The general ledger subsystem (G/L) serves as the common collection point for all accounting information in FACCTS. It has its own database and sources of data, and receives summary data from the other subsystems. It maintains a chart of accounts, produces detailed and summary trial balances, handles recurring and one-time manual journal entries and can produce custom balance sheet and profit/loss (income) reports.
The chart of accounts connects a general ledger number with other information pertaining to it and defines the structure of the general ledger. There is no numbering scheme imposed on the user by the system and only a few required accounts.
The account "number" may actually be any string of up to six characters; traditionally these are numeric, but the system will permit names such as "CASH" to be used instead of numbers such as "1001" if desired.
Many computerized general ledger systems require a complex chart of accounts to provide the needed level of information for accounting control and operating information. Since the FACCTS subsystems provide much of the detail information, the chart of accounts using FACCTS will normally be simpler than with other systems. It is suggested that only the minimum chart of accounts be created at first, with additional accounts added only if needed; this will make use of the system and interpretation of reports much simpler.
Data FieldsCoupled with each account number is an account description, such as "Cash in Bank" or "Accounts Receivable Control"; these appear on all reports involving the account and may be up to 30 characters in length. In most cases, the choice of account names should be based on the appearance of the financial reports: if the asset section of the balance sheet has a heading "CASH IN BANK", the associated ledger account should be called "People National" rather than "Cash in Bank - PNB". This makes for a cleaner report.
Each account also has an account type, either "B" for balance sheet or "P" for P/L; there is also an account direction with "+" for normal debit accounts and "-" for normal credit accounts. These fields are used for control of printing on the financial reports.
The accounting activity for each account is stored in summary form within the chart of accounts; for each of the two fiscal years carried, the system stores the beginning balance for the year and the activity for each month. This allows changes in previous months to propagate through the year automatically.
The chart stores two fiscal years to prevent problems at year-end; it is possible to continue with a second fiscal year for as long as necessary while waiting for final adjustments to close the first year. In many systems this is either difficult or impossible, resulting in a hurried closing or stacks of unposted papers in the office.
Required AccountsThe accounts required for the general ledger are:
In addition, there must be at least one revenue account and one expense account to be used in booking receivables and payables. Naturally, the normal chart of accounts will also include entries for fixed assets, depreciation, owner's equity, and additional asset, liability, income and expense accounts.
Report CodesOptionally associated with each ledger number is one (or two) report codes. This code directs the report writer in the placement of the account on one of the financial reports. Accounts of type "B" (balance sheet) use codes 1 through 4 to direct placement on the balance sheet report; accounts of type "P" use codes 5 through 8 for placement on the profit/loss statement. There are four possible codes for each account since there are four available reports of each type.
See the documentation on the Report Writer Codes.
Journal entries in FACCTS may come from one of several sources; there are manual and recurring entries produced within the general ledger subsystem. The other subsystems (eg; receivables and payables) produce summarizing entries to G/L when their internal data is "posted" to the ledger subsystem.
Each journal entry is composed of at least two lines; each line corresponds to a dollar amount which is to hit a given ledger account.
IdentificationEach entry is identified by a system-generated sequential numbering scheme. Within each entry, the individual lines are further identified by the number of the line within the entry. Thus entry 1234 might consist of lines 1234.01, 1234.02, and 1234.03. These line numbers appear on all reports which reference the entry details, providing a simple trail back to the original document or source of the entry.
Data FieldsWithin each line of an entry, there are several pieces of data. The first is the number of the general ledger accounts to which the line is to be posted. The dollar amount of the posting is also kept here. In addition to this "bare bones" data is a description of the entry; this may be entered by the user in case of manual entries or made up by the subsystem in the case of automatic entries posting subsystem data to the G/L.
Each entry also is further identified by a source and type. The source is a two character code identifying the originator of the entry; examples would be "ME" for a manual entry and "AP" for accounts payable subsystem. The type is made up by the user in the case of manual entries and by the system for automatic entries; examples might be "AD" for asset depreciation or "IP" for invoices posted.
The type field is used in account analysis to summarize account activity by type. For a fixed asset account, for example, the sale of assets would be distinguished from depreciation by the type field in the entry. This eliminates the need in most cases to use clearing accounts for long hand calculations to separate effects on an account.
Unposted EntriesJournal entries are said to be "unposted" if they are not yet reflected in the activity fields in the chart of accounts. This is the initial status for entries created by the subsystems or the general ledger system. Entries which are unposted will not have any effect on any report, including the detailed general ledger report.
The possibility of unposted entries is one of the reasons that reports for an unclosed month are titled "preliminary". The process of closing a month ensures that there are no unposted entries for the month to be closed, and all susbsystems prevent the user from making entries to closed months; thus any report which is not titled "preliminary" can be changed only through the intervention of someone authorized to "unclose" a month.
Posted EntriesThe posting process takes entries from the unposted status and moves them to the posted status. The appropriate chart of accounts monthly activities are updated to reflect the impact of the entries and the entry details are made available to such reports as the detailed general ledger. It is important to note that entries must be posted before they will have any impact on the accounting system database.
Manual Journal EntriesAlthough most of the journal entries required in the typical installation will come from the automatic posting of the subsystem activity (eg; accounts receivable invoices posted to A/R control), there are always cases of journal entries which must be entered in detail manually. As an example, bank service charges or a telephone transfer from checking to money market accounts would be entered in the form of a manual journal entry.
Manual entries are assigned identification numbers in the same sequence as all other entries; these numbers are used to follow the audit trail back to the source document. As part of the audit trail, the system will generate "aprons" for manual entries; the apron is an after-the-fact document that gives the details of the entry made, with a separate document for each journal entry. These aprons should be filed in numerical sequence along with the subsystem posting reports for a complete trail of all journal entries.
Recurring Journal EntriesThese are similar in concept to manual entries except that the system can be instructed to make a set of similar entries each month, eliminating some of the manual effort required. An expected end of year expense might be accrued month by month to smooth out the effect on the P/L statement. Rather than making a manual entry each month (and maybe not remembering to do it), the user would set up a recurring entry to be made each month.
The system ensures that each recurring entry is booked exactly once each month. Entries can be grouped on reports to provide the audit trail in a convenient form; the report resulting from each recurring entry generation run should be filed with the other journal entry aprons as discussed above.
Although the general ledger system can produce a variety of reports, there are several which will supply the bulk of the information needed of most installations. These are typically run at least once each month.
General LedgerThis report is called a "detailed trial balance" in some systems; it shows each account in the chart of accounts with its balance as of the start of the period covered by the report. Following the starting balance is the detail of all account activity for the selected report period, then the ending balance.
This is used primarily as a backup to the financial reports.
To print the General Ledger Report, you need to:
You may also print a Trial Balance, which will show all ending balances of all general ledger accounts for a particular month.
To print this report, you need to:The Account Analysis Report is a report for one general ledger account. It shows the beginning and ending balance, along with all activity for that particular account.
To print the Account Analysis Report, you need to:This is a user-designed report implemented via the report writer section of the general ledger system; the user may define up to four balance sheet formats. A balance sheet is always run as of the end of a selected month; if the month is not closed, the report will carry the heading "preliminary" and will typically be out of balance by the month's net income. This is due to the fact that the net income is not posted to the retained earnings account until the month is closed.
To print the Balance Sheet:Also called the P/L report, this is also a user-designed report under the report writer; four versions of this report are available as with the balance sheet. The income statement is run for any selected period within the fiscal year, from a single month to the entire year. If the selected period contains any unclosed month, the report will be marked as "preliminary".
To print the Income Statement, follow the same steps as above for the Balance Sheet.
Outside the day to day activities of making journal entries, posting, running reports, etc, there are several functions which serve special purposes in the system. These should be used with care, preferably only by a department manager, comptroller, or other person responsible for the books.
Close a MonthThis process first requires the user to post any unposted entries to general ledger. After this is done, the system marks the month as "closed" and calculates the net income for the month. This figure is booked (and automatically posted) to the retained earnings and total income accounts in the chart of accounts.
Since the FACCTS system will not permit any entry (including in A/R and A/P) to be made to a closed month, it is important to close a month only after all expected activity is completed. There is no requirement that a month be closed before continuing with entry for subsequent months, so this process can be held for a week or so after the actual end of the month is desired.
"Unclose" a MonthSometimes an important entry must be made to a closed month. The system allows a month to be "unclosed" for this purpose; the process reverses the retained earnings entry and opens the month. This is not advised as standard practice, but is supplied for emergencies.
Calculate FY2 BalancesSince a fiscal year is often not closed until well into the next year, FACCTS provides a method of carrying current FY1 account balances over into the second fiscal year. This may be done at any time and may be repeated as often as necessary.
Roll Fiscal YearWhen a fiscal year is finally closed, and all reports have been run, it is time to roll the fiscal year. This process deletes all journal entries for the year closed, and rolls the years "left" one column on the displays. Thus if the two years being carried were 1992 and 1993, this step will change the years to 1993 and 1994, with 1994 having no balances or activities.
It is important to note that there is no "unroll a year" function; once this process is completed, there is no way to undo its effects other than restoring a backup of the database. For this reason it is critically important to make sure that there is a good backup before rolling the years.