Eliminate small-balance accounts.
Over time some general ledger accounts
will fall into disuse, perhaps because the
underlying transaction volume is low or the systems
for which they originally were designed no longer
are used. Whatever the reasons, the accountant
responsible for the general ledger still must waste
valuable time reconciling the contents of these
accounts. Instead, periodically review the general
ledger for small-balance accounts and roll them into
larger-balance ones. |
Reduce the number of general ledger
accounts. The number of general
ledger accounts tends to grow over time as
business divisions or new expense categories are
added. Having many accounts gives the accounting
staff too many similar ones to choose from when
creating journal entries, which can result in
erroneous entries to the wrong accounts. Finding
and fixing these entries is extremely
time-consuming. To avoid this issue, prune the
number of general ledger accounts on a regular
basis by merging similar accounts.
Use identical charts of accounts for
subsidiaries. When a company
acquires other entities, it typically allows them
to retain their own charts of accounts. The parent
company then must either incorporate each
additional account code into its own general
ledger for consolidation purposes or develop a
complicated consolidation table to convert each
subsidiary’s accounts. Though it’s initially more
time-consuming, the parent company should require
subsidiaries to adhere to the master chart of
accounts, making the month-end roll-up process
Restrict use of journal entries.
In larger accounting departments,
allowing multiple employees to create journal
entries often results in confusion. CPAs should
recommend a better approach: to restrict access to
a single user so all journal entries flow through
and are tracked by just one person.
Use a standard journal entry list.
It is impossible to issue
consistently reliable financial statements unless
exactly the same journal entries are used every
month. The assistant controller should create a
standard journal entry list from those
transactions that have been used repeatedly in
prior months and check off items from the list as
part of the standard month-end closing process.
Use boilerplate journal entries.
Most accounting software packages
allow users to create boilerplate journal entries.
Staff accountants should use this feature; it
ensures that every journal entry uses exactly the
same account codes every month, resulting in
consistent account usage.
Modify the general ledger to accommodate
If a company uses activity-based
costing (ABC), much of the information it
accumulates varies considerably from the data that
are stored in the traditional chart-of-accounts
structure and maintained in electronic
spreadsheets. This “off-site” data storage may be
acceptable if the ABC system is used only for
individual projects. If it’s used on a regular
basis, though, cost accountants should consider
creating accounts for the new ABC data in the
chart of accounts. This will result in a more
formal data storage system and likely will yield
more consistent ABC information.