AB Report
AB Report
Getting Started

Financial and tax accounting

Overview

The primary objective of the AB Report is to provide management and owners with operating information and to generate management reports. The preparation of financial statements in accordance with IFRS or national accounting standards based on IFRS is a secondary task.

The financial accounting aspect of the AB Report is structured to serve both of these purposes and has several distinctive features:

  • The input of source documents is predominantly done by staff rather than professional accountants. No accounting knowledge is required to enter the documents.
  • Analytical accounting with seven fixed dimensions to provide management with detailed insights beyond the requirements of financial reporting.
  • Real-time accounting to provide management with up-to-date operational information.
  • Division of accounting into three branches: managerial accounting as the primary function, financial accounting as an extension of managerial accounting, and tax accounting as an extension of financial accounting.

Accounting Process

The accounting process in AB Report is orchestrated by the Accounting Taxonomy, which defines the chart of accounts and a complete list of Business Transactions. For each Business Transaction, a template of accounting entries must be defined.

The specified entries are posted to the general ledger when a Document with this Business Transaction is posted in the document register.

In the AB report, you cannot manually enter entries in the general ledger. It is necessary to define a Business Transaction in the Accounting Taxonomy, attach the transaction to a document type, and then post the transaction using the Documents interface.

Decentralised data entry

AB Report is designed to facilitate decentralised data entry, allowing multiple business users to contribute to data entry, rather than relying solely on accountants. The accountant's role is to check, validate and ensure the accuracy of the information entered.

This approach simplifies the accountant's life, but requires some accounting adjustments.

AB Report prioritises user-friendly interfaces and does not require the user to have accounting knowledge. Unlike traditional practices, it is not possible to specify an account when registering documents, only a business transaction. Therefore, there are some limitations that need to be considered when developing an Accounting Taxonomy.

Accounting Branches

AB Report supports three branches of accounting: managerial accounting, financial accounting and tax accounting.

In many cases, a single set of accounting policies can effectively meet the needs of all branches of accounting. This is particularly true for non-manufacturing companies, where expenses are expensed rather than capitalised as part of the cost of inventories, and where financial accounting meets the requirements of the tax authorities.

The accounting branches used are defined in the accounting policy. When managerial accounting, financial accounting and tax accounting are separated, the different entries in the Business Transaction posting templates are used and different Profit and Loss statements are used.

Managerial accounting comes first. These accounts may not always be fully compliant with regulatory requirements, but they do make it possible to know more quickly where the company stands in terms of account balances, revenues and profits.

Real-time Accounting

AB Report is designed to provide real-time information. Most accounting calculations should be done at the time of the entry posting, before the period-end closing process. There are several methods for doing this:

  • Fast closing income and expenses accounts. Posting templates should use a debit and credit to the retained earnings account, not to the income and expense accounts also specified in the template, but closing at the time of posting. Example.
  • The Cost of goods sold is calculated at the time of posting and is recalculated if a previously linked transaction is changed. To use these calculations in posting templates, use the "Cost of Goods" amount.
  • Accounts Payable and Accounts Receivable reconciliation takes place during the posting of transactions. Special amounts within templates are used to calculate AP or AR totals for the business partner and contract. Example.
  • Foreign exchange gains and losses. Realised gains and losses may be calculated at the time of posting if the accounts used in the template are not functional currency accounts. Business Transactions for this operation are described in the accounting policy and automatically added to the posting document.

Consolidation

AB Report supports real-time consolidation, allowing the financial results of multiple subsidiaries to be combined into the parent company's overall financial results. The business dimension Cost Centers is used for this purpose.

Financial reports can be generated at either the Cost Center or legal entity level. Cost Centers are organised hierarchically, with legal entities linked to their respective Cost Centers. For instance:

  • Holding Company <Legal Entity Not Linked>.
    • Construction Department <Company 1 Ltd>.
    • Legal Department <Company 2 Ltd>.

By reporting on the Holding Cost Center, consolidated financial statements are automatically generated.

When consolidation is specified in the accounting policy, AB Report proactively creates reversing entries to eliminate intercompany transactions. These entries are generated in real time as the document is posted. To maintain the integrity of individual legal entity reporting, reversal entries are limited to parent Cost Center, ensuring that they are included only in consolidated reports.

Accounting Reports

All accounting reports allow you to analyse account balances and movements in the context of Business Dimensions.

  • General Ledger report. Details the balances of the asset, liability and equity accounts and the movements during a period.
  • Profit and Loss Journal. Details the movements of income and expense accounts during a period. The standard view of this statement is designed to detail the profit and loss statement, so the amounts are not shown in the context of debits and credits, but as + and - relative to the company's profit.
  • Cash Flow Journal. Details the movements in the cash and cash equivalents accounts during the period. Designed to detail the cash flow statement to drill down into the figures.
  • Trial Balance. Report general ledger account balances on a selected date. Accounts with nil balances don't show in the report.
  • Account Movement Report. A summary of the balances of the asset, liability and equity accounts and their movements during a period. Allows you to drill down into the figures and analyse them in the context of the business dimensions.

Dynamic financial statements with actual data are also useful for accounting analysis.

These reports are shared between accountants and business users who also need accounting insight. For ease of use, reports are adopted by default specifically for business users, with a deliberate effort to minimize the use of complex debit/credit terminology. For example, profit and loss analysis uses more intuitive symbols such as +/- for greater clarity. Users have the flexibility to revert to an accounting view as needed through accounting policy settings.

Period Close Process

The Period Close process is fully customisable by describing the tasks of the process. Tasks includes a selected procedure and business transaction template to reflect the results of the procedure calculation in accounting.
The following procedures are supported:

  • Calculation of depreciation and amortisation
  • Accrual of interest on loans and borrowings
  • Foreign exchange gain/loss
  • Allocation of costs to cost of goods
  • Activity based costing
  • VAT Reconciliation
  • Income tax calculation
  • Perform business transaction selected
  • Perform budget business transaction*

* Running a budget transaction method is useful when the accounting policies and rules for calculating the transaction are described in the budget template. For example, transactions to evaluate legal liabilities and warranty obligations, or to accrue some expenses.

Disclosure Management

The Disclosure Management feature allows you to easily create and generate disclosure reports for for regulatory compliance purposes or for management, owners and investors.

Next: Managerial accounting