5.2
Setting up the General Ledger
Slideshow 2
List of Topics
Slide No.
Setting Up the System Manager
Activating the GENERAL LEDGER
Verifying the Fiscal Calendar
Setting Up the GENERAL LEDGER
Step 1:
Step 2:
Step 3:
Step 4:
4
10
12
13
Define Options
Define Account Structures
Specify G/L Source Codes
Create Source Journal Profiles
Generally Accepted Accounting Principles (GAAP)
Cost Principle
Full Disclosure Principle
Objectivity Principle
Business Entity Concept
Time Period Principle
Consistent Reporting Principle
Matching Principle
Why are adjustments necessary?
15
18
19
20
21
22
23
24
25
26
27
28
29
CCSL: Sample Company
Throughout the book, you will be
working on the accounts of
Collegiate Computer Systems
Limited (CCSL), our sample
company.
Click.
CCSL utilizes the accrual basis of
accounting. Study the difference
between accrual and cash basis
accounting at the right.
Click.
CCSL consists of three
departments and it uses the
Department feature of ACCPAC.
This means that you can produce
departmental income statements
and a consolidated income
statement. Study the descriptions
at the right.
Click.
CCSL utilizes three ACCPAC
modules: G/L, A/P and A/R.
When used with other modules,
the G/L is first set up, as it
contains the Chart of Accounts.
Click to continue.
Accrual vs. Cash Basis Accounting
Collegiate Computer Systems Limited
(CCSL)
Accrual Basis accounting
SYSTEM
MANAGER
Generally Accepted
Accounting
Principles (GAAP)
Department 10 – Service
stipulate that revenue
shouldAdmin
be recognized and
Common
Purchases and
resells computer
hardware and Database
recorded
when
a
service
has
been
providedand
or a
Services
Services
Pervasive SQL
software; maintains
an inventory
of hardware
product
has been delivered (for cash or on credit).
software.
Expenses should be recognized and recorded when a
Department GENERAL
20 – Product
service has been
provided or products have been
LEDGER
Deals mainly with
service contracts and repair orders.
delivered (for cash or on credit). This is the main
Department
– Officemethod.
premise
of the30
accrual
ACCOUNTS
ACCOUNTS
Provides administrative and general office support to
RECEIVABLE
PAYABLE
the
Sales and Service Departments.
Cash Basis accounting
Revenue is recognized and recorded when cash is
received, and expenses are recognized and recorded
when paid. This method is contrary to the accrual
method and not consistent with GAAP.
Setting up the System
Manager
There are 5 steps in setting up the
System Manager. Study them at
the right.
Steps in Setting Up the System
Manager
Click to continue.
1. Create the System Database
2. Create the Company Database
3. Activate Administrative and Common
Services.
4. Verify the fiscal year starting date.
5. Set up the Company Profile in
Common Services.
Setting up the System Manager
Step 1: Create the
System Database
From the START menu, you can
access the ACCPAC Database
Setup program.
Click.
The list of existing databases
appear, depending on what has
been previously installed in your
computer.
Click the NEW button.
Database ID may consist of up to
six capital letters and numbers.
Once the database is created, this
can not be changed.
Database Format – you may
select from a list of databases
recognized by ACCPAC.
Click.
Be sure that the correct Database
Category is selected.
Click.
Be sure that the folder you enter
has enough storage space, as this
is where your company files will
be stored.
Click to continue.
Setting up the System Manager
Step 2: Create the
Company Database
The procedure is very similar to
the creation of the System
database.
Click.
Be sure that the Database Format
is the same as the System
Database.
Click.
The Database Category must be
Company.
Click.
The proper System Database ID
must be selected.
Click.
You must also make sure that the
company database folder is in the
same folder location as the
system database folder.
Click to continue.
Setting up the System Manager
Steps 1 and 2 Complete
Once the databases have been
created, the CCSL databases
whould appear in the Database
Setup window.
Click to continue.
CCSL
databases
Setting up the System Manager
Step 3: Activate CCSL
Administrative and
Common Services
After setting up the databases,
you can activate the Administrative and Common Services for
the company.
Click and study the functions
managed by Administrative Services.
Click again and study the functions
of the Common Services.
Common Services
Administrative
Services
Hold and maintain
data such as:
•
•
•
•
To activate Administrative
Services, click Proceed.
•
Click the Proceed button now.
•
Step 4: Verify the Fiscal
Year Starting Date
When the Common Services
Activation window opens, change
the date to the first day of the
company’s fiscal year, then click
the Proceed button.
Click to continue.
•
Company Profile including name, address,
telephone,
e-mail, contact,
and
so forth;
User IDs, Security,
and User
Authorizations,
which
Fiscal
Calendar,
which
is the
calendar
fordata
the and
determine
who can
access
the
company
current
andare
previous
fiscal years;
what tasks
they permitted
to do;
Currency,
which which
determines
the currency
orusers
User Interfaces,
determine
the fields
currencies
for transactions;
are allowedused
to view
in the application windows;
Optional
Tables,
which
provides
for customizable
Data Integrity,
which
checks
the company
data for
additional
data; and
errors;
Scheduling,
which
established
the month
Data Activation,
which
activatestimes
otherinACCPAC
or
year when
tasks
are to besuch
done.
modules,
suchcertain
as G/L,
or services,
as Bank
Services; and
Restart Maintenance, which is used if a batch fails
during posting.
Setting up the System Manager
Step 5: Create the
Company Profile in
Common Services
ACCPAC creates the data tables
for Common Services.
Click.
You would then fill in the Common
Services Activation ADDRESS
page.
Click the OPTIONS tab.
In these three fields, you may
choose one of the three options:
None – allows you to proceed
with an error in an entry without
warning.
Warning – displays a warning if
the entry has an error, which you
may choose to ignore or correct.
Error – will not allow you to
proceed without correcting the
error.
Click to continue
Setting up the System Manager
Step 5: Create the CCSL
Company Profile in
Common Services
(continued)
Accepting 30 for Warning Date
Range instructs ACCPAC to warn
you if you enter a date in a date
field that is more than 30 days
earlier or later than the current
Session Date.
Click.
CAD for Functional Currency
stands for Canadian Dollar. It can
not be be changed after the
activation procedure is completed.
Click OK.
The main CCSL ACCPAC desktop
window then appears.
Click to continue.
Activating the GENERAL
LEDGER
It is very important to backup your
data before activating G/L.
Click.
If you are not entering historical
information from a previous fiscal
year, the Oldest Fiscal Year
Starting Date would be the
current fiscal year, which in our
example, is 01/01/2009.
It is important that the correct date
is entered; otherwise the G/L will
be set up incorrectly and you will
either have to start over, or
correcting the dates would be a
difficult process.
Click .
You have successfully activated
G/L when you see the icon on the
right-pane desktop.
Click to continue.
Verifying the Fiscal
Calendar
Before proceeding, you should
ensure that the dates and settings
in the fiscal calendar are correct.
Click.
Active must be checked;
otherwise, you will be unable to
post entries for 2009.
Click.
In this example, CCSL’s fiscal
year starts from January 1 and
ends December 31. Any fiscal
year start/end dates may be used.
However, once the fiscal calendar
is set, it cannot be changed
without the permission of the
Canada Revenue Agency.
Click.
The status in all these fields must
be left Unlocked; otherwise,
attempting to post entries to a
Locked period will create an error.
You would Lock the period in
order to disallow further entry to
that period; e.g., at year-end.
Click to continue.
Setting up the GENERAL
LEDGER
There are 4 steps in setting up the
General Ledger. Study them at the
right.
Click to continue.
Steps in Setting Up the System Manager
1. Define Options – options define how the G/L
functions, the default retained earnings account
and the account lengths and segments.
2. Define Account Structures – define how
account segments are used in account
numbers.
3. Specify Source Codes – set up codes for
transactions from different sources.
4. Create Source Journal Profiles – customize
journal reports.
Step 1: Define Options
Study the Company page in the
G/L Options window, then click the
various tabs and study the
relevant information on each
page.
Be sure to click the tabs from left
to right consecutively.
Set up in Common
Services and cannot be
changed.
This
refers to the contact
in the Accounting
Department, which may be
different from the contact
person entered in the
Company Profile in
Common Services.
Step 1: Define Options
(continued)
The Posting Statistics information
is only for display. Ignore it.
Click.
This box must be checked.
Provisional Posting allows you
to post a batch temporarily to test
the effect of the entries on the
financial statements before
permanently posting them. This is
particularly useful at year-end,
especially when there are many
adjustment entries.
Click.
Checking Force Listing of
Batches would require that you
print the batch to any print
destination before posting. This
allows greater control over
processing.
Click.
Entries can be imported into the
ACCPAC G/L from other
programs; e.g., MS Excel.
Click to study the options.
Click to continue.
All Fields – any field
can be changed.
Fiscal Year, Period,
Trans Date – only
these date fields can
be changed.
No Edit – no changes
are allowed.
Step 1: Define Options
(continued)
Fiscal Year Sets contain only the
net change in account balances
and budget data for each account.
Keeping 2 years of fiscal sets will
allow you to produce prior year
comparisons for income
statements and balance sheets.
Click.
This number must be equal to or
less than the number of fiscal year
sets. Transaction detail maintains
each posted entry on file with all
original details.
Click the SEGMENTS tab.
Step 1: Define Options
(continued)
Defining Account Segments
allows you to create account
numbers most suitable to your
accounting system. For example,
if you are using the Department
feature, you will be able to include
a segment in the account number
that refers to each department,
thus making it easy to identify
corresponding accounts.
Click and study examples of account
numbering systems using Account
Segments.
Account Numbering Using Segments
Example:
10-325-500
Click and study how to define the
segments according to the desired
account numbering system.
Click again.
Selecting Yes for Use in Closing
allows you in the future to use
different closing accounts for
different departments.
Click to continue.
Division
Department
BC/Yukon
Administration
Account
Salary Expense
CCSL Numbering System
6010-10
Account
Department
Salary Expense
Service
Step 2: Define Account
Structures
CCSL utilizes two different
account structures:
Click and study CCSL’s account
numbering structures.
By using the two-segment account
structure, you will be able to use
the same account number for
related entries for all departments.
For example, you can use 4000
for all revenue accounts: 4000-10
for the Product Department,
4000-20 for the Service
Department.
Click .
When you open the G/L Account
Structures window, the two
account segments that you have
defined earlier would appear. To
complete the G/L Account
Structures window, you would
highlight each of the segments
and click the INCLUDE-> button.
Click to view the completed window.
Click to continue.
CCSL’s Account Numbering Structures
• ACC (Single-segment account) consisting of 4 digits;
e.g., 1000 for CASH.
• DEPT – (Two-segment account) consisting of 6 digits;
e.g., 4000-10 for SERVICE REVENUE; 4000 for the
account, and 10 identifying the department (Service
Department).
Step 3: Specify G/L
Source Codes
Source codes are useful in
producing reports for similar
transactions. For example, you
will be able to produce a report for
all reallocations if you attach a
code (e.g., GL-RT) to all
reallocation transactions.
Click and study the pre-set Source
Ledger codes.
Source Ledger Codes
GL – General Ledger
AP – Accounts Payable
AR – Accounts Receivable
BK – Bank Services
These pre-defined Source Ledger
codes cannot be changed, deleted
or added to.
Click .
Source Type Codes
You can then add a second part,
referred to as Source Type code,
which identifies the transaction
type.
JE – Journal Entry
Click to view examples of Source
Type codes.
PY – Payment
There are pre-defined source
codes to which you can add your
own.
AD – Adjustment
Click again to view some useful
source codes.
Click to continue.
IN – Invoice
Step 4: Create Source
Journal Profiles
To be able to print reports using
Source Codes, you must first
create a Source Journal Profile
that lists the Source Codes to be
included in the report.
Click.
You would enter the name of the
profile.
Click.
To select the Source Codes, you
can use the Finder icon.
Click the FINDER icon (see gold
arrow).
You can then highlight the code
you wish to include in the
particular profile, and click Select.
Click to view an example of a
completed Journal Profile.
This is the last step in setting up
the GENERAL LEDGER. In the
next slideshow, you will learn how
to set up the Chart of Accounts.
Click to continue.
General Journal
Generally Accepted
Accounting Principles
(GAAP)
How would you know how to
interpret a transaction and how to
record it? Processing transactions
in ACCPAC is no different from
what you have already learned in
your Accounting course. You
simply follow Generally Accepted
Accounting Principles (GAAP).
Click and study the definition.
GAAP not only guides you in
determining how to treat
transactions and communicate
financial information but it can
also help interpret financial
statements between companies.
Click to continue.
GAAP
A set of policies, procedures and
guidelines that direct accounting
practitioners to record and report
financial information.
GAAP is published in a handbook by
the Canadian Institute of Chartered
Accountants (CICA).
GAAP:
Cost Principle
You will apply GAAP when you
complete the exercises in the
various modules. The slides that
follow discuss the principles that
apply to ALL types of transactions.
First is the Cost Principle.
Click and study the principle, then
read the example below.
Example: A computer bought for
$3,000 is recorded as an asset at
the time of purchase. If the value
of that same computer decreased
in price to $2,500 shortly after
purchasing it, the value in the
accounting records remains the
same. Any change in the market
value of the asset does not get
reflected in the accounting
records.
This principle is followed even
when the value of the asset
increases.
Click to continue.
Cost Principle
All assets purchased must be
recorded in the company
accounting records at their
purchase price (historical cost).
GAAP:
Full Disclosure Principle
Next is the Full Disclosure
Principle.
Click.
Example: A firm may report an
unusually high amount of a
particular expense on the Income
Statement. To avoid confusion or
misunderstanding, the entry
should include a note explaining
the high expenditure item, thus
following the Full Disclosure
Principle.
Click to continue.
Full Disclosure Principle
Full disclosure requires that all
relevant information pertaining to
the firm that may be important to
the users of the information must
be revealed on the financial
statements.
GAAP:
Objectivity Principle
Click and study the Objectivity
Principle, then read the example
below.
Example: A company should use
and file relevant source
documents (invoices, cheques,
memos, etc.) that can be verified
and are free of any personal bias
and judgment. These source
documents should be part of the
audit trail.
Click to continue.
Objectivity Principle
The Objectivity Principle requires that
all information reflected in the
accounting records and financial
statements is gathered, analyzed,
recorded and communicated using only
independent and verifiable data
separate from any influences of the
gatherer and recorder.
GAAP:
Business Entity Concept
Click and study the concept of
Business Entity, then read the
example below.
Example: The company’s
financial records should not
include information about the
owner’s personal belongings,
such as a house or a personal car.
The owner should also have his or
her own bank account separate
from the company’s bank account.
If the owner wants to invest more
money into the business, a
cheque or money transfer should
be made to the company and
recorded in the company books as
additional investment.
Click to continue.
Business Entity Concept
A company’s financial information is
recorded and reported separately from
the owner’s personal financial
information.
GAAP:
Time Period Principle
Click and study the principle.
According to this principle, an
organization’s activities are
identified with specific time
periods; e.g., a month, threemonth quarters, or a year.
Most companies prepare monthly
(month-end) reports and use one
year (year-end) as their primary
accounting period.
The annual reporting period
(referred to as fiscal year) is not
always the same as the calendar
year ending December 31. A fiscal
year can consist of any 12
consecutive months.
Click to continue.
Time Period Principle
The economic life of a business
can be divided into time periods.
GAAP:
Consistent Reporting
Click and study the Consistent
Reporting Principle, then read the
example below.
Example: Owners and managers
use information reported on
financial statements when making
decisions. Information from one
year is often compared to
previous years’. If accounting
information is recorded and
reported differently from one year
to the next, the information cannot
be compared.
Click to continue.
Consistent Reporting Principle
In the preparation of financial
statements, the same accounting
concepts are applied in the same way in
each accounting period.
GAAP:
Matching Principle
Click and study the principle and
example below.
Example: An accounting
consultant, Faye Anderson, bought
$600.00 worth of paper and
printing supplies in December. She
collected $2,800.00 consulting fees
from her clients that month.
Faye entered $600.00 for paper
and printing supplies as prepaid
asset at the time of purchase.
At the end of the month, she
calculated that she used up
$285.00 worth of the supplies she
purchased earlier. When Faye
prepares her monthly financial
statement for December, she
should report the $2,800.00
revenue and her expenses to earn
the revenue, including $285.00 (not
$600.00) for supplies.
Click to continue.
Matching Principle
Expenses are matched with
revenues in the period when
efforts are made to generate
the revenue.
Why are adjustments
necessary?
ALL adjustments are entered in
the General Journal. Why would
you need to do adjustments?
During an accounting period
(GAAP: Time Period Principle), the
company records the financial
events during that time and
produces financial statements.
At the end of the accounting
period, adjustments are necessary
before producing financial reports
for a number of reasons. For
example, if services are
performed before the end of one
month and would not be
completed until the following
month, fees earned until the end
of the current month should be
recorded (GAAP: Realization of
Revenue Principle). Similarly,
office supplies used up for the
month should result in a reduction
in PREPAID OFFICE SUPPLIES
(GAAP: Matching Principle).
Click to continue.
Time Period Principle
The economic life of a business
can be divided into time periods.
Revenue Recognition Principle
Revenue should be recognized
in the period in which it is earned.
Matching Principle
Expenses are matched with
revenues in the period when
efforts are made to generate
the revenue.
More…
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