Suzie Brown is the controller of ABC, and automotive parts manufacturing firm. It is for major operating divisions are heat treating, extruding, small parts stamping, and machining. Last years sales from each division ranged from $150,000-$3 million. Each division is physically and managerially independent, except for the constant surveillance of Jeff Russel, the firms founder.

The AIS for each division evolved according to the needs and abilities of its accounting staff. Brown is the first controller to have responsibility for overall financial management. Russel wants Brown to improve the AIS before he retires in a few years so that it will be easier to monitor division performance. Brown decides to redesign the financial reporting system to include the following features:

• It should give managers uniform, timely, and accurate reports of business activity. Monthly reports should be uniform across divisions and be completed by the fifth day of the following month to provide enough time to take corrective actions to affect the next months performance. Companywide financial reports should be available at the same time.
• Reports should provide a basis for measuring the return on investment for each division. Thus, in addition to revenue and expense accounts, reports should show assets assigned to each division.
• The system should generate meaningful budget data for planning and decision-making purposes. Budgets should reflect managerial responsibility and show costs for major project groups.

Brown believes that a new chart of accounts is required to accomplish these goals. She wants to divide financial statement accounts into major categories, such as assets, liabilities, and equity. She does not foresee a need for more than 10 control accounts within each of these categories. From her observations to date, 100 subsidiary accounts are more than accurate for each control account. No division has more than five project groups, Brown foresees a maximum of six cost centers within any product group, including both the operating and nonoperating groups she views general divisional costs as a non-revenue producing product group. Brown estimates that 44 expense accounts plus 12 specific variant accounts would be adequate.