Finance GL

Introduction:
A companys financial information must be periodically compiled in two financial statements: a balance
sheet and an income statement. The balance sheet provides a summary of a companys resources,
liabilities, and equity at a given point in time. The income statement shows profit or loss for a given time
period. In order to satisfy these reporting requirements, a general ledger (GL) is used.
Set-ups to be made before starting any transactions:
1) Entity set-up
An entity is any business or part of a business that submits reports of its activities to tax
authorities, stockholders, or other people outside the business. One of the entities defined should
be the primary entity.

2) GL Calendars (25.3.4)

The GL calendar makes it possible to store transactions and print comparative reports for
different periods. Calendars also determine which periods are active. To close an accounting
period for one or more specific transaction types, set the corresponding fields in GL Calendar
Maintenance to Yes.

A closed period can be re-opened until the fiscal year is closed if the Suppress Reopen GL
Periods is set to No in the GL control (25.24).

3) Format Positions (25.3.7)

The structure of the financial statements can be defined by setting up format

positions headings for grouping and totaling account balances that control
where, how, and at what level of detail the account information is sequenced,
totaled and printed. Format Positions are defined from the top-down.

4) Chart of Accounts
5) System/Account Control File (36.1)
This is a special control program used by all modules of MFG/PRO. It defines vital system
parameters such as base currency and default general ledger (GL) accounts.

The 3 most important fields in the setup are:

a) Verify GL Accounts
This specifies whether the system should validate general ledger (GL) accounts and effective
dates for transactions created in modules other than General Ledger. Accounts are verified in
the GL module regardless of the value entered in this field.
b) Base Currency
This is the default currency for the system. Financial statements like balance sheets and
income statements always print amount in the base currency.
c) Entity
The primary entity for the system is entered here.
Apart from this, default GL accounts, sub-accounts, cost centers and project codes for all the modules are
setup here.

GL Transactions
A transaction is a record of the financial effects of business activity. Transactions enter the general ledger
in one of four ways:

Activities in other modules (like Accounts Payable, Accounts Receivable, and Work Orders etc.)

create journal entries that are subsequently posted to the General Ledger module.
Posted transactions from other databases are imported by a consolidation database.
Adjusting transactions are recorded in the GL journal. Examples of adjusting transactions are

corrections to posted transactions and reversing entries.

Standard transactions are entered in the general ledger to record miscellaneous activity such as
bank charges, loans, or acquisitions.

All of these originate as unposted transactions. They do not affect GL balances and are not included on
financial statements until posted in Transaction Post. Once posted, transactions cannot be modified.
Whenever a transaction is created, the system automatically assigns it a 14-character GL reference
number with the following format.
<transaction type><yr><mm><dd><transaction number>
For example, transaction IC9905210037 is the 37th transaction created in the Inventory Control module on
May 21, 1999.
Two elements common to all GL transactions are control totals and multiple lines. When entering a
transaction, you can specify a control total to verify data entry. The control total is the sum of the debit
amounts on the transaction, expressed in terms of the specified currency. The system displays a warning if
the amounts entered do not match the control total. If debit and credit amounts for a transaction do not
cancel out, the unbalanced amount is displayed in the Total field. When you access an existing
transaction, the control total defaults to the sum of the debits, and the system displays any unbalanced
amounts.
Transaction amounts are distributed on multiple lines. For each debit and credit, enter the following:

Entity
Account or allocation code, sub-account, cost center, and project
Transaction description
Amount
Currency

Note: When the transaction or account currency is not the same as the base currency and effective
exchange rates are not found in Exchange Rate Maintenance, the system prompts you to specify a rate to
use. Enter credit amounts as negative numbers. The system does not use the accounts normal balance to
determine whether the amount should be positive or negative.
Standard Transactions:
Standard transactions are used to:

Enter GL account balances from your previous system during implementation.

Enter miscellaneous GL transactions.
Correct unposted transactions.

Create adjusting entries for posted transactions.

Update values in memo and statistical accounts.

There are other GL transactions like Retroactive Transactions, Reversing Transactions (25.13.3), Year-end
Adjustment Transactions (25.13.5), Foreign Exchange Revaluation transactions (25.13.9) etc. These
transactions are used very rarely.
Transaction Post
Transaction post (25.13.7) is used to update GL account balances and transfer valid unposted GL
transactions to the GL history table. The history table is the source of information for printing financial
statements. Unposted transaction amounts are not summarized on statements.
To be posted, transactions must:

Reference active accounts, sub-accounts, cost centers, and projects that are valid in combination

with each other

Be balanced, with debits equaling credits
Be balanced within entities when Balanced Entities is Yes in General Ledger Control
Occur in an open accounting period

Transactions that do not meet these criteria are considered unbalanced and remain in the unposted
transaction table. To identify unbalanced transactions for correction, use Unposted Transaction Inquiry
(25.13.13) or Register (25.13.14).
The financial information can be viewed using a variety of reports like Account Balance Summary
(25.15.1) and Detail (25.15.2), Trial Balance Summary (25.15.4) and Detail (25.15.5), Balance Sheet
(25.15.8), GL Statement of Account (25.15.11), Income Statement (25.15.13) etc.

Closing GL Periods & Years

Period Close
Period-end processing in the General Ledger module includes the following steps:

Use Transaction Post (25.13.7 or 25.19.16) to post transactions from other modules.
Use GL Calendar Maintenance (25.3.4) to close the calendar to other modules.
Use Standard Transaction Maintenance (25.13.1) to correct unbalanced transactions that did not

post.
Enter and post adjusting transactions in the General Ledger module using Reversing Transaction

Maintenance (25.13.3).
Create adjusting transactions for unrealized exchange gain/loss using Foreign Exchange

Revaluation (25.13.9 or 25.19.13).

Use Transaction Post (25.13.7 or 25.19.16) to post unrealized gain/loss transactions.
Print and review trial balance using Trial Balance Summary (25.15.4).
Generate and review reports from Balance Sheet (25.15.8) and Income Statement (25.15.13).
Enter and post corrections as required and reprint reports. Use the Year-End Adjustment

Transaction (25.13.5), if needed.

Optionally print Transaction Register (25.13.21).
Use GL Calendar Maintenance (25.3.4) to close GL calendar to the general ledger.

Year-End Close
The year-end procedure is as follows:

Complete all period-end processing.

Print annual financial statements and reports.
Make corrections if necessary. Use the Year-End Adjustment Transaction (25.13.5), if needed.
Back up the databases.
Use GL Calendar Maintenance (25.3.4) to close the GL calendar to the month (25.3.4).
Close the year in Transaction Year-End Close (25.13.12). The year-end close creates a one-sided
transaction (type YR) to update the retained earnings account from net profit/loss. It also closes
the GL calendar for all periods in the year. Typically, this function is not performed until year-end
financial statements have been audited. Prior fiscal years must be closed before financial
statements will print correctly for the current year. If you print a balance or trial balance for a
fiscal year when the previous fiscal year is not closed, reports will be out of balance. This is
because retained earnings have not been updated to reflect the prior years net profit/loss.

Important Always back up the database before closing the fiscal year. Once a year is closed, it cannot be
reopened. Any adjustments to a closed year can only be made through Retroactive Transaction
Maintenance (25.13.2). Menu security should be defined for this program.