006.09.1 R2-19-4-518. Journal Entries
AR ADC 006.09.1 R2-19-4-518Arkansas Administrative Code
Ark. Admin. Code 006.09.1 R2-19-4-518
006.09.1 R2-19-4-518. Journal Entries
Journal entries are used to change the posted value of a general ledger account balance or sub-ledger balance that is specific to a single business transaction. Generally, these include correcting the posting of a cash receipt, check or warrant to an improper account. Journal entries are also used to adjust the ending or beginning balance of an account so that the general ledger, as well as sub-ledgers is maintained in accordance with Generally Accepted Accounting Principles (GAAP), State policies, and audit requirements, such as year-end accruals for financial reporting.
Most transactions do not originate in the general ledger but rather in one of the modules (sub-ledgers) that feed the general ledger, such as the Accounts Payable and Accounts Receivable modules. In order to maintain module integrity, proper audit trails and to comply with external audit requirements, it is imperative that adjustments or corrections be made in the module from which a transaction originated whenever possible. Thus, adjustments or corrections made directly in the general ledger should be relatively few in number. In AASIS, a journal entry is prepared, checked and parked by one staff member; and it is approved and posted by another staff member. The approving staff member is responsible for ensuring that each journal entry is:
2. fully substantiated with the reason for processing a request clearly identified by the supporting documentation. This could include correspondence, notes, copies of documents, working papers detailing the basis of any calculations, the source of supporting data and the name of the preparer of the calculations. Retain supporting documentation for audit verification and review.
3. explained clearly on the journal entry document. The text field in AASIS is approximately (50) characters long on each line. Double click on the text field if more room is needed to ensure that each journal entry contains a description that is clear, concise and logical to readers of general ledger reports.
PLEASE NOTE: Do not use simple one and two word explanations, such as “correction error,” “transfer,” “recovery,” etc. It is critical that an accurate and meaningful description be provided for accounting, reporting and audit purposes.
PLEASE NOTE: the CFO or his designee shall approve in writing journal entries to record anything other than a summarized monthly recording of cash receipts or commercial bank activity.
PLEASE NOTE: Agencies not using AASIS shall retain original copies of journal entries processed, complete with original authorization signatures and supporting attachments, for audit verification and review.
Recurring Entries
Recurring accounts payable and accounts receivable entries may be entered by agency personnel when normal operation of the State's accounting system resumes each fiscal year, as well as during the fiscal year. Items that require payment before mid-July should be paid as a direct invoice for the July payment only. Refer to AASIS web site at http://www.aasis.state.ar.us/ and their transaction training tutorials for detailed instructions regarding the proper procedures to enter recurring entries.
Recurring entries must be reviewed and approved in writing by the agency Chief Fiscal Officer (CFO). A list of recurring entries can be obtained and printed with transaction ZF_15 in the State's accounting system. The listing must be forwarded to the DFA - Office of Accounting-CAFR Section with the agency's CFO's signature and the date of the review prior to processing. Requests to change or delete recurring documents must also be sent to the DFA - Office of Accounting-CAFR Section by the agency CFO. Include the document number and a reason for the change or deletion.
The DFA - Office of Accounting is responsible for the processing of recurring entries. Office of Accounting personnel will review for unauthorized entries. Unauthorized recurring entries will be deleted prior to the monthly posting of the recurring entries.
Expenditure Error Corrections
An Expenditure Error Correction is made by entering a journal entry that reclassifies an expense paid to/from:
• The wrong fund.
• The wrong funds center.
• An incorrect commitment item.
• An incorrect general ledger account.
• An incorrect Work Breakdown Structure (WBS) Element.
• An incorrect Internal Order.
• Or any combination of the list above.
Certain restrictions apply to Expense Error Corrections:
• No prior fiscal year expenses may be corrected through an Expense Error Correction.
• Expense Error Corrections cannot be made between funds held at the Treasurer of State and a cash fund.
• Expense Error Corrections cannot be made between Treasury appropriations and cash appropriations.
• Expense Error Corrections cannot be made between business areas. Errors of this type must be handled on a case by case basis by the Department of Finance and Administration-Office of Accounting (DFA-OA).
Error corrections that do not cross funds
If the correction is only a reclassification of general ledger expense accounts or cost center and the expense accounts have the same commitment item (character code), fund and funds center (appropriation), a two-sided journal entry is needed. Debit the correct general ledger expense account and credit the incorrect general ledger expense account. This posts the expense to the correct general ledger account/internal order/WBS element and deducts the expense from the wrong general ledger account/internal order/WBS element without expensing the item a second time and overstating the business area's expenses. There is no funds transfer generated. The affected business area may park and post this type of expense error correction.
Error corrections from one Fund and Funds Center to another Fund and Funds Center
If the expense to be corrected is incorrectly posted to an inappropriate fund, funds center (appropriation) and/or commitment item (character code), a four-sided entry is needed. These expense error corrections involve funds center (appropriation) restoration and must be posted and sent to the Auditor of the State by DFA-OA. The first two sides of the entry debit the correct general ledger expense account and cost center/fund/funds center (appropriation) combination and credit the incorrect general ledger expense account and cost center/fund/funds center (appropriation) combination. The last two sides of the entry reduce cash in the fund that should have paid the expense and restores cash in the fund that incorrectly paid the expense.
See: P3-19-4-518
Elements needed for the journal entries are:
• The original document number that was incorrect as a reference number. This number is used as a search criterion when displaying or changing documents in the State's Accounting System.
• A brief description providing justification for the expenditure correction.
• Use document type ZE for all expense error corrections.
The transaction to process error corrections is FB50. The document generated by this transaction must be parked. The document is not complete when parked, and the current appropriation amounts will not be updated until the document is approved and posted. After parking the expense error correction documents, the agency must notify DFA-OA-Funds Group via e-mail with the parked document number or the “Expense Error Correction Request” Form to complete the processing.
Service Bureau agencies should complete the “Expense Error Correction Request” Form and submit it to DFA-OA-Service Bureau (DFA-OA-SB). DFA-OA-SB will enter and park the document and then notify DFA-OA Funds Manager.
After the document has been reviewed for correctness and the reference document has been reviewed, the error correction will be posted and adjustments can be seen in the State's accounting system depending on the type of error correction being processed.
Expense Error Correction Matrix
Changes fund | Does not change fund | changes funds center (same fund) | Changes funds center (different fund) | add or change WBS Element or Internal Order (same fund) | Changes Commitment Item (same fund) | Changes Commitment Item (different fund) | ||
|---|---|---|---|---|---|---|---|---|
Two line journal entry - parked and posted by agency | ||||||||
Do not | ||||||||
Use | Do not use | Do not use | Use | Do not use | Do not use | |||
Example: | use | |||||||
DR Expense | ||||||||
CR Expense | ||||||||
Two line journal entry-parked by agency, posted by DFA-OA | ||||||||
Do not | ||||||||
Do not use | Use | Do not use | Do not use | Use | Do not use | |||
Example: | use | |||||||
DR Expense | ||||||||
CR Expense | ||||||||
Four line journal entry-parked by agency, posted by DFA-OA | ||||||||
Example: | ||||||||
Use | Do not use | Do not use | Use | Do not use | Do not use | Use | ||
DR 1100001006 | ||||||||
CR Expense | ||||||||
DR Expense | ||||||||
CR 1100001005 | ||||||||
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.09.1 R2-19-4-518, AR ADC 006.09.1 R2-19-4-518
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