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FAQ on Management Reports and Financial Statements

posted Sep 5, 2008, 9:46 AM by Unknown user

Some users may be confused between the difference between Management Reports and Financial Statements, see table below for more elaboration of the difference between financial statements and management reports:

 

Description

Management Reports

Financial Statements

Has standardized format, according to GAAP or FASB

Management reports could be in any format, it could be related to money, or otherwise. For example, a job sheet listing, analysis of the sales by different product category, stock balance reports, which may include certain additional information.

The purpose of the management reports is to help the management of a company to make decisions, and manage their operations. Some management reports that are needed by one company may be useless for others.

There are 4 basic financial statements:

1) Balance Sheet

2) Income Statement

3) Statement of Retained Earnings

4) Statement of Cash flow

Double Entry

There's no need for any double entry,

Double entry and other accounting practices need to be enforced

For chain store with multiple branches, can these reports be generated?

Absolutely possible. The system could generate stock reports, sales reports and other reports on a totality basis or for each individual branch.

 

The system can generate financial statement for the company, but not individual branch. This is because when there's cross branches transactions that does not have any impact on the financial statements. For example, when there's an internal stock transfer from Branch A to Branch B, if we credit the inventory General Ledger of branch A, and debit that of Branch B, then the balance sheet for both branch A and B would not be balance anymore.

 

If a company would like to see the financial statements of each branch individually, the system would have to be configured in such that each branch becomes an independent company. The downside of this method is increased administrative overhead of processing cross branches transactions that may not be necessary, for example, settlement of stock transfer (treated as sales and purchase) and subsequently re-adjust the sales, purchases, account receivable and account payable, additional cost allocation / sharing for expenses paid centrally.

 

For chain store, unless each branch is sizable, and managed independently by different management, we recommend configuring Wavelet as ONE company, with multiple branches, rather than multiple companies with multiple branches.

 

 

For franchise with multiple franchisee, can these reports be generated?

Absolutely possible, this is the same as chain store.

Since each franchisee could be configured as an independent company in the Wavelet EMP, the user could generate the full financial reports for each of the franchisee.

 

 

 

 

 

 

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