Accounting practice definition

Accounting practice is the system of procedures and controls that an accounting department uses to create and record business transactions. Accounting practice should ideally be extremely consistent, since there are a large number of business transactions that must be dealt with in exactly the same manner in order to produce consistently reliable financial statements. Auditors rely upon consistent accounting practice when examining a company's financial statements. Examples of good accounting practice are:

  • Always using the same calculation to determine the amount of overtime paid to employees
  • Always issuing billings to customers on the same day that goods are shipped to them
  • Always paying supplier invoices on the day when they are due
  • Always using the same depreciation method for the same class of fixed assets

The development of a high level of accounting practice calls for the routine examination of any departures from the mandated process flow, so that errors can be spotted and the underlying causes corrected. This level of self-examination is only possible if the accounting staff has a sufficiently high level of training to understand:

  • The proper process flow
  • When a departure from the authorized process has occurred
  • How to devise a systemic correction to an error
  • How to ensure that the change is properly implemented in the process on a go-forward basis

Accounting practice also calls for the continual installation and updating of best practices, so that both the efficiency and effectiveness of the accounting processes are improved over time. Doing so calls for additional skills in identifying best practices and in the installation and monitoring of any changes made.

Related Courses

Accounting Controls Guidebook 
Accounting Procedures Guidebook