The business management must create the accounting policy manual and review it yearly. Similar to other policies and regulations, the finance and accounting side of business policies facilitate the improvement of the business in several ways. Contact Pembroke pines accounting firm to get professional assistance for managing your company’s finances.
By drafting and implementing accounting policies, you are improving the quality and efficiency of the finance reports created in your company. If you are unsure about the need for accounting policies, check out the following benefits to understand their necessity.
- Consistency in terms of Application
Accounting policies facilitate the evaluation of accounting transactions similarly by the designated employees. In big business establishments, many accountants handle the assessment of financial activity. Due to their differences in judgment, the various accountants may use different accounting treatments for the same transaction.
Accounting policies eliminate this variance by acting as a guideline for instructing the employees to apply generally accepted accounting principles. The results due to differences in judgment become even with their help.
- Correct Accounting Treatment
The accounting policies guide employees in handling complicated accounting issues. They facilitate the workers in applying the correct accounting treatment regardless of their lack of specialization in the complicated issue. However, the supervisor must use reasonable care to help the employees analyze the problem correctly. The policy must not be substituted for competency expected by the employee. Usage of accounting policies is encouraged, but the responsible employee must identify if the transactions are out of the policy’s limitations and take the required measures to analyze and correct the issue.
- Improves Efficiency
The accounting policies help in making decisions. They also ease the book-keeping process. Accounting policy can also be used to automate the company’s accounting systems. The financial transactions will become easier. It will require less time as compared to manual work. The automation process will also facilitate the elimination of transaction errors. The automated accounting systems will produce errorless outcomes in terms of typing or transposition. The other errors will become easily spottable so that their correction can be done effectively.
- Documentation Requirements
For companies that require audits, the accounting policies help the establishment significantly. The Sarbanes-Oxley Act of 2002 needs all companies to provide an opinion after assessing the internal control systems and financial reports.
The accounting policies of a company act as evidence to prove that all the accounting transactions are assessed systematically, and adhering to those policies displays that the transactions are also processed similarly.
The accountants responsible for assessing the internal control system can use accounting policies to facilitate the following transactions with the accounting system.