Proper Procedure:
On July 31, 2004 you are approaching the end of the business day and operators are entering the last of the accounts payable invoices received for the month. Your company runs on a calendar year and uses 12 periods in StreamV. The current system period is set to 7.
At the end of the day, the Controller changes the period to 8, and runs the final sub-ledger reports for the month of July.
On August 1, 2004, the system date automatically changes to the current date, and the default accounting period changes to 8 for all operators (none of the accounts payable operators can modify the period used for accounts payable transaction processing).
Since the “final” accounts payable sub-ledger report for July was produced at the end of the prior day and since all new activity is being posted to the current date (8/1) and the current period (8), the cut-off or relationship between the general ledger and sub-ledger at the end of period 7 should be valid. Any activity that affects the sub-ledger prior to the ending July report is posted to periods prior to period 8 and any activity that affects the sub-ledger after the ending July report is posted to period 8.
Improper Procedure:
On July 31, 2004 you are approaching the end of the business day and operators are entering the last of the accounts payable invoices received for the month. Your company runs on a calendar year and uses 12 periods in StreamV. The current system period is set to 7.
At the end of the day, the Controller determines that all transactions for period 7 have not been posted, and does not run the final sub-ledger reports for the month of July. The Controller also leaves the default accounting period in the system set to 7 (to allow the remaining accounts payable transactions to be posted).
On August 1, 2004, the system date automatically changes to the current date, and the default accounting period remains set to 7 for all operators (none of the accounts payable operators can modify the period used for accounts payable transaction processing).
The remaining invoices for period 7 are posted and the default accounting period is changed to 8. The operators exit and re-enter the system to pick up the new default accounting period.
Unfortunately, the Controller does not run a final AP report after the remaining period 7 invoices were processed and before additional accounts payable invoice and payment transactions are processed (in period 8). This means there is no way to generate a final accounts payable sub-ledger report for period 7 (the current report includes both period 7 and period 8 activity and is not a valid end of period 7 report).
In addition, the warehouse received goods (that should have been recognized in august), while the period was still set to 7, and the transactions were posted to the prior period. These transactions were not reflected on the final Inventory Valuation that was produced at the end of the prior day.
The results from the above are.
No valid accounts payable report can be produced for period 7 as the end of day report from the prior day does not include all period 7 activity and the end of day report for the current day includes both period 7 and period 8 activity. If you wish to reconcile the accounts payable sub-ledger balance to the ending control account balance for period 7, the period 8 activity must be manually backed out.
The valid inventory valuation report produced at the end of the prior day is no longer valid as transactions were posted that affect the current inventory valuation report (due to 8/1 date), but the prior period general ledger balance (period 7).
It is possible to hold a period open and to post only transactions that apply to that period after the calendar end date for the period, but this method requires a large amount of discipline and control to be exercised. The system period and date information is used by all systems that process accounting transactions and changing or setting these values incorrectly can affect many areas in the system.
Some other issues with trying to hold a period open are
• Trying to determine how long the period needs to remain open. You may hold a period open for a week into the next period, and still receive invoices, or information about other transactions that should be processed in the prior period after the week is up.
• You may not process transactions for the current period until all transactions for the prior period have been entered. If you wish to produce valid ending sub-ledger reports, the reports must include all activity from the prior period and none from the current period. This means you may not process current transactions (which affect the sub-ledger reports immediately), until all transactions for the prior period have been posted and the final report for the period has been generated.