6_t24accountingsetupadditionalfeatures.pdf

Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

When a Money Market contract is first captured onto the system, for example a Taking, then it generates a consolidation credit entry of a FORWARDCR Contingent Liability position for the contract principal. When the Money market Taking deal starts the following entries are generated: (1) a consolidation entry to debit (reverse) the FORWARDCR Contingent Liability position for the principal (2) a consolidation entry to credit the LIVECR liability type (3) a statement entry to debit the Customer account supplying the funds for the deal. The daily accrual process will generate (1) a Profit and Loss entry to debit P/L Interest Expense for the daily interest (2) a consolidation entry to credit IENP (interest expense not paid) for the daily interest The contract maturity will generate the following entries (1) a consolidation entry to debit (reverse) the LIVECR liability type for the principal (2) a consolidation entry to debit the IENP (interest expense not paid) for the total interest (3) a statement entry to credit the Customer account returning the deposit principal and total interest.

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

Contingent entries will be raised in the COB process for any contract which has been created with a value date greater than the System date. These contingent entries will be raised for both the amount bought and the amount sold. All contingent entries are of the type `Special Consolidation Entries’ and will use the Transaction codes and CRF Asset Types described earlier in accordance with the contract type. It is now possible to opt for self balancing of contingent entries except contingent PL by moving contingent accounting and value dated suspense processing online.

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

ACCT.ENT.FWD is updated with only the Ids of Cash-flow. Forward dated STMT.ENTRY records are generated account-wise by Contracts and Standing Order applications. ACCT.ENT.TODAY and CATEG.ENT.TODAY are no longer used for updating the CRF base during COB. Hence, they can be suppressed. RE.CONSOL.SPEC.ENT.TODAY can also be suppressed as all the applications are updating EB.CONTRACT.BALANCES. For suppressing these files to be updated, ENT.TODAY.UPDATE Field in ACCOUNT.PARAMETER should be disabled. TRANS.FWD is updated with the Ids of Forward STMT.ENTRY records contract-wise. STMT.PRINTED and STMT2.PRINTED respectively contain the Ids of STMT.ENTRY records to be printed in the cycle-1 and other cycle account statements. CONSOL.UPDATE.WORK is updated by both STMT.ENTRY and RE.CONSOL.SPEC.ENTRY. This file is used to update the Asset & Liabilities consolidation file CAL during COB. PL.CONSOL.UPDATE.WORK is used to update Profit & Loss consolidation file CPL during COB. In FOREX contracts , intermediate step of CONSOL.ENT.TODAY is skipped and it straight away prepares RE.CONSOL.SPEC.ENTRY during COB. The Balance look-up files EB.CONTRACT.BALANCES are updated during online. The CRB reports will fetch balances from EB.CONTRACT.BALANCES rather than from the contract itself.

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Accounting Set-up - Additional Features

The Balances files are updated online. They are used to accrue interest and charges. Their structure is application dependent. Id of Balance file is Account-YYYY-MM / Contract Number. Each time interest / commission is accrued on a contract, the balance file fields are updated (e.g. OUTS ACCRUED INT Field is debited on a placement contract) and an entry is posted to Profit and Loss (e.g. INTEREST RECEIVED is credited on a placement contract). The keys to the Category entry records produced in this accrual process are stored in this file. It should be noted that it is only the Category entry numbers that relate to the current interest period that are held in this field. Because one accrual period can have many Category Entries then this field will also accept sub values. The key to the Category Entry file is made up of 2 parts, Statement Number and Sequence Number. If a transaction generates several Entries, all the entries have the same Statement Number, the Entries on the same file are distinguished from each other by their Sequence Number. The Sequence Number is a 6 digit number out of which first two digits can be viewed here and balance numbers are from 0001 to 9999. Statement Number which is first part of the key for all the Category Entries is shown separately and the range of Sequence Numbers used for category Entries is shown separately.

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Accounting Set-up - Additional Features

The screenshots given are of ACCT.ACTIVITY file and of CONSOL.UPDATE.WORK file

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

EB.CONTRACT.BALANCES files are updated online in respect of all applications except FOREX. STMT.ENTRY and RE.CONSOL.SPEC.ENTRY are generated online for all applications except FOREX. FOREX contracts straight away prepares RE.CONSOL.SPEC.ENTRY during COB. The Forex Contracts update EB.CONTRACT.BALANCES online with STMT.ENTRY Ids related to position entries. The Balance look-up files EB.CONTRACT.BALANCES are updated during online. Transactions of these applications update STMT.ENTRY and RE.CONSOL.SPEC.ENTRY files online. While STMT.ENTRY and RE.CONSOL.SPEC.ENTRY files update CONSOL.UPDATE.WORK , CATEG.ENTRY files update PL.CONSOL.WORK. The work file CONSOL.UPDATE.WORK is updated online. This file holds consolidation key-wise debit and credit movements each processing date which is used to update the CRF base during COB of corresponding processing date. The processing date of future value dated entries in a value dated accounting system will be equal to the value date. The work file PL.CONSOLIDATE.UPDATE.WORK is updated online. This file holds the consolidation key wise movements for the day which is used to update CRF base during COB. CAL and CPL keys are updated during COB. CONSOL.UPDATE.WORK will update CAL keys and PL.CONSOL.UPDATE.WORK will update CPL keys.

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Accounting Set-up - Additional Features

In addition to generating online entries, quite a lot of accounting entries are generated during COB. Main among them are entries for accruals, capitalisation, contract maturity and premature closing. Interest on a contract may be due on 15th of every month. A Bank may like to prepare its Profit and Loss accounts on a daily basis. Hence, every day it would accrue interest, but not debit or credit Customer accounts. If it were a loan contract, every day Interest receivable will be debited and Profit and Loss credited. This is accrual process in short. In T24, there is no need to open any account head for this Interest receivable. If the loan is consolidated as Corporate Loan to Shipping industry, then the interest due on these loans will also be consolidated under the same heading but as a different Asset type – Interest receivable. For debiting this Asset and Liability head, a debit entry is passed and stored in RE.CONSOL.SPEC.ENTRY. Corresponding credit entry would be in CATEG.ENTRY. On 15th, Customer’s account would be debited by way of STMT.ENTRY record and credited through another entry in RE.CONSOL.SPEC.ENTRY. This is capitalisation. Here the reversal of accruals takes place by Debit or Credit by RE.CONSOL.SPEC.ENTRY. Contract maturities are handled during COB. Depending on applications, premature closing can be handled online as well as during COB.

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Accounting Set-up - Additional Features

FOREX module provides daily revaluation of Foreign Exchange position, producing daily profit / loss for each dealer in each foreign currency against local currency. Contract wise revaluation can be seen in POS.TRANSACTION application SPOT contracts are uniformly revalued as mark to market, while the FORWARD deals have choices as rebate method and Straight line method. Under REBATE method the deals are revalued on cost to cover deal today. In the case of straight line method the deals are revalued on amortisation of exchange profit or loss over the life of the deal. In the case of SWAPs exchange profit may also be treated and accrued as interest.

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Accounting Set-up - Additional Features

Different revaluation methods are available in T24 which are pre defined in FX.REVAL.TYPE. Application handles the following methods namely: IN = Interest method RB = Rebate method SL = Straight line IH = Interest hedged SF = Straight line funding which is used only for swap. If SF is defined, then PM.PARAMETER table will need changing to include the new position class - FXFSF.

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Accounting Set-up - Additional Features

FX and SWAP contracts till maturity will be revalued as per the applicable parameters in REVALUATION.PARAMETER. One side will be a STMT.ENTRY to an internal account and other side will be a CATEG.ENTRY. Details are held in POS.TRANSACTION. POSITION records will not be updated. In FOREX revaluation under close to cover method has two types of revaluation they are SPOT and REBATE. In the case of SPOT method, the latest available Reval rate is used and in its absence Mid Reval rate of a currency will be used. REBATE method for forwards uses only the Mid reval rate and adds the applicable forward premium or discount available in the forward rates table. Under these methods the daily revaluation profit or loss is posted to Profit and loss on one side and internal accounts on the other side which are defined in REVALUATION.PARAMETER and ACCOUNT.CLASS as EXCHADJ internal account FX and SWAP are held in contingent asset types in CAL. When they are revalued in CAL (optionally if set in CONSOLIDATE.COND), RE.CONSOL.SPEC.ENTRY will be generated and LCY amount of the contingent position will be updated. After maturity they will be revalued as per the parameters for AL.

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Accounting Set-up - Additional Features

REVALUATION.PARAMETER defines the rules for revaluing FOREX position. Id of the revaluation parameter is Company. Company wise rules are set. Revaluation parameters can be specified at an application level and in the case of FOREX can also be specified for the SP (Spot method) or the RB (Rebate method) and the rest. The system allows for the selection of a POSTING.STYLE for the entries to be raised for revaluation. The two types allowed are Input / Output method and Adjustment method. 'I/O' - In this method the old amount is reversed out and the new amount is posted again. 'ADJ' - In this method the difference between the old & new amounts is posted as an adjustment.

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Accounting Set-up - Additional Features

To effect revaluation profit, an internal account is debited and P & L is credited. To effect revaluation loss, P & L is debited and internal account is credited. It is possible to stipulate different profit and loss category codes and different internal accounts for different types of Forex deals like Spot, Forward, Swap etc to account the revaluation profit or loss separately. This internal account is required to be defined in ACCOUNT.CLASS as EXCHADJ.

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Accounting Set-up - Additional Features

AL revaluation is done at a ‘bucket level’. Here, balance in each Asset Type in a key is revalued (System Wide 5 – EOD.CRF.REVAL) and a debit/credit RE.CONSOL.SPEC.ENTRY record is raised in LCY. This value is also reckoned while posting the debit/credit movements to the LCY component to the respective Asset Type. When an interest accrual is done to a FCY account, a foreign currency position is created, since the categ.entry is generated in LCY and accrual is held in FCY. Following is the workflow for A & L revaluation. ie. A/L asset type figures in each CAL record are re-valued and RE.CONSOL.SPEC.ENTRY is raised. Totals of A/L asset type balances are written to a work file, and the difference amount between CAL and POSITION is adjusted in the Post routine. The forward asset types are re-valued if the setting in CONSOLIDATE.COND says the asset type should be revalued .

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Accounting Set-up - Additional Features

Regarding revaluation of contingent Assets and Liabilities, it is carried out only in respect of Contingent Asset types indicated in CONSOLIDATE.COND record. Revaluation is similar to non-contingent assets .

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Accounting Set-up - Additional Features

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Accounting Set-up - Additional Features

Revaluation entry to P&L (System Wide 5 – REVALUATION.AL) is based on the net Position for the currency for a dealer desk. One CATEG.ENTRY for each currency for each dealer desk is raised . Forex and SWAP position revaluations create CATEG.ENTRY records and the contra to the Profit and Loss. Deals involving two currencies create currency Positions in POSITION table Id: Company code, Currency Market, Position type (TR), Dealer Desk, Bought and sold currencies, Value date FX and SWAP applications can create cross currency positions directly Other applications create positions vis-à-vis local currency Local currency is USD. Transaction involves only GBP and EUR FX and SWAP will create GBP – EUR and EUR – GBP positions Other applications create GBP – USD, USD – GBP and USD – EUR, EUR – USD positions System provides daily revaluation of net Foreign Exchange positions, producing daily profit / loss for each currency market, Dealer desk wise and in each foreign currency against local currency

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Accounting Set-up - Additional Features

The POSITION file is updated only when a specific transaction actually impacts the position of a particular currency i.e. when because of that specific transaction, the position of a particular currency increases or decreases. In other words, if a transaction involves the same foreign currency on the debit and credit side with the same amount on both sides. No position updates will be raised. There are no real accounting entries behind the POSITION file.

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Accounting Set-up - Additional Features

If there is a requirement in some instances that real physical accounting entries are to be maintained in addition to the POSITION file updation, T24 can be parameterised through POSITION.ENTRY Field in CONSOLIDATE.COND application to generate balanced entries for internal position accounts. This is made possible by the creation of internal position accounts. The

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Accounting Set-up - Additional Features

The account number format for these will be determined by the type of environment, single company, multi company or multi-book. For a multi-book environment, the format of the account will be CCYCCYCCCCCDDSSBBBB. The first CCY is the currency code of the account The second CCY is the other currency of the position relationship CCCCC is a category code in the range 10000 – 19999 DD is the DEALER.DESK code SS is sequence number, which will allow the user access to sub account processing BBBB is the branch sub division in a multi book area. These position accounts use similar functionality to other internal accounts i.e. statement frequency, opening balance, closing balance, movements as of any date and between any dates. Each of these currency position accounts will have a corresponding account in local currency which will contain the local currency counter value of the foreign currency position. For example if there is an account GBPUSD1055000010001 and local currency is USD, there will be a corresponding USDGBP1055000010001 account. The accounts are populated with real accounting entries each time a transaction raises a position in a particular currency. These accounting entries will be included in the STMT.ENTRY file where all T24 account entries are kept. Each of these currency position accounts will have a corresponding account in local currency which will contain the local currency counter value of the foreign currency position. For example if there is an account GBPUSD1055000010001 and local currency is USD, there will be a corresponding USDGBP1055000010001 account. The benefits of position accounting are: On the overall balance sheet i.e. all currencies converted to local currency equivalent, the net impact of all the position accounts will be exactly ‘NIL’ as the net balance of all these position accounts will be exactly equal to zero. The system will be able to balance each currency ledger.

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Accounting Set-up - Additional Features

The EB.POSITION.PARAMETER record has the @Id to this record is the COMPANY Id. In a multi-book environment it will be necessary to create a separate record for each lead company in existence. It is necessary to clearly separate the On Balance Sheet position accounts from the Off Balance Sheet position accounts. This will be managed by the use of CONTINGENT or NON-CONTINGENT accounts. The Off Balance sheet position accounts will be furthermore subdivided between the spot, forward and al forward position accounts. In order to set up position accounting, 4 new CATEGORY codes must be created. One for each of the following: AL (Non contingent) ALFWD (Contingent) FXSP (Contingent) FXFWD (Contingent) The category codes created for ALFWD, FXSP and FXFWD need to be made contingent. This is done by entering the category codes into the ACCOUNT.PARAMETER record, using the Fields CONT.DESC, CONT.CAT.STR and CONT.CAT.END.

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Accounting Set-up - Additional Features

We need to log out of the system, so that the changes in the ACCOUNT.PARAMETER can take effect. 4 new transaction codes must be created. One for each of the following: IN.CR.TXN.CODE, IN.DR.TXN.CODE, MAT.CR.TXN.CODE, MAR.DR.TXN.CODE The use of ENT.TYPE Field in the EB.POSITION.PARAMETER is to allow for the accrual transactions to be posted to a different dealer desk for position accounts thus we can enter ACC which is an overall request and then we can enter ACC-MM which means that for MM we wish to do something different. The field is used in conjunction with Fields CHANGE.DD and DEALER.DESK. Now that the structure has been input, the functionality is activated by setting the field value of POSITION.ENTRY in CONSOLIDATE.COND – ASSET & LIAB record to “ACCOUNT”. Before the functionality becomes live, it is necessary to exit the system. Upon signing in the functionality will be active. We have to create an internal account for each of the new category codes. The currency of the account must be the same as the first currency in the @Id. For example in internal account USDCHF1055100010001 the currency must be USD. The system will then use this as a template to open further accounts as and when required. When opening the first position account for a currency the DDSS part of the account number should be input as 00 which is for dealer desk 00 followed by sequence 01 as in the above example account record. This is so that sub accounts can be used and the maximum number of sub accounts allowed for a position account is 98 meaning that sequence number can have values 01 to 99 with 01 the master/main and 02 to 99 the sub accounts.

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Accounting Set-up - Additional Features

Refer to the workshop-9, wherein we transferred USD 15,000 from Internal Account for Computer software to our customer’s GBP account with today’s value date at exchange rate of 1.7 The accounting entries including the position accounting entries generated can be observed and understood. Notable point to observe that as GBP position has increased by virtue of a credit of GBP 8,823.53 to the customer’s account, an internal position accounting entry related to GBPUSD140160001 is generated with GBP -8,823.53 (which is equal to USD -17,430). Simultaneously a credit entry for USD 17,430 (equivalent of GBP 8823.53 at Treasury Rate) related to the local currency position in USDGBP140160001 is also generated. Thus, it can be observed that overall the net position will be equal to zero.

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Accounting Set-up - Additional Features

The following processing workflow will apply to revaluation if the option on CONSOLIDATE.COND is ACCOUNT in the record ASSET & LIAB. In other words, if Position Accounting is opted for, Revaluation of the position record is done but accounting entries will not be raised. To revalue FCY A/L positions, balances will be converted using mid rate and compared with that of LCY position account. When there is a difference, A STMT.ENTRY to the LCY position account for the difference amount will be raised. A CATEG.ENTRY for the opposite sign for the P&L for the amount will be raised. The following CRF information will be updated in the work file called POS.CRF.WORK and will be used to raise the relevant RE.CONSOL.SPEC.ENTRY records (CRF entry) Id – CONSOL.KEY of the Position account ASSET.TYPE POSITION.ACCOUNT.NO ACCOUNT BALANCE ACCOUNT BALANCE LCY EQUIVALENT REVALUATION DIFFERENCE

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Accounting Set-up - Additional Features

To revalue FCY A/L positions, balances will be converted using mid rate and compared with that of LCY position account. When there is a difference, A STMT.ENTRY to the LCY position account for the difference amount will be raised. A CATEG.ENTRY for the opposite sign for the P&L for the amount will be raised. The FCY position accounts total will be checked so that it has to be zero for each currency. The LCY position accounts total will be checked that it also nets to zero, if not a set of adjustment entries will be raised for the last LCY position account processed.

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Accounting Set-up - Additional Features

A fiscal year is a financial year (sometimes a budget year) is a period used for calculating annual ("yearly") financial statements in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once per twelve months, but do not require that the period reported on constitutes a calendar year (that is, 1 January to 31 December). Fiscal years vary between businesses and countries. The "fiscal year" may also refer to the year used for income tax reporting. Quarter end reporting and Half year end reporting are in place for the same purpose for every quarter of the fiscal year.

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Accounting Set-up - Additional Features

PL.CLOSE.PARAMETER table is the parameter table required to be set up for year end transferring of Profit and Loss balances to A & L. It consists of 5 important sections viz., Reports, Year End, Excluded Types, Grouping and Halt Process. The settings made through these sections help the system to control the reports that are produced during the close out process, specify the period end, exclude certain PL categories from close out, Group the entries at the time of close out as per the customised user definition and can help halt the cob process just before the close out process is run, if required.

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Accounting Set-up - Additional Features

Reports section is used to parameterise to control the reports that are produced during the close out process. It has 3 related fields, which are REPORT.TYPE, REPORT and REPORT.DATA REPORT.TYPE Field is used to specify which type of reports to be produced. The reports to be produced can be ENQUIRY, REPGEN.CREATE or program driven. REPORT Field contains the key to REPGEN.CREATE, ENQUIRY, REPORT, RE.STAT.REQUEST or a valid complied program name. REPORT.DATA Field is used to pass a parameter to program driven routines

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Accounting Set-up - Additional Features

CLOSE.FREQ.DATE Field should contain the year end and subsequent cycle frequency for this particular company. When this is set the field FINANCIAL.YEAR.END on the COMPANY record is changed to match this date. This field is in two parts, for example 31JAN2002 M1231. 1) Next Financial Year End: 1-9 Date characters. Default value calculated by the system from the Frequency. Must be a month end date. The day in the date and the day in the frequency (last two digits) must be the same. 2) Frequency: 2-5 type FQU (standard frequency format). Frequency must be Monthly, Quarterly, Half-yearly or Yearly. The frequency cycle must start with M12.

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Accounting Set-up - Additional Features

TYPES.TO.EXCLUDE Field contains the types which should not be included in the PL Closeout process. Valid types are PL, CP, CI & CL PL - Non-Contingent P&L item. CP - Contingent CI - IAS P&L CL - Local Gap P&L As a default we exclude the types CP …. Contingent CI …. IAS and P&L CL …. Local Gap P & L

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Accounting Set-up - Additional Features

AL.GROUPING can be set to group the entries based on the user configured elements selected from CONSOLIDATE.COND record PROFIT & LOSS. By default the entries produced will be based on the CATEGORY/CURRENCY and one entry will be passed to the internal account (as defined by the ACCOUNT.CLASS record PLCLOSE). Each of these entries will be the sum of all the CONSOLIDATE.PRFT.LOSS records matching the combination of CATEGORY & CURRENCY. To produce entries summed at different group levels, we may add the additional elements from the PROFIT & LOSS key so that the entries are summed for all records matching the same settings, for example PLCATEGORY/CURRENCY/NATIONAL/SECTOR/INDUSTRY or whatever settings we have defined. So it will be possible to group the entries with the same key elements (such as NATIONALITY, SECTOR, INDUSTRY etc) but in doing so the number of accounting entries will increase.

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Accounting Set-up - Additional Features

PL.CLOSE.HLT.PRCES Field is used to specify whether the cob process is required to be halted before the close out process is run. This allows the user to access the reports or files to extract key financial data they require before the files are updated by the process. If left unchecked, the process will run without halting. Though the half field is included on each PL.CLOSE.PARAMETER record, there will be in fact only one halt to the cob processing. This will happen once all the companies have finished this stage of the PL close out processing.

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Accounting Set-up - Additional Features

The most essential parts of the PL close out are the accounting and the backup to how accounting has been created from the system. During the financial year the PL Category items will become used and contain both credit and debit balances. Let us assume a simple PL item head which has a balance of USD 5,000 over a period and has a credit of USD 100 on the final day of the financial period. The accountant of the bank will expect to see a closing balance of USD 5,100 for the old year and a new fresh balance of USD 0.00 for the New year. This is because of the transfer of the balance to an internal Asset & Liability account. In the examples in the slides to follow you can see the progression of a single CONSOLIDATE.PRFT.LOSS record from a populated start point to the ‘virtual year end day’ and then the new financial year based on the record, whose PL category code is 50010 and Currency is USD. If more than one record satisfies the grouping criteria, then the system will produce grouped accounting entries.

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Accounting Set-up - Additional Features

We started with a record showing the following balances as on 29/01/2001. Balance.1 ( Opening Balance) as on 29/01/2001 was USD -60,944.17. Debit.Movement.1 (Debit transaction amount on the day) was USD -4,343.16. Balance.Ytd (Balance till the beginning of the month) was USD -80,943.54. From the above data we can infer that the total balance was USD -146,240.87 (debit balance of USD 146,240.87). Now, as per the PL close out process the balance of USD -146,240.87 needs to be transferred to the Internal Account as specified in ACCOUNT.CLOSE record PLCLOSE. Assuming that there are no transactions between 29/01/2001 and 31/01/2001 the total balance of USD -146,240.87 has to be transferred by passing a credit entry for USD 146,240.87. This transaction takes place during the PL close out process. As a result of this process the outstanding balance in PL category 50010 becomes zero. That is the reason the balance.1 after the PL close out process was shown as zero.

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Accounting Set-up - Additional Features

The processing of the PL close out effectively creates a second day for the year end. This ‘virtual day’ is used to segregate the accounting entries and record updates to enable the year end process audit to be as clear as possible. Some of the system files will have system dates with ‘CL’ appended to indicate these are unique to the close out process.

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We have now come to the end of this course. We hope that you have attained a high level understanding of T24 and would like to welcome you to join us in our subsequent courses. Thank you!

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