Tip of the Month for: May 2011

Financial Statement Analysis

Answers provides tools that help when tracing problems on the Financial Statements.

Generally, problems with the figures on the Financial Statements fall into two categories.  This is not always the case, and there can be other reasons for amounts and figures to be wrong or not balance, but generally, there are two main reasons for a problem.

The first primary cause for figures on the Financial Statements to be wrong or not balance is that an account is missing from the statement.  When new general ledger accounts are added to the system through the G/L Account Maintenance, they are not automatically added to the Financial Statements.  You must add new general ledger accounts to the appropriate financial statements.

To verify that an account is being included on the financial statements, you can use the Edit/Change mode in the Financial Statement Management program to pull up the financial statement layout.  On the toolbar is a Search icon, , which will allow you to key in a general ledger account and search the financial statement format for that account.

The second primary problem is when using lines that pull from multiple accounts and might be pulling from the wrong accounts or having a line set up that is pulling from a single wrong account.  It could also be that journal entries have been made to the wrong account or the account is configured as the wrong type of account (ie. revenue account carrying a credit balance when it should be an expense account carrying a debit balance).  Reviewing the accounts and the amounts from each account will normally help determine the resolution for these types of problems.

The Financial Statements include an "analysis" tool that allows you to review the Financial Statement on-screen with the ability to "drill-down" to the accounts and the amounts being printed for each account.

To use this feature, click on the from the toolbar in the Financial Statement screen.  It will ask for the period number just as it does during normal printing, and generate the financial statement just as it does when it is printed.

The Financial Statement will displayed in a screen that looks similar to the printed format.  From this screen, you can click on any amount and see a complete analysis of how that figure was obtained.  When you click on an amount, you will see the general ledger account and amount that figure is taken from.  If it was taken from multiple accounts, each account will be listed.  You can click on an account to review that account in G/L Account Inquiry.

This analysis program also provides a search feature to locate specific accounts being used in the financial statement, provided by the icon.  You can generate or print the financial statement from this window as well.

The analysis tool is very helpful when trying to narrow down where the figures actually came from and how lines with multiple account figures are being calculated.