What Are Some Basic Accounting Procedures?
Basic accounting procedures include collecting financial documents, posting transactions and reconciling accounts. Other procedures include auditing accounts payable and accounts receivable, and conducting internal and external reporting, according to David Ingram for the Houston Chronicle.
Businesses should ensure they have a system that records all expenses and income. The financial documents a business collects include invoices, travel receipts, cash register tapes, tax forms and salary records, explains Ingram. In the past, accountants entered transactions manually into the accounting system. However, technological advancement has seen accountants use different solutions to post transactions automatically. For example, proprietary automatic ordering software is a technological solution accountants can use to adjust accounts automatically.
Accounts reconciliation is another procedure. It involves checking accounts against external records. The accounting department checks the internal records of the organization’s assets against investment portfolio and bank account statements. This helps the team identify any differences between the two, notes Ingram.
Accounts receivable deals with the money owed to the business by debtors and customers, while accounts payable deals with the money the business owes to its lenders and suppliers. The business should have an accounting system that tracks the status and due dates of both accounts receivable and accounts payable. The business can set the system to send notifications to delinquent account holders or to pay bills automatically and on time, says Ingram. Internal and external reporting involves creating reports for investors, management and other stakeholders of the organization. Internal reports present operational data in a strategic manner to help managers in the decision-making process.