General Ledger, Journals and Financial Accounting matters.

General Ledger, Journals andFinancial Accounting matters

GL, Journals & Financial Accounting presentation 191010 2

Topics to be covered:

1. Journals

2. Year end

3. Research acquittals

4. Gift guidelines

5. Chart of Accounts

6. Questions


What are journals?• A journal [document] is used to record accounting transactions in the general

ledger.

Journal types:SAP code

Finance code

Document Number

Document type Purpose

AA FA 7****** Asset posting Transfer of expenditure from capital to operating and vice versa

AB N/A 85***** Accounting and Controlling document

Reversal of journals

AF N/A 79***** Depreciation posting Depreciation expense posting

GA AC 81***** General Ledger Accrual document

Month end accrual document

SA TR, RC, PP

80****** General Ledger Standing Journal

Permanent journal document

ZR BK 90****** Bank posting Record bank statement transactions


Journal Templates

• Journal templates are used to authorise and process journal entries that need to be posted into SAP.

• There are three types of journal templates:

1. General Journal (all postings within one RMIT entity)

2. General Journal – Intercompany

3. General Journal – Fixed Assets

• The templates can be found on the Financial Services website under:

Staff > Service groups > Financial Services > Finance forms (under Quick Links)


Journal Life Cycle

School/College preparesJournal template

School/College preparesJournal template

Sender initiates the journaland sends template to their Manager for approval, the

Receiver

Sender initiates the journaland sends template to their Manager for approval, the

Receiver

Receiver emails the journaltemplate to

[email protected] (cc: the Sender)

Receiver emails the journaltemplate to

[email protected] (cc: the Sender)

Is the subject convention in the email to ‘Journals’ correct?

Is the subject convention in the email to ‘Journals’ correct?

YESYES

Financial Reporting team will process the journal within

24 hours of receipt

Financial Reporting team will process the journal within

24 hours of receipt

NONO

The journal will be automatically declinedand a reply email issued requesting

the journal be resent

The journal will be automatically declinedand a reply email issued requesting

the journal be resent


Overview – journal templatesGeneral Journal – Single entity

• Financial impact is within one entity.

• Complete the fields in the ‘Posting sheet’ and the total debit/credit amounts on the GJ cover sheet will update automatically.

• Take note of the structure of the template and order of information that is required (ie. Account, Internal order etc).

General Journal – Intercompany

• Used when the financial impact is across two different entities (e.g. RMIT recovering costs incurred on behalf of RMIT Union).

• Must specify the company code for each line item.

• Ensure correct internal orders are used for the company code you are posting to.

• When using this template, SAP is configured to post the balance sheet impact to the related party accounts.

• Manual postings to an intercompany account (eg. RMIT-RMIT Training account 155125 does not constitute an intercompany posting).

General Journal – Fixed Assets

• Posting keys are different – Debit asset = 70, Credit asset = 75.

• Transaction type is 100 for line item postings to an asset.

• For line item posting to an asset number, need to complete the Asset value date field (this is the date of the journal posting).


Things to note / Common issues with journals• Ensure that a narrative/text description is provided for each line item in a journal to assist

with the review of general ledger postings.

• Supporting documents must be provided for audit purposes for all accruals/deferrals/prepayments at year end. For each month end it is expected that each School/College has supporting information for their journals.

• Per the TR policy memo issued in August:

i. Generally the line item threshold for TR journals is $1,000.

ii. Exceptions – external research grants, closing of internal orders, accounts where external acquittal is required, specific awards such as VC performance awards etc. Please provide a brief justification in the covering email.

iii. Summate the cost element and IO impacts into one template where the transactions are related to the same cost element and internal order.

iv. For correcting journals, review the cause of the issue and attempt to fix this at the source.

• Accrual journals should only be processed for amounts greater than $5K or at least 20% of projected revenues/costs for a single project. Need to consider the University wide materiality of accruals.


Things to note / Common issues with journals• Issues with loading journals into SAP:

- SAP only displays the first error in the journal (ie. errors are only identified and actioned one by one). As such, please review the information entered in the templates before submitting.

- Cells formatted with formulae, $ signs, commas, more than two decimal places cannot be loaded by SAP. Do not unprotect the journal template.

- For the majority of journals there are no GST consequences - use P9 or S9 tax codes and leave the Tax amount field blank. Refer to the following summary:

- Note that the number of characters for Journal text description is limited to 50 characters (including spaces).

G/L account type G/L account code Tax code

Asset 1XXXXX S9

Revenue 4XXXXX S9

Funds transfer 621000 S9

Liability 2XXXXX P9

Expense 5XXXXX P9


Year end considerations / issues• Accrual accounting

i. Australian Accounting Standards reference –

“Framework for the Preparation and Presentation of Financial Statements”

Paragraph 22 – Accrual accounting

– financial statements are to be prepared on an accruals basis.

- effects of transactions and other events are recognised when they occur.

- users of financial statements are informed of future obligations and

resources to be received in the future as result of past transactions.

Paragraph 83 – recognition criteria

(a) it is probable that any future economic benefit associated with the item will flow to or from the entity; and

(b) the item has a cost or value that can be measured with reliability.


Year end considerations / issues…• Accrual accounting…

ii. Supporting documents – accrued expenses

- Invoice that has not been processed by Accounts Payable.

- Estimate based on prior expenditure.

At year end, due to the timetable for cut off of processing of invoices and

journals, please ensure that any invoices which have been accrued are

clearly marked “Accrued” when sent to Accounts Payable.

iii. Supporting documents – prepayments

- Scanned copy of invoice or SAP document number in which prepaid expense is paid.

- Note: an expense is not prepaid if the invoice has been processed by Accounts Payable but it has not been paid before year end. The year end prepayments balance will be reviewed by the Financial Reporting team and any necessary adjustment made.

All accruals/prepayments are processed based on the GST exclusive

amount.


Research acquittal guidelines• Supporting documents required

i. Bank statement extract – to support the receipt of the grant

ii. Invoices – to support expense payments

iii. Supporting calculations – salary allocations or in kind amounts

Note: expenses must be settled, therefore any amounts accrued must be

supported by an invoice.

• Preparation and sign off

Depending on the grant contract, the following sign off is required:

i. Deputy Director, Financial Operations

ii. Internal Audit and Risk Management team

iii. External auditor – Moore Stephens

Note: ensure adequate notice is provided to allow for review, particularly

when an external audit is required. External audit costs are allocated to

the relevant School.


Gift guidelinesKey messages from July 2010 Financial Services newsletter:

- RMIT has a ‘Deductible Gift Recipient (DGR) status with the ATO and to

retain this it is important that gifts are defined correctly.

- Definition of a gift under income tax legislation:

i. transfer of the beneficial interest in money or property;

ii. transfer is made voluntarily;

iii. transfer arises by way of benefaction;

iv. no material benefit of advantage is received by the donor.

- As there is no consideration, there is no GST. Correct tax code in SAP is S0.

- Where funds are received for the reimbursement of costs incurred, this does not represent revenue. These should be invoiced against Miscellaneous Income (GL 491200) and then the credit transferred to the relevant expense account.


Chart of Accounts

• This guide can be found on the intranet at:

http://www.rmit.edu.au/browse;ID=sfw7tl6lbyrp;STATUS=A?QRY=Chart%20of%20Account%20Guide&STYPE=ENTIRE

• This guide includes information about conventions for SAP master data, tips for SAP Management reporting, Research income information and descriptions of cost elements and balance sheet accounts and when these should be used.

• The guide will be reviewed annually and feedback from all users will be sort by the Financial Reporting and Budget & Financial Performance Management teams.


Thanks for your attention.

Any questions?

General Ledger, Journals and Financial Accounting matters.

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