The StreamV Accounting System includes a general ledger system which posts journal entry transactions to a specific year and period in a specific division and department. All journal entries identify the period, year, division and department that they will be posted to and this information identifies the account period records that should be updated as each journal entry line is posted. The date fields in each journal entry are not used at all when determining the period and year in which each journal entry should be recorded. Journal entries can be made to prior, current and future periods at any time (assuming no period range restrictions have been set up for the operator processing general ledger transactions) and the date entered into a journal entry does not determine where or if the journal entry will be processed by the system.
Since the general ledger system works by year and period, the system always uses the current totals for each account/sub account in each period/year/division and department when displaying or reporting the balance for each general ledger account. Because of this logic, the general ledger system also allows you to rebuild the account period balances for an account based on journal entry detail for the account.
The StreamV Accounting System also includes other modules or systems such as Accounts Payable, Accounts Receivable and the Inventory or Warehouse Management System. Each of these modules use what are called “sub-ledgers” to track the open balances in each of the systems. Sub-ledgers contain the detail that supports the balances in specific general ledger balance sheet accounts such as Accounts Payable, Accounts Receivable, and the Inventory Control Account. Sub-ledgers can contain open document detail (such as vendor accounts payable invoice balances or customer accounts receivable invoice balances) or they can contain current quantity and cost information (Inventory, WIP, Pending on hand quantities and average cost information).
Sub-ledger balances are determined by running reports. These reports detail the individual open invoices or extended item values at the time that each report is produced. Some of the sub-ledger reports are referred to as Agings (Accounts Receivable Aging, Accounts Payable Aging), or Open reports (Open Accounts Payable Report) and others are referred to as valuation reports (Inventory, WIP, Pending Valuations). Sub-ledger report balances and detail are updated immediately as transactions are processed based on the time that each transaction is saved. Sub-ledger reports are therefore referred to as snapshots or point in time reports, as they change from moment to moment as transactions are processed.
Sub-ledger transaction processing results in changes to both sub-ledger report balances (which are changed at the point in time that the transaction activity is processed), and changes to general ledger balances.
For example, when an accounts payable invoice is entered into the system, the system creates a new open invoice record for the vendor in the Accounts Payable Register file. The balance of the invoice is immediately included in the accounts payable sub-ledger total (and on the sub-ledger report). At the same time, the system uses the information entered for the invoice to create journal entry lines that are used to post the invoice to the appropriate general ledger accounts. The journal entry created by the system updates the accounts payable control account in the general ledger as well as any other accounts used to distribute the invoice amount. The journal entry used to post the invoice is posted based on the period and year used for the transaction.
The primary difference in the behavior of the general ledger and the sub-ledgers on the system is
• Sub-ledger balances change based on the date that individual transactions are processed. Sub-ledger reports are snapshots or point in time reports and you must run the reports at the proper time in order to reconcile the reports to the appropriate general ledger control account balances.
• General ledger balances change strictly based on the period and year that each transaction is posted to.
Since the system posts both general ledger and sub-ledger transactions in real-time, the system will add a new invoice to the accounts receivable or payable sub-ledger as soon as it has been created. Likewise, if an invoice is paid or closed out, the invoice drops off of the sub ledger report immediately. This behavior means that the relationship between the system date and the period used for posting transactions must be strictly controlled.
For example, if transactions affecting a sub-ledger are posted to a prior general ledger period after the ending sub-ledger report for the period has been produced, you will have general ledger activity in the period that is not reflected on the ending sub-ledger report. This will cause a difference between the ending sub-ledger report balance and the balance for the sub-ledger that is maintained in the general ledger. This difference will complicate any account reconciliation procedures for the account at month-end. Some examples are provided in the next section to illustrate this issue.