Accounting documents

Accounting documents are the basic source of information on the basis of which financial statements and records regarding audits are prepared. Accounting documents also include ownership of assets and liabilities, evidence of cash transactions, records of accounting books and all kinds of supporting documents (Center for Audit Quality 2009).

Account entries can have various forms

They are for example (R. Hermason, J. Edwards, M. Maher (2010), p. 148,262,271; I. Mckenzie (2012), p. 18-19).:

• Purchase of goods:

1. Quotation - is an accounting document sent to the customer by the company providing a fixed price that would be charged for the production or delivery of goods and services at the time of acceptance by the customer. Quotations are most often used when companies do not have a normative list of article prices.
2. Purchase Order - is a kind of accounting document that indicates the goods or services that the company wants to purchase from another business entity.
3. Goods Received Note - is a type of document that lists the goods or services that the company has received from the supplier.
4. Purchase invoice - is an accounting document containing a list of received goods or services, unit price, their sum and total amount for them.

• Sales of goods:

1. Sales Order - is an accounting document that describes a placed order for goods or services. The customer sends an order to the company, based on which the company generates a sale order.
2. Goods Dispatched Note - is a document which all the goods sent by the company to the customer are listed.
3. Sales invoice - is an accounting document containing a list of received goods or services, unit price, their sum and total amount for them.

• Payments:

1. Statement or Account Statement - is a document containing a list of transactions on the client's account. Includes credit memos, invoices and payments.
2. Remittance Advice - are documents sent by the customer to the supplier containing payments for invoices and credit notes that have already been settled. This document shows which amounts have already been paid and which have not been paid.
3. Receipt or Official Receipt - a document confirming the payment. Usually the supplier issues it with cash payments. The cashier issues a receipt for goods or services for which the customer pays.
4. Voucher - The type of accounting document that the customer issues. The voucher is a willingness to make payments. Such a document is issued on the basis of an invoice received by the supplier.

• Others:

1. Credit Note - is a kind of accounting document that is sent to the customer by the supplier. Includes a list of overpayments and returned goods.
2. Debit Note - is a document delivered to the supplier by the customer. This applies to the overpayment made by the customer and the goods returned by him. It is an application for the supplier, on the basis of which he can issue a credit note.
3. Ledger - this is a record of all transactions that have been completed by the company. It can take the electronic form. All these transactions are recorded in the book in various accounts. This list is called the account plan.

Accounting records are in paper and electronic form. Each of the accounting entities must also keep accounting records. There are rules that oblige companies and accounting units to keep accounting documents for a specific period of time. In the United States, for example, this period is seven years. However, CPA statements and auditing records are considered as permanent entries. Every entrepreneur must comply with the legal provisions that they regulate as well ways of completing accounting documents as methods of storing and archiving these documents. These legal regulations also apply to documents on electronic media. Due to the changing nature of business activities and the requirements of market participants, both accounting entries and accounting methods are constantly evolving. There is of course a system for electronic document processing for accounting purposes (B. Cunningham 2015, p. 22).

Examples of Accounting documents

• Financial documents: These include balance sheets, income statements, cash flow statements, and statement of changes in equity. These documents are prepared to provide information about the financial position of a business.
• Source documents: These include invoices, bills of sale, purchase orders, receipts, and bank statements. These documents provide evidence of the transactions that have taken place in order to account for them.
• Internal documents: These include ledgers, journals, accounts receivable and accounts payable records, asset registers, and payroll records. These documents are used to keep track of the financial transactions that have taken place within the organization.
• Audit documents: These include audit reports, audit evidence, and audit working papers. These documents provide evidence of the audit process and the findings of the audit.

Advantages of Accounting documents

• Accounting documents provide an organized record of financial transactions and serve as a source of evidence in case of disputes or misunderstanding.
• Accounting documents are also essential in determining the accuracy of the financial information reported in the financial statements.
• They are also used to ensure compliance with tax regulations.
• Accounting documents help to identify any discrepancies in the financial information reported in the financial statements.
• Accounting documents are also used to detect any fraud or illegal activities.
• Accounting documents also provide information regarding the performance of the business and can help in decision making.
• Accounting documents are also helpful in budgeting and forecasting.

Limitations of Accounting documents

• Accounting documents may not include all the financial information related to a company as they are limited to providing only the financial information relating to the transactions that have been recorded and reported.
• Accounting documents may also not be reliable as they depend on the accuracy of information provided by the company. Errors in the recording of financial transactions, or the misreporting of information, can lead to inaccuracies in the accounting documents.
• Accounting documents do not provide insight into the overall performance of the company and its internal operations, as the documents focus primarily on the financial activities of the company.
• Accounting documents are subject to interpretation and therefore can be open to manipulation. This can lead to different interpretations of the same document or financial statement, leading to potential misstatements or misinterpretations.
• Accounting documents are also limited in that they can be difficult to compare and analyze, as different companies may use different accounting methods or classifications. This can lead to discrepancies in the reported figures.

Other approaches related to Accounting documents

To further understand the use of accounting documents, it is important to consider other approaches related to them. These include:

• Accounting systems: Accounting systems refer to the set of rules and procedures that govern the recording, storing and reporting of financial information. This includes the implementation of internal controls and the maintenance of accurate and reliable accounting records.
• Financial statements: Financial statements are prepared to provide a detailed overview of the financial position and performance of a business. These documents include the balance sheet, income statement, statement of cash flows, statement of changes in equity, and statement of comprehensive income.
• Internal audits: Internal audits are conducted to evaluate the accuracy and integrity of accounting records and financial statements. These audits assess the effectiveness of internal control systems, as well as compliance with applicable laws and regulations.
• Tax returns: Tax returns are documents submitted to the government to report income, expenses, and other financial activities of a business. These documents are used to determine the amount of taxes the business owes.

In summary, accounting documents provide the basis for financial statements, internal audits, and tax returns and are integral to a business’s financial operations. They provide the information necessary to assess a business’s financial position and performance, as well as its compliance with applicable laws and regulations.

Accounting documents — recommended articles

Sales ledger — Month end closing — Purchases ledger — Accounting Principles — Proof of posting — Book of original entry — Subsidiary account — Purchase ledger — Management representation letter — Co maker

References

• Cunningham B. and others (2015), Accounting: Information for Business Decisions, Cengage Learning Accounting: Information for Business Decisions
• Drury C. (2012), Management and Cost Accounting Management and Cost Accounting
• Mckenzie I. (2012), Financial English with Financial Glossary, second edition Heinle, Cengage Learning
• Pysh P. , Brodersen S. (2014), Warren Buffett Accounting Book: Reading Financial Statements for Value Investing, second edition Warren Buffett Accounting Book: Reading Financial Statements for Value Investing
• Siegel J. G., Shim J. (2010), Barron's Accounting Handbook
• Understanding Quotation, edicted by: Brendel E., Meibauer J., Steinbach M., De Gruyter Mouton, (2011)

Author: Aleksandra Szczęch