Page 303 - Accounting Best Practices

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General Ledger Best Practices
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ways to improve the efficiency of the accounting department. However, given the
potential costs, it is mandatory, in this functional area, above all others, that a
controller conduct a thorough investigation and comparison of the costs and ben-
efits associated with any best practice-related changes. An implementation
should proceed only after this step has been taken.
14–1 ELIMINATE SMALL-BALANCE ACCOUNTS

If the general ledger accountant is in the habit of maintaining a record of all the
transactions in all accounts, there can be a considerable workload in store if there
are many accounts. This practice is particularly common for balance sheet accounts,
where it is necessary to keep track of all asset and liability records so that they can
be reviewed during the year-end audit. If there are fewer accounts, there is less main-
tenance work needed to update a listing of the detailed records in each account.
Accordingly, a minor and easily implemented best practice is to periodically
review the balances in the balance sheet accounts and merge them into larger
accounts (or expense them) if the current balances are quite small. This task can
be included in the financial statement preparation procedure as a standard item so
that someone reviews the size of accounts on a regular basis and eliminates a few
as necessary. There are no downsides to this best practice since it requires mini-
mal work, reduces the clutter in the balance sheet, and does not interfere with the
proper recording of information.

Cost: Installation time:

14–2 MODIFY ACCOUNT CODE STRUCTURE FOR STORAGE
OF ABC INFORMATION
The general ledger accountant is frequently drawn into any activity-based costing
(ABC) project because of his or her knowledge of the existing account structure.
This accountant is commonly asked to set up a mapping program that translates
the regular chart of accounts into a different (sometimes much different) chart of
accounts that will be used to compile information for an ABC analysis. This
analysis then compiles the costs of various products or activities throughout the
company, which usually results in better management decisions and a greater
level of profitability. Though this sounds like a reasonable task, involvement in an
ABC project requires a startlingly large amount of time, perhaps even full-time
participation for a number of months. The reason for such a heavy involvement is
that the existing chart of accounts rarely accumulates data in the same way that
an ABC analysis requires. For example, a traditional chart of accounts stores
expense information by department, whereas an ABC system needs to have this
information stored by activity center (such as a machine). Thus, when an ABC