER
SYSTEM

02. THE FINANCIAL

REPORTING SYSTEM

03. CONTROLLING THE FRS

TABLE OF 04. THE MANAGEMENT

REPORTING SYSTEM

CONTENT 05. FACTORS THAT INFLUENCE

THE MRS
 A hub that connects the

THE firm to its information flow

GENERAL
Transaction cycle

LEDGER process

SYSTEM
Sources of information

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through MRS and FRS
 GENERAL LEDGER SYSTEM
THE JOURNAL VOUCHERS
It is the sources of GENERAL LEDGER

Representation of summaries of transaction

identifies financial amounts and affect general ledeger accounts

via journal vouchers all transaction (entries) are entered into GL

 GENERAL LEDGER SYSTEM
THE JOURNAL VOUCHERS
 THE GLS DATABASE:

The GLS database

includes a variety
of files. Whereas
these will vary
from firm to firm, the

following examples are

representative.
 GENERAL LEDGER SYSTEM
Different File type:
1. General Ledger Master File - the principal file based on a chart of accounts.

2. General Ledger History File - used for comparative financial report.

3. Journal Voucher File - all journal vouchers of the current period.

4. Journal Voucher History File- journal vouchers for past period for audit trail.

5. Responsibility Center File- financial data by responsibility centers for MRS.

6.
Budget master file - budget data by the responsiblity centers for MRS.

 GENERAL LEDGER SYSTEM

GLS PROCEDURES

The GLS Procedures are performed as either

separated operation or integrated

Updates in form of reversing, adjusting and closing

entries
FINANCIAL
REPORTING
SYSTEM
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 Financial reporting system is
responsible for providing stewardship
information to external parties.
Primary

THE Required and Regulates by

Security and Exchange
recipients of
FS

FINANCIAL
information
Comission (SEC) in such form of
are external
standard financial statements,
users
tax returns and documents.
REPORTING (stockholders,
creditors &

SYSTEM Must be prepared and

presented in a way that is
government
agencies).
being understood and
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external users.
 THE FINANCIAL REPORTING SYSTEM
SOPHISTICATED USERS WITH HOMOGENEOUS INFORMATION NEEDS

The community of external users is vast and their individual

information needs may vary, financial statement are targeted at a

general audience.
They are prepared on the proposition that the audience comprises

sophiscated users with relatively homogeneous information needs.

It is assumed that users of financial reports understand the

convention and accounting principles that are applied and that

statements have information content that is useful.

 THE FINANCIAL REPORTING SYSTEM
FINANCIAL REPORTING PROCEDURES
Financial reporting is the final step in the overall accounting process that begins in the transaction cycle.
Here are the following steps procedures:

Capture the transaction - transaction are recorded in the appropriate

transaction file
Record in special journal - Each transaction is entered into the journal

Post to subsidiary ledger - The details of each transaction are posted to the

affected subsidiary accounts

Post to general ledger - summarize entries made to special journals and

subsidiary ledger are prepared and posted to the GL accounts

Prepare the unadjusted trial balance - usually occur at the end of accounting

period
 THE FINANCIAL REPORTING SYSTEM
FINANCIAL REPORTING PROCEDURES
Financial reporting is the final step in the overall accounting process that begins in the transaction cycle.
Here are the following steps procedures:

Make adjusting entries -it is made to the worksheet to correct errors and

to reflect unrecorded transaction

Journalize and posting adjusting entries - Journal vouchers for adjusting

entries are prepared and posted to the appropriate accounts in GL

Prepare the adjust trial balance - contains all the entries that should be

reflected in balance sheet

Prepare the financial statement - All statement/s (income, cash flow,

balance sheet) are prepared using the adjust trial balance

 THE FINANCIAL REPORTING SYSTEM
FINANCIAL REPORTING PROCEDURES
Financial reporting is the final step in the overall accounting process that begins in the transaction cycle.
Here are the following steps procedures:

Journalize and post the closing entries - Journal vouchers are prepared for

entries that close out the income statement (temporary) accounts and

transfer the income or loss to retained earnings.

Prepare the post-closing trial balance - A trial balance worksheet

containing only the balance sheet accounts may now be prepared to

indicate the balances being carried forward to the next accounting

period.
 FINANCIAL
REPORTING
PROCEDURES
GL/FRS USING
DATABASE
TECHNOLOGY
 THE FINANCIAL REPORTING SYSTEM
CONTROLLING THE FRS

SAS 78/COSO CONTROL ISSUE

Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
a joint initiative to combat corporate fraud.
 THE FINANCIAL REPORTING SYSTEM
GL/FRS CONTROL
ISSUES
1. TRANSACTION AUTHORIZATION
journal voucher -used as a source document such as cash
receipts processing, sales order processing, and the financial
reporting group
the journal vouchers must be properly authorized by a
responsible manager at the source department.
 THE FINANCIAL REPORTING SYSTEM
2. SEGREGATION OF DUTIES
The task of updating the general ledger
must be seperate from all accounting and
asset custody responsibility within the
organiation.
Individuals with access authority to
GL accounts should not:
1. Have record-keeping responsibility for
special journals or subsidiary ledgers.
2. Prepare journal vouchers.
3. Have custody of physical assets.
 THE FINANCIAL REPORTING SYSTEM
3.ACCESS CONTROLS

Unauthorized access to the GL accounts can result in

errors, fraud, and misrepresentation in financial
statements.
SOX legislation explicitly addresses this area of risk by
requiring organizations to implement controls that limit
database access to authorized individuals only.
 THE FINANCIAL REPORTING SYSTEM
4. ACCOUNTING RECORDS

The audit trail is a record of the path that a transaction

takes through the input, processing, and output phases of
transaction processing.
This involves a network of documents, journals and
ledgers designed to ensure that a transaction can be
accurately traced through the system from initiation to
final disposition.
 THE FINANCIAL REPORTING SYSTEM
ACCOUNTING RECORDS
Audit trail should be detailed and rich enough to:
1. provide the ability to answer inquiries
2. be able to reconstruct files if they are completely
3. provide historical data required by auditors
4. fulfill government regulations;
5. provide a means for preventing, detecting and
correcting errors.
 THE FINANCIAL REPORTING SYSTEM
5.INDEPENDENT VERIFICATION
The FRS produces two operational reports that provide
proof of the accuracy of this process:
Journal GL
Voucher Change
Listing Report
 THE FINANCIAL REPORTING SYSTEM
INDEPENDENT
VERIFICATION
The Journal voucher
listing provides
relevant details
about each journal
voucher posted to
the GL.
 THE FINANCIAL REPORTING SYSTEM
INDEPENDENT
VERIFICATION
The general ledger
change report
presents the effects
of journal voucher
postings to the GL
accounts.
MANAGEMENT

REPORTING

SYSTEM
 Management reporting is
often called
THE discretionary reporting.
MANAGEMENT

REPORTING
An effective management

SYSTEM reporting system (MRS) is

mandated by SOX
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legislation.
 FACTORS THAT INFLUENCES THE MRS
MANAGEMENT PRINCIPLES
provide insight into management information needs.

THE PRINCIPLES THAT MOST DIRECTLY INFLUENCE THE MRS ARE:

Formalization of Tasks Span of Control

Responsibility and Authority Management by Exception

FORMALIZATION OF TASKS
This principle suggests that management should structure the
firm around the tasks it performs rather than around individuals
with unique skills.

IMPLICATIONS FOR THE MRS.

Formalizing the tasks of the firm allows formal specification of the

information needed to support the tasks.
RESPONSIBILITY AND AUTHORITY
This principle refers to an individual’s obligation to achieve
desired results. Responsibility is closely related to the principle of
authority.

IMPLICATIONS FOR THE MRS.

This principle define the vertical reporting channels of the firm

through which information flows.
SPAN OF CONTROL
A manager’s span of control refers to the number of subordinates directly under
his or her control. The size of the span has an impact on the organization’s
physical structure.
IMPLICATIONS FOR THE MRS.
Managers with narrow spans of control are closely involved with the details of the
operation and with specific decisions.
Broad spans of control remove managers from these details.
MANAGEMENT BY EXCEPTION
This principle suggests that managers should limit their attention to
potential problem areas.

IMPLICATIONS FOR THE MRS.

Managers need information that identifies operations or

resources at risk of going out of control.
MANAGEMENT FUNCTION, LEVEL, AND

DECISION TYPE
Strategic Planning Decisions
Tactical Planning Decisions
Management Control Decisions
Operational Control Decisions
1. Standards
2. Problem Structure
3. Unstructured Problems
STRATEGIC PLANNING DECISIONS
Setting the goals and objectives of the firm.
Determining the scope of business activities
Determining or modifying the organization’s structure.
Setting the management philosophy.
STRATEGIC PLANNING DECISIONS HAVE
THE FOLLOWING CHARACTERISTICS:
They have long-term time frames.
They require highly summarized information.
They tend to be nonrecurring.
Strategic decisions are associated with a
high degree of uncertainty.
They are broad in scope and have a
profound impact on the firm.
It require external as well as internal sources
of information
TACTICAL PLANNING DECISIONS
These are subordinate to
strategic decisions and are
made by middle management.

These decisions are shorter

term, more specific, recurring,
have more certain outcomes,
and have a lesser impact on
the firm than strategic
decisions.
MANAGEMENT CONTROL DECISIONS
These involves motivating managers in all functional areas to use
resources, including materials, personnel, and financial assets, as
productively as possible.

Uncertainty surrounds management control decisions as it is difficult

to separate the manager’s performance from that of his or her
operational unit.
OPERATIONAL CONTROL DECISIONS
These are narrower and more focused than tactical decisions
because they are concerned with the routine tasks of operations.
More structured than management control decisions, more
dependent on details than planning decisions, and have a shorter
time frame than tactical or strategic decisions.
Three (3) basic elements
TAKING CORRECTIVE
PERFORMANCE
STANDARDS ACTION
EVALUATION
Pre-established The decision maker
After comparing the
performance to the
levels of compares the performance
of the operation in question standard, the manager
performance that takes action to remedy
against the standard. The
managers believe difference between the two any out-of-control
are attainable. is the variance. condition.
 PROBLEM STRUCTURE
THREE (3) ELEMENTS OF PROBLEM STRUCTURE

DATA

The values used to PROCEDURES

represent factors The sequence of
that are relevant OBJECTIVES
steps or decision
to the problem. rules used in The results the
solving the decision maker
problem. desires to attain by
solving the problem
UNSTRUCTURED PROBLEMS
Problems are unstructured when any of the three
characteristics identified previously are not known
with certainty.

This problem is one for which we have no precise

solution techniques.
TYPES OF MANAGEMENT REPORTS
Management report may be a paper document or
a digital image displayed on a computer terminal.
Report Objectives
Programmed Reporting
Report Attributes
Ad Hoc Reporting
 TYPES OF MANAGEMENT REPORTS
REPORT OBJECTIVES
To reduce the level of uncertainty associated with a
problem facing the decision maker

To influence the decision maker’s behavior in a

positive way.
 TYPES OF MANAGEMENT REPORTS
PROGRAMMED REPORTING
It is a report that provides information to solve
problems that users have anticipated. It consists of
two subclasses:
Scheduled reports- has established time frame as daily, weekly,

quarterly, and so on.

On-demand reports- triggered by events such as when

inventories fall to their pre-established reorder points, the system

sends an inventory reorder report to the purchasing agent.

 TYPES OF MANAGEMENT REPORTS

PROGRAMMED
REPORTING
 TYPES OF MANAGEMENT REPORTS
Report Attributes
Relevance- Every element of information must support the manager’s

decision.
Summarization- summarized report is required according to

organizational hierarchy management wherein information becomes

greater, from lower management upward to top management.

Exception Orientation- control reports should identify activities that

are at risk of going out of control and should ignore activities that are

under control.
Accuracy- free from material errors to prevent wrong decision.
 TYPES OF MANAGEMENT REPORTS
Report Attributes
Completeness- essential information must be disclosed in
whatever circumstances.

Timeliness- includes sufficiently complete and accurate

information, rather than perfect information yet too late to use.
Conciseness- presented concisely by using coding schemes and
titles for all values to represent complex data classifications and
provide all necessary calculations for the user.
AD HOC REPORTING
Ad hoc reporting, also known as one-time ad hoc reports, helps its users to
answer critical business questions immediately by creating an autonomous
report, without the need to wait for standard analysis with the help of real-
time data and dynamic dashboards.
This report supports the concept of data mining, wherein to select, explore
and model large amount of data to uncover relationships and global
patterns that exist in large databases but are hidden among the vast
number of facts.
A central feature of successful data mining initiative is data warehouse of
archived operational data. It is a relational database management system
that has been designed specifically to meet the needs of data mining.
 RESPONSIBILITY ACCOUNTING
A large part of management reporting involves responsibility accounting. This implies
that every economic event that affects the organization is the responsibility of and can
be traced to an individual manager.
These top-down and bottom-up
information flows represent the two
phases of responsibility accounting:
(1) creating a set of financial
performance goals (budgets)
pertinent to the manager’s
responsibilities, and
(2) reporting and measuring actual
performance as compared to these
goals.
 SETTING FINANCIAL GOALS:
THE BUDGET PROCESS
The budget process helps
the management achieve
its financial objectives by
establishing measurable
goals for each
organizational segment
as measuring their
performance.
 MEASURING AND REPORTING
PERFORMANCE
Performance
measurement and
reporting take place at
each operational segment
in the firm which flows
upward as responsibility
reports to senior levels of
management.
 RESPONSIBILITY CENTERS

Business entities implement this operational

organization to achieve accountability. Most common

forms are:
cost centers,
profit centers, and;
investment centers.
 RESPONSIBILITY CENTERS

COST CENTERS
an organizational unit
with responsibility for
cost management within
budgetary limits.
 RESPONSIBILITY CENTERS

PROFIT CENTERS
A profit center manager
has responsibility for
both cost control and
revenue generation.
 RESPONSIBILITY CENTERS

INVESTMENT CENTERS
An investment center
manager has the
authority to make
decisions that profoundly
affect the organization.
THANK YOU!