Financial records definition
/What are Financial Records?
Financial records are documents that provide evidence of or summarize business transactions. A well-organized set of financial records is an essential part of an accounting department. At the most detailed level, financial records can include invoices and receipts. At a more aggregated level, financial records include subsidiary ledgers, the general ledger, and the trial balance. At the most aggregated level, they include the income statement, balance sheet, and statement of cash flows.
Financial records are also needed by individual taxpayers, who need the records to complete their tax returns.
Types of Financial Records to Retain
There are many financial records that a business should retain, including the following:
Customer invoices for all sales made
Supplier invoices for all purchases made
Receipts for all cash purchases made
Travel, entertainment, and gift expense records (which have tax deductibility issues)
Asset records showing the costs of all fixed assets
Employment tax records for all employees
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Financial Records FAQs
What internal controls help maintain accurate financial records?
Internal controls that maintain accurate financial records include segregation of duties, account reconciliations, approval requirements, journal entry reviews, system access restrictions, audit trails, document retention, and periodic management review. Physical controls over assets, cutoff procedures, and variance analyses also help detect errors, omissions, unauthorized transactions, and misclassifications.
How should financial records be organized?
Financial records should be organized by transaction type, period, account, customer, vendor, project, or legal entity, depending on reporting needs. Use consistent file names, document indexes, retention categories, and cross-references to accounting entries. Good organization allows records to be retrieved, reviewed, reconciled, audited, and protected efficiently.