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General Ledger Best Practices
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accounts without permission from the corporate parent—in other words, the
main action is not to make the situation any worse than it already is. This is
an extremely minor action to take, since it is a rare event for a company to
create new accounts once the basic chart of accounts has been completed.
• Use a written map to lay out how accounts are linked. A more advanced level
of activity, which can also incorporate the first bullet point, is to create a map
that traces each account number used by every subsidiary to the corresponding
account number in the corporate parent’s chart of accounts. Though only a
manual tool, not an automated one, this is still a very important way to create
consistent entries through many accounting periods. To make this approach
even more effective, there should be a standardized journal entry form for
each subsidiary that lists both sets of account numbers so that the general
ledger accountant only has to fill in the form and enter it into the computer.
• Have subsidiaries convert results to corporate parent’s chart of accounts. An
excellent approach for organizations that do not like to impose an excessive
level of control onto their subsidiaries is to let them use any account code
structure that they want and just require them to make the conversion to the
parent’s chart of accounts when submitting period-end information. This
approach is a benign one many companies use, for it avoids the effort of a
complete standardization while still ensuring that the parent company receives
the information that it needs. It can also be completed in short order, merely
requiring a visit from corporate headquarters to work with the local account-
ing staff to create an account code conversion table the local staff will use to
submit data to the corporate parent.
• Have subsidiaries enter their data directly into the parent’s general ledger.
This approach is similar to the preceding one in that the subsidiaries can
keep their own charts of accounts but must submit their reporting informa-
tion in the corporate parent’s format. The difference here is that the sub-
sidiaries are given dial-up computer access to the corporate parent’s general
ledger, into which they are expected to enter the period-end data themselves.
This approach presents the risk of someone entering incorrect information
into the computer system but avoids the need for extra data-entry work by
the corporate general ledger accountant. Instead, the people entering the
information are the ones who know the most about it, which means that there
is less likelihood of a conversion or data-entry error being made. This best
practice is described in more detail later, in the section ‘‘Have Subsidiaries
Update Their Own Data in the Central General Ledger.”
• Convert all subsidiaries to a common chart of accounts. The best way to
ensure complete standardization is to impose the chart of accounts of the
parent onto the subsidiaries. This can involve a massive amount of work, for
each accounting system must be reset to use the new accounts. This will also
probably destroy all historical reporting comparisons, which must use the
old account numbers. Some subsidiaries may also be in such a different line