By Doug Potter
12.6 CONSIDERATIONS FOR REMOTE ACCOUNTING LEDGERS ACCOUNTING LEDGERS (CONTINUED)
Last month I presented two common designs for consolidating remote ledgers – Replacement Consolidation and Net Change Balances. This month I’m continuing this discussion with two additional (and common) designs for consolidating remote account ledgers.
Trial Balance. Another way of preparing a file of account information that foots, debits equal credits, is by building a full trial balance at the remote location and sending it to the corporate general ledger for posting. This consists of year-to-date balances for the income statement accounts and current period balances for the balance sheet accounts.
When an organization uses this approach, journal entries should be loaded into the corporate general ledger system as re versing journal entries. This achieves the desired effect on the accounts in the corporate general ledger, allowing them to mirror the cumulative period-by-period balances in the remote general ledger systems. The corporate general ledger system will be able to reproduce each period's balance in three steps
1. Starting with the current balance (either zero or the previous period ending balance).
2. Adding in the current period's journalized amount from the remote ledger.
3. Reversing out the activity from the previous period.
Figure 12-16 shows this graphically.
Although this approach is not straightforward, it does work. Note the following procedural requirements or adjustments:
• To start the process, trial balance journals are loaded at the end of the first period.
• End out the year on both ledgers after submitting and posting the last period's trial balance journal entries.
• Once each year following year end, apply the reversing journals for all come statement accounts against the retained earnings account in the corporate general ledger (Figure 12-16).
Individual Journal Entries. Rarely does the remote general ledger send the actual journal entries that were originally posted to its ledger. However, under certain situations the corporate location may need these original journals for another purpose and may also decide to use them for consolidating the remote ledger. For example, descriptive detail in the journals may be required for feeding the corporate fixed asset system with information on newly acquired assets.
To accomplish this, the individual journals themselves may be forwarded and posted to the receiving accounting company in the corporate general ledger. In the receiving general ledger system, these journals are processed just as any journals posted to a ledger. By design, these are the only journals posted to the corporate ledger. Thus, following posting, the corporate ledger mirrors the remote one.
NEXT MONTH'S TOPIC: CURRENCY CONVERSION OF ACCOUNTING LEDGERS