AT3

• Data coding schemes


  Creating simple numeric or alphabetic codes to represent complex economic phenomena that facilitate efficient data processing
• Sequential codes


  • Represent items in some sequential order (ascending or descending)
  • Common application is prenumbering of source documents
• Block codes


  • Represent whole classes of items by restricting each class to a specific range within the coding scheme
  • Common application is the construction of a chart of accounts
• Group codes


  • Represent complex items or events involving two or more pieces of related data
  • Consist of zones or fields that possess specific meaning
• Alphabetic codes


  • Used for many of the same purposes as numeric codes
  • May be assigned sequentially or used in block and group coding techniques
• Mnemonic codes


  • Alphabetic characters in the form of acronyms and other combinations that convey meaning
• General Ledger System (GLS)

  Subsystem that processes summaries of transactions from other transaction processing subsystems and provides input to the management reporting system (MRS) and financial reporting system (FRS)
• Journal voucher


  Document that represents summaries of similar transactions or a single unique transaction, and identifies the amounts and affected general ledger accounts
• GLS database files


  • General ledger master file
  • General ledger history file
  • Journal voucher file
  • Journal voucher history file
  • Responsibility center file
  • Budget master file
• Financial Reporting System (FRS)

  Provides information to external parties to meet management's obligation to provide reliable information for informed decision making
• Financial reporting process


  1. Capture the transaction

  2. Record in special journal

  3. Post to subsidiary ledger

  4. Post to general ledger

  5. Prepare the unadjusted trial balance

  6. Make adjusting entries

  7. Journalize and post adjusting entries

  8. Prepare the adjusted trial balance

  9. Prepare the financial statements

  10. Journalize and post the closing entries

  11. Prepare the post-closing trial balance
• XBRL (eXtensible Business Reporting Language)

  XML-based language designed to provide the financial community a method for preparing, publishing, and automatically exchanging financial information
• Controls applied in the FRS

  • Transaction authorization
  • Segregation of duties
  • Access controls
  • Accounting records
  • Independent verification
• Management Reporting System (MRS)


  Provides information to managers to support effective management and the organization's business objectives
• Factors influencing MRS design

  • Management principles
  • Management function, level, and decision type
  • Problem structure
  • Types of management reports
  • Responsibility accounting
  • Behavioral considerations
• Management principles


  • Formalization of tasks
  • Responsibility and authority
  • Span of control
  • Management by exception
• Formalization of tasks


  Structuring the firm around the tasks it performs rather than around individuals with unique skills
• Responsibility and authority


  Responsibility is an individual's obligation to achieve desired results, and authority is the power granted to make decisions within the limits of that responsibility
• Span of control


  The number of subordinates directly under a manager's control
• Management by exception


  Managers should limit their attention to potential problem areas (exceptions) rather than being involved with every activity or decision
• Management function, level, and decision type

  • Planning function (long-range and short-term)
  • Organizing function
  • Directing function
  • Controlling function
  • Strategic, tactical, and operational decisions
• To identify items of inventory that turn over more slowly than normal
• The majority of inventory that fluctuate within normal levels should not be included in the report
• Management can focus on the exceptions
• Planning function


  Concerned with making decisions about the future activities of the organization
• Long-range planning


  Usually encompasses a period of between 1 and 5 years, involves setting goals and objectives, planning growth and size, deciding on diversification
• Short-term planning


  Involves implementing specific plans to achieve long-range objectives, e.g. marketing and promotion, production schedules, budgetary goals
• Control function


  Ensures activities conform to the plan, involves evaluating the operational process against a standard and taking corrective action
• Types of planning and control decisions

  • Strategic planning
  • Tactical planning
  • Managerial control
  • Operational control
• Strategic planning decisions


  • Have long-term time frames
  • Require highly summarized information
  • Are nonrecurring
  • Have a high degree of uncertainty
  • Are broad in scope and have a profound impact
  • Require external and internal information sources
• Strategic planning decisions made by top-level managers

  • Setting goals and objectives
  • Determining scope of business activities
  • Determining or modifying organizational structure
  • Setting management philosophy
• Tactical planning decisions


  • Are subordinate to strategic decisions
  • Are made by middle management
  • Are shorter term, more specific, recurring
  • Have more certain outcomes
  • Have a lesser impact on the firm
• Management control


  Involves motivating managers to use resources productively, comparing performance to pre-established standards, taking corrective action
• Uncertainty surrounds management control decisions due to difficulty separating manager's performance from operational unit, lack of criteria and techniques for measuring performance
• Operational control


  Ensures firm operates according to pre-established criteria, concerned with routine tasks, more structured than management control
• Elements of operational control decisions


  • Setting of standards
  • Performance evaluation
  • Taking corrective action
• Care should be exercised when taking corrective action to avoid unintended consequences
• Characteristics of decision types

  • Strategic planning
  • Tactical planning
  • Management control
  • Operational control
• Structured problem


  All three elements (data, procedures, objectives) are known with certainty
• Unstructured problem


  Data requirements are uncertain, procedures are not specified, or solution objectives are not fully developed