Internal Transfers / Journal Entries

Journal Entry Rules

Journal entries are transactions that affect financial balances and related reports, but do not create transactions with third parties

(unlike cash disbursement transactions such as Accounts Payable, or cash receipt transactions such as the Cash Module)

Journal entries are made in the General Ledger Module of ARC using valid ChartStrings

Journal entries are subject to rules for Combo Edits, Budget Checking, and Approvals (Workflow)

 

All journal entries follow certain rules, no matter what type of entry they are.

All journal entries must have a debit side and a credit side

Total debits must equal total credits

When you are in ARC, you must enter credits as negative numbers

This is the only way that ARC knows it is a credit

 

Types of Journal Entries in ARC

Internal Transfers

Most common type.  Internal transfers are used to allocate revenue and expenses from one valid ChartString to another

General Journal Entries

Less common, and generally executed by the Controller’s Office.  General journal entries are used for accruals of revenue or expense and to record a change in balance that cannot be made via the Internal Transfers page.

Interfaced Journals

Systematically generated when a subsystem feeds transactions to the General Ledger module.

Entering Journal Entries

Online pages in ARC:

Internal Transfers page

Journal Entries page

 

Spreadsheet Journal Import enables user to create journals offline using a customized Excel template

and allows for multiple spreadsheet journals to be imported to ARC simultaneously

 

Security and Workflow

In ARC, there are three components of transaction security and workflow. These are assigned through the Security/Workflow application process:

 

1. System Security – you must have access to ARC and to the Internal Transfers and / or General Journal Entries pages in order to create transactions in ARC

 

2. ChartField Security – there are two types of ChartField Security

    Security based on Department (which governs the departments you can approve for - although you can create for any department)

    Security based on Natural Account – generally you will be able to select the natural accounts you need, but certain natural accounts are restricted

 

3.   Workflow controls the routing of a transaction to multiple people throughout a process. Workflow is defined as the routing to roles based on rules. Workflow will be used in General Ledger to obtain approvals for internal transfers and general journal entries. Workflow helps transactions process more securely and efficiently.

 

Creating Online Journals for Internal Transfers

  • Identify the accounts that correspond to internal transfers
  • Navigate to the internal transfers page in ARC 
  • Enter internal transfer journals and carry out the standard journal processes
  • Handle journal edit errors when applicable
  • Approve and post internal transfer journals to the General Ledger

Internal Transfers

Internal Transfers are used for several reasons, including to allocate revenue and expenses from one valid ChartString to another and to execute fund transfers from one valid ChartString to another.  (Note, however, that expenditure corrections on an AP entry should be handled through AP journal vouchers NOTE  Internal transfers and salary corrections should be handled through Labor Accounting). 

 

Unlike general journal entries, internal transfers are limited to a narrower range of options to ensure transfers are easily identifiable for reporting purposes and are one to one and equal in amounts.

 

In Columbia University's Chart of Accounts, the ranges of accounts number that can be selected for internal transfers are as follows:

 

            4 series: Direct revenue

            6 series: Direct expenses

            7 series: Indirect transfers

 

When to use Internal Transfers

Internal transfers are the most common type of journal entries.

 

They are used in the following situations: 

To allocate revenue / expenses from one valid ChartString to another. For example, if a department allocates space charges to other departments, an internal transfer journal entry can be used for the allocation.

If one department charges other departments for services performed as a valid Recharge Center (e.g., Print Services).

To execute a fund transfer from one valid ChartString to another.  For example, if a department needs to fund a Capital Project from an Unrestricted Project. However, expenditure corrections on an AP entry should be handled through AP journal vouchers – NOT internal transfers.

Rules for Entering Internal Transfers

When creating internal transfers in ARC it is important to keep the following rules in mind:

 

Internal transfers are made using the “Internal Transfers Page” in ARC

All transfer debits must have one matching transfer credit, with the same dollar amount

Certain ChartField values will be defaulted upon save, as follows:

Fund – this will default on save, but can be overwritten

Function – this will default on save, and any values entered will be overwritten by the default logic once the page is saved. (Only select users within the Controller's office will have access to override the defaulted values for function)

Only certain account numbers will be available for use in the internal transfers page in ARC

Credits must be entered as negative numbers

 

Additionally, if you are creating a Sponsored Project cost transfer please review the: Sponsored Project Cost Transfers Policy

Journal Header

The first step in the journal entry process is entering the journal header information (for interfaced journals this will happen in the subsystem where the entry was originally created i.e. Accounts Payable).

 

On the Journal Header page the system required fields will default : 

Ledger Group - will default to Actuals. This field is grayed out meaning that it can not be changed.

Source - will default to ITF for Internal Transfer Journal Entries. This field is grayed out meaning that it can not be changed.

Transaction Code - will default to GENERAL. This field is not grayed out and therefore can be changed.

Long Description and Journal Class are also required fields from a business process perspective (that is, the system will not stop the transaction if these fields are not populated but it’s best practice that all users populate these fields with accurate information). 

 

The Long Description is a simple text field where you can enter a description of the journal being entered. This will give the journal approver context as to what the journal entry  is (e.g. a 7 series fund transfer).

 

The Journal Class field is a three digit code that represents the department that initiated the transaction.  It is important that the initiator of the transaction populates this field with the correct information since this will also be used for reporting purposes.

 

Journal Lines

Once the journal header information has been entered and saved, you will be taken to the journal lines page. 

 

The journal lines page is where you enter the ChartStrings for your transaction. This is where amounts are entered (debits must equal credits) and where journal processing is initiated. 

 

Journal processing involves edit checking, budget checking, routing a journal for approval, and posting a journal to the general ledger. These processing options are within the Process menu towards the top of the journal lines page.

 

Processing an Internal Transfer Journal

Once an internal transfer journal is created in ARC, the journal must be edit checked, budget checked, and submitted for approval prior to posting. When the journal edit process runs, the journal header and journal lines are checked for errors. The journal edit process ensures all accounting strings are comprised of valid ChartField combinations where debits equal credits.  When the budget checking process runs, the accounting strings are checked against budgets. If the transfer is not within the budget or a budget doesn't exist, the budget status will error. An internal transfer journal cannot be posted until it passes both edit check and budget check. Additionally, the internal transfer journal must be routed for approval and all designated approvers must approve the journal for it to be valid for posting.

 

Throughout the Processing an Internal Transfer Journal topic, you will learn how to:  

  1. Run the journal edit process
  2. Run the budget checking process
  3. Submit the internal transfer journal for approval
  4. Post the internal transfer journal

Spreadsheet Journal Import Tool

The spreadsheet journal import tool enables you to create journals offline using a customized Excel template and allows for multiple spreadsheet journals to be imported into ARC simultaneously. Additionally, you can create new Journal Sheets as well as edit, delete, and copy existing ones. Creating journals through the spreadsheet journal import tool is especially helpful for large, recurring journal entries. 

 

Creating journals on a spreadsheet has the potential advantages of excel functionalities, that when used appropriately, expedites the process of entering large journals.

 

The uploading process will check the spreadsheet journal for the following: 

 

Required fields are populated with valid values 

Debits equal credits 

 

Journals imported into ARC will have a journal status of 'N' indicating the journal needs to be edited. Once the journals are in ARC they will need to be edit checked, budget checked, and approved prior to posting to the General Ledger.  

 

IMPORTANT: The spreadsheet journal import tool is available for Internal Transfer Journal Entries as well as General Journal Entries. Please note separate templates are required for each.

Downloading the Spreadsheet Journal Import Tool from the ARC Portal

The spreadsheet journal import tool can be downloaded from the ARC Portal. Once the tool is saved to your local drive you will need to enable its content. It is recommended that users periodically check the ARC Portal for version updates of the spreadsheet journal import tool and download accordingly. This will prevent potential importing errors that may occur with earlier versions of the spreadsheet files.  

 

Importing the Spreadsheet Journal into ARC

The importing process verifies whether all required fields are populated with active ChartField values and debits equal credits. Unless these criteria are met, a journal will not be imported into ARC and you will be notified with an error message. 

 

The importing process does not verify whether or not the ChartField combinations are valid. This process takes place during edit checking. Hence, when a spreadsheet journal is imported into ARC the journal will have to go through the standard processing steps: edit check, budget check, approval, and posting.

 

As you go through this topic keep the following common importing errors in mind to avoid them in the future:

 

Are the required ChartFields populated?

Are the ChartField values valid?

Do credits and debits add up to zero? 

 

Hint: A quick way to verify whether debits equal credits is to use the Excel formula 'Sum' on the Amount column. If the sum of amounts is equal to zero then debits equal credits.

Processing the Imported Journal in ARC

Once the spreadsheet journal is successfully imported to ARC, the standard processing steps will need to take place. You can either search for the spreadsheet journal and run edit check and budget check from the Journal Lines page or you can wait until batch edit and batch budget check runs (these batch processes will run daily). Performance time is often better for batch processing. Therefore, it is recommended that longer journals are edited via batch processes.

 

After the journal passes edit and budget check, it will need to be submitted for approval and once approved, posted to the General Ledger. 

 

General Journal Entries

General journal entries are made to record the financial transactions of the university. They are made in a double entry system, according to Generally Accepted Accounting Principles (GAAP), where debits equal credits.

 

Journal entries in ARC consist of a header, which records the information that uniquely identifies the journal entry and detail lines, which record the individual transactions and the affected ChartFields.

 

When to use General Journal Entries

General journal entries are less common, and generally executed by the Controller’s Office

 

They are used in the following situations: 

For accruals of revenue or expense

Departmental Bank Account Expense Entries\

To record a change in balance that cannot be made via the Internal Transfers page

 

Note: If you do not have access to execute general journal entries,you may request that the entry be made by the Controller’s Office

  

Rules for Entering General Journal Entries

When creating General Journal Entries in ARC it is important to keep the following rules in mind:

 

General Journal Entries are made using the “Journal Entries Page” in ARC

Total debit and credit lines must equal each other, but unlike Internal Transfers, it is not required that each line have equal debits and credits.
 

Journal Header

The first step in the journal entry process is entering the journal header information (for interfaced journals this will happen in the subsystem where the entry was originally created i.e. Accounts Payable).

On the Journal Header page the system required fields will default

 

Ledger Group - will default to Actuals. This field is grayed out meaning that it can not be changed.

Source - will default to ONL for General Journal Entries. This field is grayed out meaning that it can not be changed.

Transaction Code - will default to GENERAL. This field is not grayed out and therefore can be changed.

Long Description and Journal Class are also required fields from a business process perspective (that is, the system will not stop the transaction if these fields are not populated but it’s best practice that all users populate these fields with accurate information). 

 

The Long Description is a simple text field where you can enter a description of the journal being entered. This will give the journal approver context as to what the journal entry is.

 

The Journal Class field is a three digit code that represents the department that initiated the transaction.  It is important that the initiator of the transaction populates this field with the correct information since this will also be used for reporting purposes.

 

Journal Lines

Once the journal header information has been entered and saved, you will be taken to the journal lines page

 

The journal lines page is where you enter the ChartStrings for your transaction. This is where amounts are entered (total debits must equal total credits) and where journal processing is initiated. 

 

Journal processing involves edit checking, budget checking, routing a journal for approval, and posting a journal to the general ledger. These processing options are within the Process menu towards the top of the journal lines page.

 

Processing a General Journal

Once a journal is created in ARC, the journal must be edit checked, budget checked, and submitted for approval prior to posting. When the journal edit process runs, the journal header and journal lines are checked for errors. The journal edit process ensures all accounting strings are comprised of valid ChartField combinations where debits equal credits. When the budget checking process runs, the accounting strings are checked against budgets. If the journal is not within the budget or a budget doesn't exist, the budget status will error. A journal cannot be posted until it passes both edit check and budget check. Additionally, the journal must be routed for approval and all designated approvers must approve the journal for it to be valid for posting.

 

Workflow

When a journal is routed for approval, the approver(s) need to verify the information on the journal header and journal lines and decide whether to approve or deny the journal entry. A journal will only post if all approvers approve the journal

 

Journal Approvers will have access to a Journal Approval Search page in ARC where they will be able to search for journals pending approval and take action on the respective journals.