Accounting manual

Accounting manual is a handbook that contains accounting policies and procedures. The accounting manual is usually internal document prepared by specialists and used by company accountants and other staff.

Purpose of accounting manual

The main purposes of accounting manual are:

• handbook for new employees,
• reference used to solve problems,
• source of interpretation.

The accounting manual can include additional information related to used accounting controls and indices.

Table of contents of example accounting manual

The accounting manual template can include:

1. Principles of accounting
2. Budgeting procedure
3. Accounting guidelines
4. General ledger accounts
5. Revenue accounts
6. Expenditure accounts
7. General journal entries
8. Financial reports
9. Other procedures
10. Regulations and reference materials
11. Responsibility assignment matrix
12. Glossary

Terms and interpretations

The accounting manual handbook should contain important terms and explanations, which are necessary to maintain quality of work. Words and abbreviations may be different for various companies, also same terms might have alternative meaning.

Usage of individual abbreviations in your firm will result in better understanding of problems between colleagues, overall improvement of the quality of work, and helps to avoid of understanding of third persons.

Examples of abbreviation

There are common and well-known abbreviations used in many companies like:

• CF -Cash Flow
• TSR - Total Sharehold Return
• OI or OCI- Other Income or Other comprehensive income
• bps - Basis Point
• IAS - International Accounting Standards

(Manual of accounting – Interim financial reporting, 2018)

But there are also more advanced words, which are not so understandable as others, for example:

• CODM - Chief operating decision maker
• GAAP - Generally Accepted Accounting Principles

(Manual of accounting – Interim financial reporting, 2018)

Those are only examples, terms above aren't universal, so they can mean something else in other environment. You should firstly meet with glossary in your manual of accounting.

Accounting guidelines

Accounting guidelines tells about important rules, and sticking them leads to success in fulfilling our duties. Guidelines may tell about different things, like place of bookkeeping, dates of tax calls or relationships with contractor (time for payment). Guidelines are helpful especially for new employees, it helps them to implement and to refuse doubts.

examples of accounting principles:

• Consistency - Accountant should be consistent in his job, applying same procedures, practices, and accounting principles, for example if company is changing payment time from 14 to 7 days, then starts to charge default interest, it should be disclosed, and every contractor have to get information about changes in payment methods, or payment time.

(Harold Averkamp,2018)

• Monetary Unit Assumption- Every economic activity is measured in monetary unit- currency, it should be always same currency, even if we got invoice in foreign currency, accountant should convert amount into primary unit. As a result, accountants ignore effect of inflation, it is assumed that your currency doesn't lose power.

(Harold Averkamp,2018)

Chapter about Accounting guidelines may also contain FAQ standing for frequently asked questions. FAQ answers on common problems, which are mostly basics or easy questions with unobvious answers, or answers are different for various companies. For example:

Q: What are sales rebates?
Answer:
Up to 100 Pieces - no rebate
between 100-250 pieces - 3% rebate
250+ pieces - 10% rebate on all sales

Advantages of Accounting manual

An accounting manual is an important tool for accurately and consistently performing accounting tasks. It provides numerous advantages, including:

• Improved accuracy and consistency - The accounting manual ensures that all financial processes are documented in a consistent format. This makes it easier for staff to understand the accounting process and apply it correctly, reducing errors and improving accuracy.
• Streamlined processes - The accounting manual includes standard procedures for all accounting tasks, making it easier and faster to complete work.
• Improved training - The accounting manual provides a clear reference for new staff members, enabling them to quickly learn the accounting processes of the company.
• Improved control - The accounting manual helps to ensure that all financial transactions are recorded and managed in accordance with internal policies and external regulations.
• Improved reporting - The accounting manual provides a clear structure for financial reporting, enabling the company to produce accurate and timely financial reports.

Limitations of Accounting manual

An accounting manual provides guidance on how to record and report financial information accurately. However, it has a few limitations:

• It cannot be used as a substitute for accounting knowledge, as the manual only provides guidance on specific topics.
• It cannot guarantee the accuracy of the financial information reported, as errors may arise due to incorrect implementation of the guidance.
• It cannot cover all possible accounting scenarios, as it is tailored to the specific needs of a particular organization.
• It is subject to change over time, as new accounting regulations and standards may be adopted.
• It cannot provide legal advice, as this requires professional consultation.

Other approaches related to Accounting manual

Apart from an Accounting manual, there are other approaches to accounting policies and procedures. Below is a list of those approaches:

• Internal Control: This approach involves setting up internal controls to monitor and evaluate the accuracy and completeness of financial information. It includes establishing procedures for proper authorization and approval of transactions, setting up proper accounting records, and establishing a system to ensure compliance with laws and regulations.
• Accounting Standards: This approach involves the adoption of accounting standards such as GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards). This helps to ensure that the financial information is presented fairly and accurately.
• Risk Management: This approach involves the identification and assessment of risks associated with the financial activities of the company. It helps to ensure that the financial information is protected from potential risks.
• Performance Measurement: This approach involves measuring the performance of the company and its financial activities. It helps to ensure that the financial information is presented in an accurate and reliable manner.
• Internal Audit: This approach involves the examination and evaluation of the internal control systems and procedures established by the company. It helps to ensure that the financial information is properly managed and reported.

In summary, there are various approaches to accounting policies and procedures, such as Internal Control, Accounting Standards, Risk Management, Performance Measurement, and Internal Audit. These approaches help to ensure that the financial information is presented accurately and in accordance with applicable laws and regulations.

Accounting manual — recommended articles

Internal audit — Accounting control — External audit — Management representation letter — Internal check — Compliance test — Focus report — Objectivity concept — Accounting documents — Data anonymization

References

• Example Accounting Manual
• Interim financial reporting (2018), PWC Manual of accounting
• Harold Averkamp (2018) www.accountingcoach.com,2018
• Accounting Policies and Procedures Manual (2018), Wegner CPAs Accounting Policies and Procedures Manual

Author: Michał Rogóż