Re: GAAP (was Re: Patch for serious bug in LedgerSMB 1.2.16)

[Chris Travers <..hidden..>]

On Wed, Feb 18, 2009 at 4:14 PM, Chris Bennett
<..hidden..> wrote:

> As Chris suggested, a one button, quick reversal system would be great.
> Perhaps there may be a way of excluding the mistaken and their reversed
> transactions from informal reports (but never from formal reports).
>
Actually one of the elements we are working on will do exactly that
(and exclude from formal reports as well, provided the transaction is
not posted to the books):  Drafts and vouchers.   This is also a
bigger deal for larger businesses.  Let me explain the basics:

One of the issues that starts to occur when you have a business which
has more than one person responsible for the books (or a bookkeeper
other than the owner) is you have the possibility of embezzlement.
One of the primary ways that this risk is managed is using a principle
called separation of duties.  So in this case, one person could create
a GL, AR, AP, payment, or other transaction and save it to the system
without posting it to the books.  A second person has to come around,
review the transaction, make sure everything looks good, and post it.
The idea is to make it harder for people to steal money from the
business by requiring collusion between employees, but it also has the
effect of ensuring that people's work is double-checked before it is
posted to the books.

A single one of these is what we call a "draft."  A collection of
these would be a "batch" of "vouchers."  These terms arise from
paper-oriented workflows.

Now, aside from the fact that there are plenty of variations in what
sort of policies companies may have in implementing this sort of
thing, the error control function is actually a pertinent here.  Until
a draft or voucher is approved it is not a financial transaction.
People with permission to do so could edit an invoice if necessary
before it is approved.

You can already do this to an extent with orders vs invoices, but this
is a little different.  For a draft sales invoice, one could not
create an authoritative view of the COGS until it is approved because
of the problem discussed before, but it could be edited prior to being
approved (approval posts to books).

Unapproved transactions are excluded from all financial reports
because they are not financial transactions yet.

Hope this helps,
Chris Travers