Accounting Software : Transition from Book Keeping To Financial Reporting

I had certain thoughts on Accounting Packages – which can help them Transition from being book-keeping (Recording of Transaction) to Financial Reporting packages.

1. At present, Accounting Packages allow only a single grouping for a Ledger Account. However, in a number of factual instances the grouping of account in the Financial Statement depends upon the nature (Debit or Credit) of period-ending Net Balances of the Account.

For example – Depending upon the GAAP Terminology,

Group of Accounts Group in case of DEBIT BALANCE Group in case of CREDIT BALANCE
Bankers Cash with Banks Loans from Banks-Term Loans, Cash Credit, Overdrafts, etc
Financers Loans & Advances Loans Received
Customers Accounts Receivables Acceptances / Advances from Customers
Suppliers Deposits or Advances to Suppliers Accounts Payable

Existing Accounting Packages does not figure in the possibility of Reclassification of Ledger Accounts to different / another Financial Statement Group owing to a change in the nature of period-ending Net Balance of the Ledger Account.

The solution to this can be achieved by leveraging – the grouping of Ledger on the basis of period-ending Net Balance – IF Debit – transfer to “Cash and Bank Balances” ELSE IF Credit – transfer to “Short Term Loans and Advances from Banks” A/c, ENDIF Logic.

Basically, for every account there can be TWO options for grouping depending upon the Balance Type in Account Masters.

2. At present, Statutory Masters and Basic Ledger Accounts are created same for different types of entities – say Proprietorship / Partnership / Company, etc. The reporting requirements for the the Entities depend upon their Incorporation Status and accordingly, it is pertinent to create Statutory Masters depending upon the Incorporation Status of the Entity.

3. Optional – Grouping as per Income Tax Act – The Income Tax Return Forms prescribed have mandated a different grouping of ledger items vis a vis Indian GAAP & The Companies Act. It is possible to have an option for Grouping as per IT Act in Account Masters and thereby prepare Financial Statements (BS and PL) as per IT Act also from the same Accounting Package.

4. XBRL – If XBRL Tags are assigned to Ledgers / Groups in Account Masters than primary XBRL Instances can be created from the Accouting Package without resorting to Manual Re-entry in Basic XBRL Tools or Mapping / Linking in Advance XBRL Tools.

These Primary Instances generated from Accounting Packages can be used for Finalisation of Accounts and create MCA compliant XBRL Instance documents.

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