Definition and Objectives of Accounting Procedures

Accounting procedures are a comprehensive set of systematic steps, rules, and policies followed in organizations to record, process, classify financial transactions, and prepare financial reports. These procedures form the practical framework of the accounting system and determine how to handle financial events from their occurrence until they appear in the final financial statements.

These procedures include determining methods of recording, documentation, review, and approval, and define the responsibilities, authorities, and timelines required for each step. They also ensure compliance with adopted accounting standards and applicable financial laws and regulations, and provide the necessary internal controls to protect the organization's assets and ensure the accuracy of financial information.

Objectives

• Ensure accuracy of accounting records
• Standardize accounting practices
• Apply accounting standards and principles
• Prevent errors and manipulation
• Facilitate review and auditing
• Produce reliable financial information

Steps and Stages of Accounting Procedures

Accounting procedures follow a regular and interconnected cycle that begins with financial transactions and ends with the preparation of financial statements, including the following stages:

1. Identify Financial Transaction - Examine and analyze economic events to determine whether they have a measurable financial impact, and classify them according to their commercial, investment, or financing nature

2. Collect Documents - Obtain all supporting documents and evidence for the transaction such as invoices, receipts, payment vouchers, and contracts to ensure the validity and legitimacy of the financial transaction

3. Accounting Analysis - Detailed study of the transaction to determine affected accounts, appropriate amounts, and apply double-entry rules to ensure accounting balance

4. Record in General Journal - Enter the accounting entry in the general journal with specification of date, debit and credit accounts, amounts, and explanatory description

5. Post to General Ledger - Transfer entries from the journal to individual general ledger accounts to consolidate all movements for each account in one place

6. Prepare Trial Balance - Extract balances of all accounts from the ledger and arrange them in a list to ensure balance between total debit and credit balances

7. Adjusting Entries - Record required adjustments and corrections at the end of the period for accrued expenses, deferred revenues, and depreciation to apply the accrual principle

8. Prepare Financial Statements - Extract income statement, balance sheet, and cash flow statement from adjusted balances to show financial position and business results

9. Closing Entries - Close revenue and expense accounts at the end of the accounting period and transfer net profit or loss to equity accounts

10. Review and Approval - Comprehensive examination of all procedures and financial statements by management and auditors to ensure accuracy and compliance with accounting standards

Importance and Benefits of Implementing Accounting Procedures

Implementing accounting procedures ensures recording accuracy and standardizes accounting practices, reducing errors and improving the quality of financial data. It also ensures compliance with accounting standards and financial laws and enhances internal control to protect the organization's assets from fraud and manipulation.

These procedures provide reliable information that supports management decision-making and financial planning, and increase confidence with investors, creditors, and regulatory authorities. At the operational level, they accelerate review processes, reduce administrative costs, and improve the overall efficiency of the accounting system.