Accounting, Information Technology,
and Business Solutions, 2nd Edition
By Hollander, Denna, Cherrington
An Overview of the General Ledger Architecture
PowerPoint slides by:
Bruce W. MacLean,
Faculty of Management,
Dalhousie University
Appendix B
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The McGraw-Hill Companies, Inc., 2000
Supplement B Objectives
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List and describe various file types.
Describe how a computer stores and accesses data.
Describe various processing methods.
Explain the difference between physical and logical file
structures.
Describe how computers search for data.
Describe the processing and audit trail of an automated,
batch general ledger.
Describe the processing and audit trail of an automated,
online general ledger.
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The McGraw-Hill Companies, Inc., 2000
Overview of Basic System Terms and
Concepts
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Master files contain the balance or status of entities vendors, credit customers, inventory, assets, employees
Transaction or activity files - contain activity data batches of source data - (orders, sales, payments)
History or archive files inactive past or historical data
Reference files (rates, prices, chart of accounts)
Suspense files - items awaiting action, errors, missing
information
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Storage and Access of Data in a
System
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sequential storage - read through all records - tape cartridges and
open reel tapes require sequential storage and sequential access
of data
random access - storage in any order - hard disk, floppy disk to
CD-ROM disk
direct access - any record can be retrieved directly regardless of
position without reading all of the records
ISAM indexed sequential access method. The file can be
processed sequentially, but the index can also be used to directly
identify the location of one group of records.
sequential - paper, tape, or disk
direct - disk or paper
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Processing Methods
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Batch: accumulates transaction data for a period of time. Then
all of the transactions in the transaction file are posted to the
master file in one processing run. (Tape processing is always
batch)
Online: means the computer-input device is connected to the
CPU so that master files are updated as transaction data are
entered
Real-time: denotes immediate response to an information user;
transaction data are entered and processed to update the relevant
master files and a response is provided to the person conducting
the business event fast enough to affect the outcome of the event
Report-time: the data used to generate the requested report is
processed as the report is created.
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The McGraw-Hill Companies, Inc., 2000
Physical and Logical File Structures
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Access stores data in pages which match the physical sector size
of your hard drive
A page may contain one or more records
Tables contain one or more records
Only the portion of the table being viewed is loaded into memory
The table is stored on the physical device and is updated each
time a change is made
Excel loads the whole spreadsheet into memory and updates the
hard drive only when the whole file is saved
Nevertheless, the computer can take the randomly stored data
(the file’s physical structure) and create a list in alphabetical
order for the processor or the user to see (the file’s logical
structure).
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The McGraw-Hill Companies, Inc., 2000
Computer Data Searching
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Each record normally has a data field called a key attribute (also
known as a primary key) that uniquely identifies it and
distinguishes it from other records in the file. The key attribute is
created at the time the record is initially stored in the file.
When a computer user requests a particular record he/she must
identify its key. The computer searches the file and compares the
key input by the user with the keys of records in
the file to locate a record or records that match
the input key.
A secondary key (non-primary key attribute)
can identify a record as part of a group; thus
searching on a secondary key can locate a group
of records with some common characteristic.
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Other basic systems concepts
you should understand:
Logical
versus
physical
Field
Record
File
Primary versus secondary keys
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The McGraw-Hill Companies, Inc., 2000
A Review of The Traditional Manual
General Ledger Architecture
 In a manual system, paper source documents serve as the
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Manual systems employ batch processing.
repository for the detail transaction data and carry the data,
 Each source document is a transaction record, and each
information, and special documentation such as proof of
document file is a transaction file. Each function or department
approvals
and authorizations
from one
the next.
Each
retains
transaction
files that document
the person
work ortoactivity
they
document
has aThe
unique
identifying
number
(primary key)
have
performed.
documents
relating
to a particular
transaction
 Files ofa source
organized
or sequenced
in provide
one of
comprise
portiondocuments
of the auditare
trail.
The source
documents
methods,
themany
activity
details including:
that support summary data postings to journals
and ledgers.
By date/chronologically
Alphabetically
By document
 Thenumber/sequenced.
journals used in the accounting departments are also
 Traditional
systems
collectaccounting
and store data
by business
transaction
files
that contain
summary
data. function,
there
is duplicate
departments
 so
The
system’s
masterdata
filesretained
include in
thevarious
subsidiary
ledgers and the
general ledger used by various accounting departments.
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Traditional Automated General
Ledger Architecture
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Automated general ledger systems
still include source documents,
journals, ledgers, a trial balance,
and, of course, the financial
statements themselves.
Some source data, the ledgers, and
journals are in computerized form
(tape and disk) rather than paper
form.
The posting and mathematics are
performed electronically rather
than manually.
Document flows are similar to the
manual systems, as is the large
degree of data duplication
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Basically, the physical design of the
system (rather than the logical
design) was altered as manual
processes and paper files were
replaced with, or supplemented by,
computer processes and tape or disk
files contents of machine readable
and computer data files are similar
The accounting system boundary is
often defined as the ledgers and the
journals that feed into the ledgers.
Some automated systems allow users
to input source document data
online, rather than waiting for batch
input.
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General Ledger Tape
Batch Processing Example
Sorted
Journal
Vouchers
Journal
Voucher
Batch
Edit input
and update
master file
General
Ledger
Master
Key in journal
voucher data
Unsorted
Journal
Vouchers
Sort vouchers
in chart of
account order
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Old
General
Ledger
Master
New
General
Ledger
Master
Sorted
Journal
Vouchers
Error and
Exception
Report
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General Ledger Tape Batch
Processing Example
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Step 1: The data is entered into the computer system.
Input:
A batch of journal vouchers (journal entries).
Process: Transfer of data from paper to tape.
Output: A tape of unsorted journal entry transaction data.
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Step 2: The transaction data is sorted to order the data
in the same ordering scheme as the primary key of the
master file (in chart of account order). This step is needed
because of the sequential posting procedure.
Input:
A tape of unsorted journal entry transaction data.
Process: Sort all the journal entries in chart of account order.
Output: A sorted tape of journal transaction data.
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General Ledger Tape Batch
Processing Example
Step 3: The transaction data is posted to the master file.
Input:
The sorted tape of journal transaction data
and the current (pre-posting) general ledger master file.
Process: Update the balances in the general ledger
master
file to reflect journal entry data, and perform edit routine to
identify journal vouchers with errors or incomplete
information.
Output: The transaction file of journal entries, the old
(pre-posting) master general ledger file, the new updated
general ledger master file, and an error and exception list
displaying all the journal vouchers that could not be
processed due to errors. If necessary, the old master file
and the transaction file can provide back up copies for the
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new master file.
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General Ledger
Disk On-line Processing Example
Journal
Voucher
data
General
Ledger
Back-up
Input data (could
use scanner)
General Ledger
Master
Edit data
and update
master file
Transaction
Log
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Error and
Exception Message
(Journal Voucher file
numerical order)
N
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General Ledger
Disk On-line Processing Example
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Step 1: Input Journal Voucher (journal entry) data and update the
general ledger master file (chart of account balance).
Input:
Journal entry data and the General Ledger Master File.
(Paper journal voucher is not mandatory.)
Process: Edit check input data and, if possible, update the applicable
chart of account balances in the general ledger master file .
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Output: Updated general ledger master file and/or an on-line
(immediate) error report .
Notice how no data preparation (sorting) is mandated in this example,
due to the use of a direct access storage medium . On-line processes
should maintain a transaction log of all transaction inputs and a
periodic back-up to the master file. Such back-up procedures protect
system users from loss of data.
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General Ledger Software Packages
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Several general ledger
accounting software
packages are available in the
market. General ledger
packages differ in terms of
features and scope. Most are
comprised of a series of
modules, and many users add
on modules that you can
purchase to make the general
ledger information more
useful.
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Sample GL software modules
include:
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The general ledger
Accounts payable
Accounts receivable
Order entry/invoicing
Payroll
Reports
Inventory Stock control
Purchase control
Job costing
Fixed Assets
The McGraw-Hill Companies, Inc., 2000
Vendors
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ERP Software Vendors
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Baan Company
Computer Associates
International, Inc.
Geac Computer Corporation
J.D Edwards Enterprise
Software
Oracle
PeopleSoft
SAP AG
Other Vendors
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Account Mate
ACCPAC International
AICPA Software
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Champion Software
Cougar Mountain Software
Cyma Systems, Inc.
DacEasy
Data Pro
Flexi
Great Plains Software
Intuit
Lawson Software
Macola
M.Y.O.B Bestware Canada
Navision® Software
One Write Plus
Open Systems Inc.
The McGraw-Hill Companies, Inc., 2000
Adapting to Change
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General ledger vendors
are working to adapt
their products to
changing user desires
and needs.
In fact, one vendor states
that its products do not
just process debit and
credits, but are designed
to support all financial
information flows.
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When you read about trends
and developments in GL
packages, the vendors often
mention the following types
of advances:
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Flexibility
Network/client server capable
Graphically based
More look up ability
Ability to drill down to detail
Supports data mining
More user defined output
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