Account Management Procedures
Accounting procedures are used as a way to document control procedures for a specific organization, department or asset class. They help organizations to identify, control, use and maintain the status of capital equipment as well as the flow of resources.
Other People Are Reading
-
History
-
Accounting procedures should tell the employee or auditor how to purchase an asset (including the capitalization criteria and proper account numbers for the acquisition), how to distinguish between regular capital assets and computer-related software and well as the approval process for equipment usage. They should also provide a threshold for purchases with defined ranges for signature authority. If your organization uses a purchasing card (P-card), you should also supply instructions on which items can be purchased.
Tagging
-
As an example, all small-value property assets should be defined, e.g., assets between $3,000 and $4,999. Those assets over this threshold should have a "tagging process" that can be a bar- or color-coded system. Procedures should also provide the contact information for the business manager or asset-management specialist.
-
Asset Codes
-
Asset codes can also be a way to provide instruction and information about the nature of the asset. All codes should be clearly defined in the procedures. The International Standards Organization (ISO) examples and maintains a standard way for organizations to develop asset codes and procedures.
External Reporting
-
While account-management procedures are primarily used for internal record-keeping, they can also be a major cause of distortions in financial statements and ratio analysis. Additionally, while GAAP (Generally Accepted Accounting Procedures) may provide accounting procedures for financial statement preparation, there is always room for variation among different business units. For this reason, create accounting procedures for financial statement preparation and other documents meant for external circulation.
Consistency
-
Consistency is important when creating account management procedures for external reporting. Common distortions, and therefore places to add account-management procedures, are revenue recognition, depreciation methodology, inventory polices and treatment (LIFO, last in first out, vs. FIFO, first in first out), expense (immediate or capitalization), research and development treatment (affects cost of goods sold), extraordinary or nonrecurring charges and tax treatment.
-
