1. Implementing Applications
  2. Thick Versus Thin General Ledger

Thick Versus Thin General Ledger

Thick versus thin general ledger is standard terminology used to describe the amount of data populated and analysis performed in your general ledger. Thick and thin are the poles; most implementations are somewhere in between.

Here are some variations to consider:

  • A general ledger used in conjunction with an enterprise profitability management product, which has data standardized from each operation, is a thin general ledger. Use this variation if your solution is project-based, and Oracle Fusion Project Management is implemented. More detailed reporting can be obtained from the Projects system. In the thin general ledger, business units, divisions, and individual departments aren't represented in the chart of accounts.

  • A thick general ledger:

    • Has segments representing all aspects.

    • Captures every detail of your business.

    • Runs frequent posting.

    • Defines many values in each segment.

    A thick general ledger is designed to serve as a repository of management data for a certain level of management. For example, a general ledger designed to provide management data to supervise operations, such as daily sales, without invoice details.

  • A primary and secondary ledger, with one thick general ledger and the other a thin general ledger, provides dual representation to meet reporting requirements.

Thin General Ledger

With a thin general ledger, you use the general ledger for internal control, statutory reporting, and tracking of asset ownership. You minimize the data stored in your general ledger. A thin general ledger has many of the following characteristics:

  • Minimal chart of accounts

    • Short list of cost centers

    • Short list of natural accounts

      • Short list of cost accounts

      • Summary level asset and liability accounts

    • Low number of optional segments

  • Infrequent posting schedule

A thin general ledger:

  • Has natural accounts at a statutory reporting level, for example, payroll expense, rent, property taxes, and utilities.

  • Has cost centers at the functional expense level, such as Research and Development or Selling, General, and Administrative, rather than at department or analytic levels.

  • Omits business unit, division, and product detail.

One example of an industry that frequently uses a thin general ledger is retail. In a retail organization, the general ledger tracks overall sales numbers by region. A retail point of sales product tracks sales and inventory by store, product, supplier, markup, and other retail sales measures.

Thick General Ledger

With a thick general ledger, you use the general ledger as a detailed, analytic tool, performing analytic functions directly in the general ledger. Data is broken down by many reporting labels, and populated frequently from the subledgers.

You maximize the data stored in the general ledger. A thick general ledger has many of the following characteristics:

  • Maximum use of the chart of accounts

    • Long list of natural accounts

    • Long list of cost centers

      • Long list of costing accounts

      • Detailed asset and liability accounts

  • Frequent posting schedule

A thick general ledger had details for cost of goods sold and inventory balances and track property plant and equipment at a granular level. Cost centers represent functional expenses, but also roll up to departmental or other expense analysis levels. Using product and location codes in optional segments can provide reporting by line of business. Posting daily, at the individual transaction level, can maximize the data stored in the general ledger.

One example of an industry that frequently uses a thick general ledger is electronic manufacturers. Detail on the revenue line is tagged by sales channel. Product is structured differently to provide detail on the cost of goods sold line, including your bill of materials costs. The general ledger is used to compare and contrast both revenue and cost of goods sold for margin analysis.

Other Considerations

Consider implementing a thick ledger if there are business requirements to do any of the following:

  • Track entered currency balances at the level of an operational dimension or segment of your chart of accounts, such as by department or cost center

  • Generate financial allocations at the level of an operational dimension or segment

  • Report using multiple layered and versions of hierarchies of the operational dimension or segment from your general ledger

Consider implementing a thin ledger in addition to a thick ledger, if there are additional requirements for:

  • Minimal disclosure to the authorities in addition to the requirements previously listed. For example, in some European countries, fiscal authorities examine ledgers at the detailed account level.

  • Fiscal only adjustments, allocations, and revaluations, which don't impact the thick general ledger.

The important consideration in determining if a thick ledger is the primary or secondary ledger is your reporting needs. Other considerations include how the values for an operational dimension or segment are derived and the amount of resources used in reconciling your different ledgers. If values for an operational dimension or segment are entered by the user, then a thick primary ledger is the better choice.

However, if values for the operational segment are automatically derived from attributes on transactions in your subledger accounting rules, then use a thick secondary ledger. This decision affects the amount of:

  • Storage and maintenance needed for both the general ledger and subledger accounting entries

  • System resources required to perform additional posting

  • In summary, you have:

    • Minimum demand on storage, maintenance, and system resources with the use of a thin ledger

    • Greater demand on storage, maintenance, and system resources with the use of a thick ledger

    • Greatest demand on storage, maintenance and system resources with the use of both thick and thin ledgers

    Note: Generally speaking, there is a trade-off between the volume of journals and balances created and maintained versus system resource demands. Actual performance depends on a wide range of factors including hardware and network considerations, transaction volume, and data retention policies.

Summary

The factors you should consider in your decision to use a thick or thin general ledger for your organization, are your:

  • Downstream EPM system and its capabilities

  • Business intelligence system and its capabilities

  • Subledger systems and their capabilities and characteristics, including heterogeneity

  • General ledger reporting systems and their capabilities

  • Maintenance required for the thick or thin distributions and record keeping

  • Maintenance required to update value sets for the chart of accounts segments

  • Preferences of the product that serves as a source of truth

  • Level at which to report profitability including gross margin analysis

  • Industry and business complexity