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STRUCTURE OF THE FINANCIAL RECORDS SYSTEM

Accounting Services Section (ACT)

POLICY 2

Effective Date: 07/01/1996

Last Modified Date: 02/10/1997


Accounts

An account is the basic building block of the Financial Records System (FRS). An FRS account contains a broader grouping of information than is normally found in most accounting systems.

Characteristics

An FRS account is a collection of both dollar and descriptive data concerning a particular activity. An account can be recognized by the following characteristics:

Purpose

Accounts can be established for a variety of purposes. For example, an account could be established for any of the following purposes:

A unit might have any number of different accounts, as shown in the example below:

A unit might have any number of different accounts for the same basic function. For example, an instructional function could be broken down into a number of accounts, each representing a field of interest within the subject.

An individual might have any number of different accounts for which he or she is responsible, for example, for various research activities or different funding for the same research activity.

What is important is that each account must be unique in that it covers only one function or activity, has only one person responsible for it, and gets its funding primarily from one source.

Ledgers

All the accounts within FRS are contained in either the General Ledger or a Subsidiary Ledger.

Subsidiary Ledgers

The accounts used by most departments are part of a subsidiary ledger. One exception is trust funds, which are often contained only in the general ledger. Subsidiary ledgers contain the revenue and expenditure accounts of the University. Each account, depending on its nature, will show data on the fiscal year basis (July 1 to June 30) or on a project-to-date basis (from the date the project began to the present date). For example, a grant would be on a project-to-date cycle, while a State account would be on a fiscal year cycle. The basic dollar data shown in these accounts are budgets, revenues, expenditures, encumbrances and budget balance available.

General Ledger

The general ledger accounts are used to record claim-on-cash, accounts receivable and other assets, accounts payable and other liabilities, and fund balance. Some general ledger accounts will be used to record specific fund additions and fund deductions as account activity occurs. Others, with related subsidiary ledger accounts, will carry summaries of the budgets, revenues, and expenditures that are in the subsidiary ledger.

Relationship of Ledgers

The subsidiary and general ledger accounts have a predefined relationship designed into the system. In some cases there are many subsidiary ledger accounts reporting to one general ledger account. In other instances there is a one for one relationship between the two ledgers. Any transactions posted to a subsidiary ledger account is automatically posted to its related general ledger account to update the claim on cash, fund balance and the appropriate summary revenue or summary expenditure control. The updating of the general ledger is performed simultaneously with the processing of each subsidiary ledger transaction, causing the ledgers to be always in balance with each other.


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