Page 241 - Accounting Best Practices

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Financial Statements Best Practices
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deal of updating. All footnotes in the first category should be clustered together to
the greatest extent possible, reviewed prior to the end of the month, and even
printed out and ready for inclusion with the remainder of the financial statements.
By handling these items well in advance, there is less work to be done during the
crucial period immediately following the end of a reporting period, when there is
little time available for such work. Unfortunately, many footnotes do require
updates based on current financial results and so cannot be completed in advance.
In these cases, it is still possible to highlight those portions of each footnote that
must be changed, either with different font sizes, underlining, or color changes in
the computer, so that everything requiring examination can be spotted and
checked easily. In addition, it is a good idea to create a checklist containing all of
the data to be updated in each footnote. This checklist is an excellent way to
avoid situations where footnotes are distributed that have not been updated to
account for the most recent results.
Cost: Installation time:

12–5 AUTOMATE RECURRING JOURNAL ENTRIES

The average financial statement many require several dozen journal entries
before it is completed. Some of these entries can be quite large, perhaps to
redistribute payroll costs to a large number of departments or to allocate occu-
pancy costs in a similar manner. If they are substantial, it is easy to incorrectly
enter them occasionally, resulting in revenues and expenses being sent to the
wrong accounts, making the financial statements very difficult to compare from
month to month. If the journal entries have been highly inconsistent over time,
it may even be necessary for the general ledger accountant to review all of them
and create new journal entries to correct the original entries. All of this work
takes time, of course—and time is in short supply during the financial state-
ment closing process.
Many general ledger accounting software packages have a feature that
allows one to avoid the continual reentry of journal entries every month by set-
ting up recurring journal entries which the system will automatically generate
every month, with no further manual interference. This type of entry is only for
those situations where the exact amounts of the entries do not change from month
to month (e.g., for the allocation of occupancy costs), so it will only apply to a
portion of the total number of journal entries. Nonetheless, by setting up recur-
ring entries in the computer, there are fewer journal entries to make.
The only problem with using recurring entries is that they will change at
long intervals, necessitating a periodic update. To use the earlier example, occu-
pancy costs may be reallocated based on changes in the square footage occupied
by each department, so the closing schedule should include an annual review and
updating of the amounts used in this entry. Another way to update recurring