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When financial statements are calculated, amounts are rounded to maintain the integrity of the totals. When amounts are rounded to the nearest dollar, anything less than .50 is rounded down, and anything greater than or equal to .50 is rounded up to the next dollar. If all detail lines end in amounts greater than .50 or if all detail lines are amounts less than .50, rounding to the nearest dollar results in total amounts being off by several dollars.
To achieve better accuracy, you can select a specific rounding factor when defining a financial report using the Financial Reports Wizard. In the Number Format Options window of the Financial Reports Wizard, you can select a value in the Rounding Factor field. Rounded values are also affected by the number of decimal places selected in the Decimal Places field.
If an account has a value of 25,385,225.58, the value will be rounded according to the selection in the Rounding Factor field as follows, assuming 2 is selected in the Decimal Places field:
Rounding Factor
Rounded Value
<none>
25,385,225.58
Dollars
25,385,225.58
Thousands
25,385.23
Ten thousands
2,538.52
Hundred thousands
253.85
Millions
25.39
If an account has a value of 25,385,225.58, the value will be rounded according to the selection in the Rounding Factor field as follows, assuming 0 is selected in the Decimal Places field:
Rounding Factor
Rounded Value
<none>
25,385,225.58
Dollars
25,385,226
Thousands
25,385
Ten thousands
2,539
Hundred thousands
254
Millions
25
When you select a rounding factor, a rounding assessment is applied to the Beginning Retained Earnings on the Balance Sheet and to the Net Income on the Statement of Cash Flow.
Note If you choose to round your figures, there may be a discrepancy in the Retained Earnings account on the Balance Sheet. The system compensates for the difference between actual and rounded figures to force the balance between the Assets and the Liabilities and Equities sections on the Balance Sheet.
Financial ratios use the total activity for all accounts of a particular type to calculate the solvency, operation, leverage, and profitability of your company. The General Ledger Analysis includes a list of 13 important financial ratios that can provide a recap of your company's financial condition. The following formulas are used by General Ledger Analysis to calculate the totals for the Income Statement, Balance Sheet, and financial ratios.
The following formulas are used to derive the solvency ratios provided in General Ledger Analysis.
Quick Ratio
This ratio determines the number of times current liabilities can be covered using cash and receivables assets. This ratio provides a measure of a company's liquidity and ability to meet short-term debt obligations. The higher the ratio, the better the margin of safety for paying day-to-day current debts and covering current liabilities.
(Cash + Net A/R + Other Receivables) ÷ Current Liabilities
Current Ratio
This ratio determines the number of times current liabilities can be covered using current assets (for example, cash, net Accounts Receivable, other receivables, inventory, and prepaid expenses). This ratio also provides a measure of a company's liquidity and ability to meet short-term debt obligations.
Current Assets ÷ Current Liabilities.
The following formulas are used to derive the operational ratios provided in General Ledger Analysis.
Days Sales in Inventory
This ratio determines the number of days necessary for the inventory balance to be sold. A low number of days indicates that inventory is being well-managed and turned over quickly. A high number of days may mean a company is carrying too much inventory, or that inventory stock is obsolete.
Ending Inventory Balance ÷ (Cost of Sales ÷ 30.417*)
* This number is based on a 12-period year. It varies according to the number of periods defined in the General Ledger Options window.
Note For the year-to-date calculation, cost of sales equals the year-to-date cost of sales divided by the current period.
Inventory Turnover
This ratio determines the number of times per year inventory is turned over. It indicates a stock-to-sales ratio rather than an actual physical turnover. If this ratio is lower than the industry average, it may indicate obsolete, non-moving merchandise. A ratio higher than the industry average may indicate an understocked condition and loss of sales due to inadequate inventories.
365 Days ÷ Days Sales in Inventory
Average Sales Days Outstanding
This ratio determines the number of days that sales remain uncollected for the period. The higher the receivables month-end balance is, in relationship to the current month's sales, the greater this value will be. This may indicate that credit and collection policies need to tighten.
Current Period Net A/R ÷ (Current Period Sales ÷ 30.417*)
*This number is based on a 12-period year. It varies according to the number of periods specified in the General Ledger Options window.
Note For the year-to-date calculation, current period sales equal year-to-date sales divided by the current period.
Receivables Turnover
This ratio determines the receivables collection period in number of days. An increase in the number of days may indicate a need for a tighter collection policy.
365 Days ÷ Average Sales Days Outstanding
The following formulas are used to derive the leverage ratios provided in General Ledger Analysis.
Equity Ratio
This ratio determines the percentage of equity to total assets. A low percentage may mean that not enough retained earnings are being used as working capital to support sales volume. A high percentage may indicate the working capital is deficient and that the company is relying on credit or borrowing too much to meet its operating expenses.
(Stockholders Equity + Retained Earnings) ÷ Total Assets
Debt Ratio
This ratio determines the percentage of debt to assets. The higher the ratio, the greater the return of capital in a normal-to-good economy, and the lower the return on equity in a depressed economy. Conversely, the lower the ratio, the greater the return in a depressed economy.
Total Liabilities ÷ Total Assets
Debt to Equity Ratio
This ratio determines the percentage of debt to equity. A ratio larger than 1 indicates banks and suppliers have more invested than the owners. A lower than average ratio indicates a strong ownership interest.
Total Liabilities ÷ (Stockholders Equity + Retained Earnings)
The following formulas are used to derive the profitability ratios provided in General Ledger Analysis.
Net Income to Sales
This ratio determines the percentage of profit from each dollar of sales after cost of sales, taxes, and operating expenses. A very low profit margin that is not in line with a company's goals may indicate poor management or other internal problems.
Net Income ÷ Net Sales
Gross Profit to Sales
This ratio determines the percentage of gross profit from each dollar of sales before taxes and operating expenses. This percentage should be competitive within a given industry and can be used to gauge comparable profitability.
Gross Profit ÷ Net Sales
Operating Expense to Sales
This ratio determines the percentage of operating expense dollars for each dollar of sales. If this percentage is high, it may indicate that overhead needs to be reduced, that sales need to increase, or that the company is borrowing too heavily.
(Operating Expense + Interest Expense) ÷ Net Sales
Return on Total Assets
This ratio determines the percentage of return on assets. This ratio provides a measurement of a company's return on invested capital and serves as an indicator of future growth potential.
(Net Income + Interest Expense) ÷ Total Assets
The Non-Financial account type is not used in financial ratios.
Account Type
ID
Type Description
Category Description
01
Cash
Asset
02
Net A/R
Asset
03
Other A/R
Asset
04
Inventory
Asset
05
Prepaid Expenses
Asset
06
Fixed & Other Assets
Other Assets
07
Current Liabilities
Liability
08
Long Term Liabilities
Liability
09
Stockholders Equity
Equity
10
Retained Earnings
Equity
11
Net Sales
Revenue
12
Cost of Sales
Cost of Sales
13
Operating Expense
Expense
14
Interest Expense
Expense
16
Other Income & Expense
Other Income & Expense
17
Income Tax
Income Tax
18
Interest Expense
Other Income & Expense
Income Statement
Category Description
Revenue
Net Sales
Cost of Sales
Cost of Sales
Gross Profit
Net Sales - Cost of Sales
Operating Expense
Expense
Interest Expense
Interest Expense
Other Income & Expense
Other Income & Expense
Income Taxes
Income Taxes
Net Income
Net Sales - Cost of Sales -
Operating Expense + Other
Income & Expense - Income Taxes
Balance Sheet
Category Description
Cash
Cash
Net A/R
Net A/R
Inventory
Inventory
Current Assets
Cash + Net A/R + Other A/R + Inventory + Prepaid Expenses
Fixed & Other Assets
Fixed & Other Assets
Total Assets
Current Assets + Fixes & Other Assets
Current Liabilities
Current Liabilities
Long Term Liabilities
Long Term Liabilities
Stockholders Equity
Stockholders Equity + Retained Earnings
Total Liabilities and Equity
Current Liabilities + Long Term Liabilities + Equity
The General Ledger Financial Reports wizard can create several different types of financial reports. Each report type can be presented in a variety of formats. You can select the format most appropriate for your situation.
The Balance Sheet provides information about the long-term state of your company by displaying what your company owns and what it owes. The difference between what is owned and what is owed determines your company's equity or net worth.
The Balance Sheet formats include:
Year to Date Balance - Use this format to prepare a balance sheet that displays your company's financial position for the fiscal year to date.
Period to Date Balance - Use this format to prepare a balance sheet that displays your company's financial position based on changes during the current period only.
Both Period to Date and Year to Date Balance - Use this format to prepare a balance sheet that displays your company's financial position based on changes during the current period compared to the year-to-date financial position of your company.
Prior Year to Date vs. Current Year to Date - Use this format to prepare a balance sheet that compares your company's financial position during the same period last year to your company's current year-to-date financial position.
Prior Year End vs. Current Year to Date - Use this format to prepare a balance sheet compares your company's financial position at the end of the prior fiscal year to your company's current year-to-date financial position.
The Income Statement provides a short-term statement of your company's profitability by comparing revenue to costs and expenses.
There are several sub-types of income statements that can be prepared. You can select one of the following types:
Select Combined Statement to prepare a detailed income statement for all accounts.
Select Combined Summary to prepare an income statement with only a summary total by main account shown for each segment defined in the account structure.
Select a segment defined in your account structure. When you choose a segment name, a separate income statement will be prepared for each sub account defined in the segment.
For each income statement type, you can select from different column formats that include combinations of the current period, prior period, prior year, and budget data.
The Trend Report is a specialized Income Statement that represents your company's profitability over a number of successive fiscal periods.
Trend Reports can be prepared using the same statement types as Income Statements. Because trend reports will have a separate column for each period, there are fewer choices for column formats on trend reports.
For trend reports you can also select the range of periods to print on the report. In the Set Trend Report Format wizard page, at the What accounting periods do you want to print? field:
Select Trailing Number of Periods From the Current Period to create a trend report that prints the current fiscal period and up to 12 prior fiscal periods.
Select Specified Range of Periods to create a trend report that prints in the range beginning with the specified starting period and ending with the selected ending period.
Note Specified Range of Periods should only be selected if the report definition will be used with valid fiscal periods. If invalid fiscal periods are selected, the invalid periods will print with blank/zero values on the report.
You can also select to use the condensed format. In the Set Trend Report Format wizard page, select the Use Condensed Format check box to print a single line for each account without the general ledger account number as well as rounding the values to the nearest dollar. Clear this check box to enable the decimal place format and allow to print general ledger account numbers on the report.
The Quarterly Report is a specialized Income Statement that presents your company's profitability summarized by fiscal quarters, with each quarter representing three periods of the fiscal year.
Note Quarters are calculated assuming a 12- or 13-period fiscal year. For 13-period years, the fourth quarter is 4 periods (Period 10, 11, 12, and 13). Printing quarterly reports for fiscal years with less than 12 periods will produce zero columns for undefined period/quarters.
Quarterly Reports can be prepared using the same statement types as Income Statements. A number of specialized quarterly column formats can be selected.
The Statement of Cash Flows allows you to analyze the sources and application of cash assets over a fiscal period.
The Statement of Cash Flows has two formatting options:
Year to Date Balance - Select this format to show the sources and applications of cash during the fiscal year to date.
Period to Date and Year to Date Balance - Select this format to show a comparison of cash activity for the current period to the total cash activity year-to-date.
Amounts on a Trend report can contain a maximum of 12 characters and numbers combined. If you defined more than 12 characters or numbers to use for amounts and percentages on a Trend report in the Financial Reports Wizard, number symbols (######) print in place of amounts on the report.
