VISUAL NEWSLETTER – FEB 2001

INTERNAL CONTROL PROCEDURES

The lack of ongoing and monthly internal audit controls can cause accounting computer users considerable grief. In the examples below I will illustrate some of the controls that are necessary in any basic accounting environment.

Without such ongoing controls a business has no idea whether their accounting systems are accurate or not. Many things can go wrong in the course of a month but the implementation of some simple procedures can reduce the chore of sorting things out six months down the road.

Integrated Systems

Libra performs at its best when all accounting modules are integrated. This means that the subledgers communicate journal entries to the General Ledger during postings. While this can significantly reduce month-end entries to the General Ledger and allow us to maintain current financial status, it also requires that you be aware of the sorts of problems that can arise and watch for them. Among the sorts of things that can and occasionally will go wrong are the following:

1) Postings that do not update the G/L.

2) Postings that update everything twice.

2) Procedural failures requiring that you

Restore and Repost Transactions.

3) Posting Restarts that update the General Ledger twice.

4) Postings to the wrong General Ledger Period.

With a little caution you can identify and correct problems that arise as soon as they happen.

If these problems are identified immediately, it

is usually fairly simple to correct the problem. You can often Repost or reverse postings easily.

INITIAL G/L INTEGRATION

To initiate integration with the General Ledger, you must set up the following:

1) Make sure that you define both the G/L Database and Company numbers via Company File Maintenance in the Subledgers.

2) Define Account numbers for Accounts Receivable, Cash, Terms, Etc. in the appropriate Company Constants Screen.

3) Define specific A/R and Sales Accounts via the Customer or Inventory Files or be prepared to enter them at time of data entry.

4) Set the Program Defaults in the Subledger

Posting programs to update the General

Ledger in either detailed or summary mode.

5) In Payroll, both Company & Departmental G/L

accounts must be set up to post correctly to

the General Ledger.

Keep in mind that the posting defaults, in some modules, are saved by user name. New users in a database will need to be set up with the same defaults as another person in the same position.

When setting up user security on a network also keep in mind that users in the Subledgers may also need access to the General Ledger Files if they are going to post invoices and the like. They will not require access to the program, (e.g. GLA) but they will need the files. (e.g. GLD001)

At this point you are ready to do our first posting that will update the Subledger and the General Ledger at the same time.

Most postings produce two main documents, the Register and the Journal. One documents updates to the Subledger, the other documents updates to the General Ledger. It is extremely important to check and save these reports.

POSTING PROBLEMS

The posting is the single most common source of problems in our accounting systems. If however you follow a few basic rules these problems can be greatly reduced and easily corrected.

1) Backup Regularly

- Power Failures, Computer Freeze Ups, Etc. can cause a posting to fail in mid-stream. If this happens the system may require that you Restore our files. If your backups are not current, you may lose considerable work and everything that was done since the last backup will have to be repeated. Keep in mind that when you backup the Subledger you are not backing up the General Ledger. This is an often-neglected task and can result in large volumes of lost data.

2) Review Posting Reports

The Postings on the Subledgers produce the Registers and the Journals. You must make it a point to review these documents after each posting to check for Warnings that something did not post and to make sure that the Register and Journal are in balance. This will confirm that the Subledger and the General Ledger were both updated synchronously. Of particular interest on the Journal is the Journal Reference No. This should read SJ01-0001 Etc. if an invoice posting updated the General Ledger for period 01. If you see SJ00-0001 then the Journal did not update the General Ledger.

3) File Posting Reports

Should something go wrong during a month it is essential that posting documents be available to help resolve problems. I recommend that each type of register and journal be filed by date and kept for the entire year. Most Auditors make this a requirement to make their job a little easier. If for any reason you don’t get a Register or Journal it may mean that the posting did not complete normally. Most can be reprinted using special settings in the posting.

3) Be Careful When Restoring

While Restoring from a backup is supposed to solve problems it can create some. Before Restoring Files, determine when the backup was made and try to construct a list of everything that was done after the Backup was performed. Any posting, customer changes etc. done after a backup will be lost when you restore from that backup. The other problem that may occur when you Restore is to forget that the General Ledger has been updated by the postings that Restoring the Subledger will undo. Make sure that repeated postings do not update the General Ledger twice by setting program defaults to eliminate any problems.

MONTH END CONTROL CHECKS

So you've made it to Month-end and avoided any obvious problems. How can you ensure that the Subledgers and the General Ledger are both correct and in balance with one another.

1) Print the General Ledger Report to detail the Opening Balance, Journal Entries and Closing Balance for each account.

2) On Accounts Receivable print the Aged Trial Balance, Detailed Sales By Sales Account

& Detailed Cash By Cash Account in Totals Only.

3) On Accounts Payable print the Aged Trial Balance, Detailed Purchases By Purchase Account & Vendor Payments in Totals Only.

Make sure to balance both Aged Trial Balances to their respective Closing Balances on the General Ledger Report. Compare Sales and Purchase Totals to journal activity. If you find an imbalance review the posting reports. Often a single posting may be found to be missing and it is easily replaced if you have the proper documentation. If not the work is only beginning, however if you maintain ongoing controls you can greatly reduce any month end audit problems.

Visual Accounting (905) 458-6650