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Adamson & Venerable Chapter 9. Financial Reporting Spring 2012. Star Schemas in Financial Reporting. Managerial accounting vs. financial accounting Balance sheets Income statements Cash Flow statements. Managerial vs. Financial Accounting.

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adamson venerable chapter 9

Adamson & Venerable Chapter 9

Financial Reporting

Spring 2012

star schemas in financial reporting
Star Schemas in Financial Reporting
  • Managerial accounting vs. financial accounting
  • Balance sheets
  • Income statements
  • Cash Flow statements
managerial vs financial accounting
Managerial vs. Financial Accounting
  • Managerial Accounting: It is accounting intended for internal consumption, used in planning and operating the organization by managers and employees.
  • Data may come from many sources, not just the approved, audited financial system. For example, sales force automation software may be used to forecast sales. These will not be the official expectations for external consumption, but only used internally to manage the sales force.
managerial vs financial accounting4
Managerial vs. Financial Accounting
  • Financial Accounting: It is accounting for external consumption, used in reporting financial results on a periodic basis to shareholders, creditors, and the government.
  • The source of data is a company’s approved, audited accounting system. Well-defined procedures are used to ensure data accuracy, prevent irregularities and thwart fraud.
  • Shareholders use information from the financial accounting system to monitor the performance of their investment.
  • Creditors use it to monitor the security of their debt.
guidelines for a financial reporting dw
Guidelines for a Financial Reporting DW

To ensure the financial reporting DW is reliable and meets the high standards demanded of a financial system, we follow two strict guidelines:

  • The financial reports produced from a DW must be as reliable as reports from the existing financial reporting system. All changes and reversals in the financial system must be reflected in the financial DW.
  • The sources for the financial DW must be the approved, auditedsystems recognized as the official source for that data in the corporation.

If not, the DW can still be a valuable managerial accounting asset, but should not be used for financial accounting purposes

accounts
Accounts
  • An Account is a defined entity of financial importance to the business. Transactions are recorded against accounts. Examples include:
    • A corporate checking account
    • A line of credit
    • Salaries
    • Vacation
    • Taxes
  • The Chart of Accounts is the current set of valid accounts in the business, against which transactions may be recorded.
  • Accounts can be balance sheet accounts or income statement accounts.
the balance sheet
The Balance Sheet

It is also called the statement of financial position. It is less accessible to most people than the income statement. It includes 3 categories of accounts:

  • Assets. Items that have inherent value. Short term (convertible securities) or long term (real estate).
  • Liabilities. Items for which the company must eventually use cash to reconcile. Unpaid bills for operations, current salaries, lines of credit, loans.
  • Owner’s equity. The capital invested in the company and retained earnings.
balance sheet granularity
Balance Sheet Granularity
  • The general ledger of the accounting system records all transactions against an account
  • We can take each general ledger transaction for balance sheet accounts, apply reversals, and create our transaction fact tables
  • The general ledger transaction will be the grain of our fact tables
balance sheet granularity9
Balance Sheet Granularity

The basic dimensions related to a General Ledger transaction are:

  • Time. Recording individual transactions requires a grain of day.
  • Category – credit or debit.Debit an asset to increase its value. Credit an asset to decrease its value. Debit a liability to decrease its value. Credit a liability to increase its value.
  • Account. Contains the type (asset, liability, equity) and other interesting characteristics.
benefit of star schemas in financial reporting
Benefit of Star Schemas in Financial Reporting
  • These detailed facts are usually not presented in the official summary balance sheet, even though they exist in the financial source system
  • Detail reporting will allow users to drill into the usually bland balance sheet line items:
    • Accounts Receivable could be classified by customer, age, quality, etc.
    • Long-term liabilities can be presented by creditor and interest rates
    • Lines of Credit can be assigned to different operating divisions (which are not directly related to GL transactions)
  • These details are invaluable for internal analysis of financial results!
balance sheet star with transaction facts

ASSET_FACTS

LIABILITY_FACTS

ASSET_PARTY

LIABILITY_PARTY

ACCOUNT_OWNER

Acct_key

Date_key

Type_key

Asset_party_key

Account_owner_key

Transaction_amount

Date_key

Type_key

Acct_key

Account_owner_key

Liability_party_key

Transaction_amount

Account_owner_key

Department

Division

Region

Activity

Manager

Responsible_executive

Asset_party_key

Name

Type (creditor/customer/steward)

City

State

Liability_party_key

Name

Type (creditor/internal/govt.)

State_province

Country

ASSET_ACCOUNT

TRANSACTION_TYPE

LIABILITY_ACCOUNT

Acct_key

Financial_system_id

Name

Liability_type

Term (debt only)

Interest_rate (debt only)

Type_key

Category (debit, credit)

Type (depreciation charge, receivables payment, etc.)

Acct_key

Financial_system_id

Name

Asset_type

Term (short/long)

Fixed_flag (yes if fixed asset)

Fixed_asset_category

Balance sheet star with transaction facts

EFFECTIVE_DATE

analyzing accounts receivable ar over time
Analyzing Accounts Receivable (AR) over time
  • A Data Mart built only from AR records would provide details of the timeliness of payments
  • BUT, it would be useful to compare AR activity with asset value cycles.
  • Example:
    • If there is an increase in slow payments from customers, the value of AR will increase
    • As operating expenses continue to be paid, thebalance of cash accounts decreases
    • Eventually, a company would be forced to draw on credit sources to replenish cash supplies!
relationship among accounts receivable cash and credit

Increased Value of the AR Asset due to Slow Payments

Decreased Value of Cash Assets to Pay Short-Term Expenses

Increase in lines of Credit (Long Term Liabilities) to Supply Cash

Relationship among accounts receivable, cash, and credit
producing a balance sheet
Producing a Balance Sheet
  • With a trio of transaction fact tables, we can create a complementary set of summary tables that store the balance of all accounts associated with the balance sheet.
balance sheet star with period summaries

LIABILITY_FACTS

EQUITY_FACTS

ASSET_FACTS

LIABILITY_PARTY

ACCOUNT_OWNER

ASSET_PARTY

Period_key

Type_key

Liab_acct_key

Account_owner_key

Liability_party_key

End_of_period_balance

Asset_acct_key

Period_key

Type_key

Asset_party_key

Account_owner_key

End_of_period_balance

Equity_acct_key

Period_key

Type_key

Account_owner_key

End_of_period_balance

Asset_party_key

Name

Type (creditor/customer/steward)

City

State

Liability_party_key

Name

Type (creditor/internal/govt.)

State_province

Country

Account_owner_key

Department

Division

Region

Activity

Manager

Responsible_executive

EQUITY_ACCOUNT

ASSET_ACCOUNT

LIABILITY_ACCOUNT

PERIOD

Equity_account_key

Financial_system_id

Name

Type

Period_key

Period_type

Period

Period_year

Liab_acct_key

Financial_system_id

Name

Liability_type

Term (debt only)

Interest_rate (debt only)

Asset_acct_key

Financial_system_id

Name

Asset_type

Term (short/long)

Fixed_flag (yes if fixed asset)

Fixed_asset_category

Balance sheet star with period summaries
the income statement
The Income Statement
  • The Income Statement is a summary of revenue, expenses, and income for a given period of time.
  • The income statement is a summary of activity, not a snapshot, therefore measures that make up the line items of an IS are additive
  • Revenue comes from operations or from non-operational investment activity
  • In manufacturing, the cost of materials, labor, plant depreciation, etc. is called Cost of Goods Sold
  • Gross Income = Revenue – Cost
  • Earnings Before Interest and Taxes (EBIT) = Gross Income – Expenses
  • Net Income = EBIT – (Taxes + Interest)
income statement star schema

EXPENSE_FACT

REVENUE_FACT

REVENUE_SOURCE

ACCOUNT_OWNER

PAYEE_OR_PARTY

Rev_acct_key

Rev_type_key

Date_key

Rev_srce_key

Account_owner_key

Transaction_amount

Date_key

Exp_acct_key

Exp_type_key

Account_owner_key

Payee_or_party_key

Transaction_amount

Account_owner_key

Department

Division

Region

Activity

Manager

Responsible_executive

Payee_or_party_key

Name

Type (vendor/asset/govt.)

Parent_org

State_province

Country

Rev_srce_key

Name

Parent_organization

Type (customer/investment)

Industry

State_province

Country

REVENUE_ACCOUNT

EXPENSE_ACCOUNT

REVENUE_TYPE

EXPENSE_TYPE

TIME

Exp_type_key

Subtype

Type

Category (Cost of goods sold, store overhead, SAG)

Rev_acct_key

Financial_system_id

Name

Rev_type_key

Subtype

Type

Category

Date_key

Month

Year

Exp_acct_key

Financial_system_id

Name

Cash_flag

Income Statement Star schema
cash flow statement
Cash Flow Statement
  • Cash flow from operations
  • Cash flow from investments
  • Cash flow from financing