When conceptual errors or mathematical inaccuracies find their way into a small company’s financial statements, top leadership tries to find the root cause and asks department heads to review existing accounting procedures. Part of that quest may cover things as diverse as the organization’s accounting guidelines, policy manuals for record-keeping and reporting, and systems of checks and balances in the accounting department.
Bookkeeping guidelines enables a small business to convert its economic events from raw transactional data into financial information that investors can read to figure out how the company fared over a given period. To record transactions, a corporate bookkeeper debits and credits financial accounts, which run the gamut from equity items and assets to revenues, expenses and liabilities. Given the importance of record-keeping in a small-sized company's operational spectrum, managers often hires professionals with a specific skill set to run the accounting department. They reach out to applicants who have a depth of experience in all things accounting, a solid grasp of financial regulations, analytical dexterity and a gift for expedient compromise -- which is important, given that accountants interact with non-financial personnel to record and report operating information.
Trial Balance Review
A trial balance classifies all corporate accounts in two columns -- debit and credit -- and ensures that column totals are equal. A trial balance review is central in business accounting because it's the intermediary step between bookkeeping and financial statement preparation. Therefore, ensuring that this data summary is accurate goes a long way toward preventing mathematical inaccuracies in accounting statements and troubles that arise when regulators initiate investigations -- citing incorrect, non-compliant or fraudulent reporting.
Financial Statement Preparation
The controller of a small business sets proper policies to ensure that subordinates meet the important goal of financial statement preparation, which is the last internal phase before lifting the veil on the organization's performance. The controller checks that accountants prepare data summaries correctly and completely, making sure preparers' views of the company's performance are not at odds with what department heads and functional managers expect based on preliminary data reviews. A complete set of financial statements includes a balance sheet, a statement of profit and loss, a statement of cash flows and a statement of owners' equity.
Regulatory compliance is one of the most significant aims of a small company's accounting function, especially if the business is a publicly traded entity that operates in various locales, files multijurisdictional reports and copes with regulatory tedium in many countries. The most important accounting regulations come from the Financial Accounting Standards Board, the U.S. Securities and Exchange Commission, the American Institute of Certified Public Accountants and the Public Company Accounting Oversight Board.