Accuracy definition
/What is Accuracy in Accounting?
Accuracy is the concept that a stated value in the accounting records fully reflects all of the supporting facts. When the concept is expanded to the financial statements, it means that the information in the statements is fully valued and that all necessary supporting information has been fully disclosed. In order to produce accurate financial information, the accountant cannot skew information based on overly optimistic or pessimistic views of the desired outcome.
Accounting Accuracy Best Practices
There are several ways to improve accounting accuracy. First, it is essential to maintain a detailed set of source documents that are properly recorded in the accounting system. This is a foundational issue; if this is not done, any subsequent best practices will have no effect on accounting accuracy. Second, train the accounting staff in how to use the accounting system, so that they are recording transactions properly. Third, set up a comprehensive system of internal controls, such as approvals and the separation of duties, to ensure that transactions are processed appropriately. Fourth, regularly reconcile not only the bank account, but all significant asset and liability accounts, to ensure that they only contain valid transactions; all other items should be recognized through the income statement. Finally, a member of management should review the financial statements for accuracy, preferably by conducting a trend line analysis for all income statement and balance sheet line items, to spot and investigate any irregularities. These steps can greatly increase accounting accuracy.