AIS: Financial Reporting Activity & Managerial Reporting

[Dr. Vero.,D.,SE.,MSi.,Ak.,CA.,CPA]

a. Activities in the reporting system:

- Collecting evidence of transactions carried out by each business unit. Then, it is adjusted to the authorization that has been carried out by the treasurer. The treasurer is responsible for collecting and disbursing company money and must be separated from the function of recording the outflow and inflow of company money. The recording function is carried out by the accounting department.

- Evidence of transactions is collected by the accounting department to match the records made. The accounting department will make records in the form of a transaction journal which will then be collected in the accounting records ledger.

- If an adjusting journal is required, the next step is to make adjustments to certain transactions.

- Then, the final balance of each account in an accounting period will be updated and then used in preparing financial reports.

- The accounting department can prepare financial reports according to needs and in accordance with applicable accounting rules.

- After the financial reports have been prepared, the accounting department can then create managerial reports for management decision making needs at various levels. Typically, managerial reports are prepared based on what information management needs to provide. Managerial reports can include sales reports, expense reports, reports for business expansion purposes, or other reports.

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b. Parties involved in the reporting system:

- Accounting department = records all cash expenditures and income made by the treasurer, then makes a report on its use.

- Treasurer = issues and accommodates cash flows, then makes reports on their use.

- Other departments = report cash income and expenditure in their respective departments.

- Management = receive and study reports generated from the reporting system for decision making.

- Computerized system = makes various reporting system activities easier.

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c. The risk faced by the reporting system in the scenario of an incorrect ledger updating process is that it can lead to making incorrect decisions based on incorrect information contained in the financial performance report. Control procedures to overcome this threat are:

1. Input editing and processing control.

For example, through a validity check, namely ensuring that a general ledger account exists for each account code referenced in the journal.

2. Reconciliation and control reports.

Can be used to detect if errors are made during the ledger updating process. Another important reconciliation is comparing the general ledger control account balance with the total balance of the related subsidiary ledger.

3. Maintaining an audit trail.

Shows the trace of each transaction throughout the accounting system. Specifically, an audit trail provides the information needed to trace all changes made to the general ledger.

Source: BMP EKSI4312 Module 9

A. Activities in the reporting system are as follows:

1. Starting from collecting evidence of transactions carried out by each business unit. After that, it is adjusted to the authorization that has been carried out by the treasurer. The treasurer's function is to collect and disburse company money and must be separated from the function of recording the outflow and inflow of company money. The recording function is carried out by the accounting department.

2. Then, evidence of the transaction is collected by the accounting department to be compared with the records made. After that, the accounting department will make notes in the form of a journal per transaction which will then be collected in the accounting records ledger.

3. If an adjusting journal is required, the next step is to make adjustments to certain transactions. For example, adjustments relate to depreciation of the use value of buildings used by the company and whose value must be adjusted in a certain period.

4. Then, the final balance of each account in an accounting period will be updated and then used in preparing financial reports.

5. Then, the accounting department can prepare financial reports according to needs and in accordance with applicable accounting rules. The financial reports of a company are divided into profit and loss statements, balance sheets, cash flow reports, changes in equity reports, and notes to financial reports.

6. After the financial reports have been prepared, the accounting department can make managerial reports for management decision making needs at various levels. Managerial reports are prepared based on what information management needs to provide. Managerial reports can include sales reports, customer expense reports