Overview of Average Balance Processing
You can use average balance processing to track average and end-of-day balances, report average balance sheets and income statements, and create reports using both standard and average balances.
Average balance processing is particularly important for financial institutions since many regulatory agencies require average balance sheets in addition to standard balance sheets. Many organizations use average balances for internal management reporting and profitability analysis for both balance sheet and income statement accounts.
The difference between an average and standard account balance is that balances are expressed as average amounts rather than actual period-end amounts. An average balance is calculated as the sum of the actual daily ending balance for an account, divided by the number of calendar days in the reporting period.
You can maintain and report on average balances daily, quarterly, and yearly. The application tracks average balances using effective dates, which you enter for each transaction. You can display information about average balances for specific effective dates using:
-
Financial reports created using Financial Reporting Web Studio
-
Smart View queries
-
The Inquire and Analyze Average Balances page
-
Standard average balance reports
The application provides the features to satisfy the following basic average balance needs:
-
Use average balance processing only in those ledgers that require it.
-
Maintain average balances for all balance sheet and income statement accounts automatically.
-
Create and maintain a transaction calendar to ensure that all postings have effective dates that are valid business days.
-
Ensure that entries balance by effective date, as well as by period.
-
Calculate average balances based on a transaction's effective date, not the posting or accounting date.
-
Calculate period, quarter, and year averages-to-date based on the balances for each day within the period, quarter, or year.
-
Calculate the impact of net income on the average balance for retained earnings when income statement accounts aren't enabled for average balance processing.
-
Report or inquire on average and ending balances for any effective date.