Open item

From CEOpedia | Management online

Open item - it is a manuscript found in an accounting ledger that keeps track of a particular variety of financial activity over a given period of time. It is used in Integrated management system; this basis stand for that you are willing to view item-by-item line items that make up the balance an account and clear individual line items with compensating the components so that you can have a preview on open and cleared line items [1].

Open item in general use

Open item basis indicates that you are able to have a look at every individual line items that make up the balance of the account and clear individual line items with offsetting line items so that you can view both open and cleared line items [2].

Open item management

Open item management is one of the reconciliation function. You are allowed to display the open and cleared items and amounts in an account by open item management. If the compensating entry is made for each of the line items posted in the account (the account should be reconciled and cleared against another account). Clearing accounts such as the GR/IR (goods-receipt/invoice-receipt) account are good examples of the use of open item management. In generally it is used in the balance sheet [3].

In other words, open item management means that a line item needs to be cleared against another open item. At a particular circumstance, the balance of an account is the sum of all open items of that account. Generally, you make these settings in the G/L Master for all clearing accounts, such as a Goods receipts and Invoice receipts (GR IR) account, customer account, vendor account, or bank G/L account, or all accounts except the main bank account. Open item managed accounts eternally have line item management. You can switch open item management on and off through transaction code FS00 [4].

The essence of Open Item Indicator

The Open Item Indicator is frequently selected for General Ledger accounts that require items to be cleared. These accounts need to be cleared at month-end [5]

Examples of Open item

  • Bank Statement: A bank statement is a document issued by a bank that provides a summary of account activity over a given period of time. It shows deposits, withdrawals, fees, interest earned, and other transactions that have occurred in the account.
  • Credit Card Statement: A credit card statement is a document issued by a credit card company that outlines the activity on an account over a given period of time. It includes purchases, payments, fees, and other transactions that have occurred during the billing period.
  • Loan Agreement: A loan agreement is a contract between a lender and a borrower that outlines the terms of a loan. It includes details such as the loan amount, interest rate, repayment schedule, and any fees or other costs associated with the loan.
  • Investment Statement: An investment statement is a document issued by a financial institution that outlines the performance of an investment over a given period of time. It includes information about the value of the investment, dividends and other income earned, capital gains, and other transactions that have occurred.

Advantages of Open item

An open item can provide a great deal of flexibility in tracking financial activity over a period of time. Here are some advantages of using open items in an accounting ledger:

  • Easily view and track financial transactions: Open items allow for easy viewing and tracking of a variety of financial transactions and activities. This makes it easier to identify trends, analyze data, and assess the performance of a company or business.
  • Increase accuracy of data: Open items make it easier to accurately record and track financial activities and transactions. This makes it easier to identify and address discrepancies and errors in the data.
  • Improve efficiency and accuracy of accounting: Open items make it easier to quickly and accurately update the ledger with financial activities and transactions. This can help to reduce the amount of time and resources needed to keep the accounting records up to date.
  • Reduce paperwork: Open items can eliminate the need for additional paperwork and forms. This can help to reduce clutter and make it easier to find the information you need.

Limitations of Open item

Open item accounting is a method of keeping track of financial activity over a given period of time. However, it has certain limitations, including:

  • It does not provide an up-to-date view of financial activities. Open item accounting only records transactions that have already been completed and does not provide real-time information about financial activities.
  • It can be difficult to reconcile. Open item accounting requires the reconciliation of each individual transaction, which can be time-consuming and prone to errors.
  • It can be difficult to audit. Since open item accounting does not provide a comprehensive overview of financial activities, it can be difficult for auditors to identify discrepancies and potential issues.
  • It can be difficult to spot trends. Open item accounting does not provide a comprehensive overview of financial activities, making it difficult to spot trends over time.
  • It can be difficult to make predictions. Without a comprehensive overview of financial activities, it can be difficult to predict future financial outcomes.

Other approaches related to Open item

Open item is a type of financial record, usually found in an accounting ledger, which tracks a particular type of financial activity over a given period of time. Other approaches related to open items are:

  • Manual Tracking - Open items can be manually tracked through a combination of physical and digital records. This approach typically involves writing down details of transactions, noting down the date and amount, and manually updating the ledger to reflect any changes.
  • Automated Tracking - This approach involves using specialized software to track open items. This software is programmed to automatically update the ledger based on transactions entered into the system.
  • Reconciliation - Reconciliation is the process of comparing two sets of records, such as a checking account and a ledger, to ensure accuracy and accuracy of their data. This helps to identify any discrepancies or discrepancies between the two sets of records and allows the user to make necessary adjustments.

In summary, open item is a type of financial record which is used to track a particular type of financial activity over a given period of time. Other approaches related to open items include manual tracking, automated tracking, and reconciliation.


Open item — recommended articles
Nominal ledger — Books of original entry — Book of original entry — Subsidiary account — Bank reference — Compound journal entry — Account format — Sub ledger — T account

References

Footnotes

  1. ↑ P. Jones, J. Burger 2011, p. 107
  2. ↑ P. Jones, J. Burger 2011, p. 107
  3. ↑ P. Jones, J. Burger 2011, p. 107
  4. ↑ S.N. Padhi 2009, p. 24
  5. ↑ S. Finke 2006, p. 23

Author: Klaudia Wojtas

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