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Accounting records are documents and supporting materials used by individuals and companies in the preparation of financial statements, tax documents, and so forth. By law, companies are required to keep such records for a set period of time, often seven years, to make them available for inspection and audit. Companies traded publicly may be subject to random inspections by regulatory agencies and these inspections include a review of accounting records for accuracy and completeness.
These records can be electronic, paper, or a mix of both. They include any documentation related to financial transactions, from payroll records to end-of-day printouts from cash registers. Statements from banks are also included in accounting records, along with similar statements related to investments. Accounting ledgers are also considered accounting records. Essentially, if it contains a record pertaining to a company's financial activity, it is an accounting record.
Companies are expected to keep this documentation in good working order. Accountants and support staff typically supervise the maintenance of such records and they use the documents in the preparation of things like statements for investors and tax declarations. If the records are not complete, financial statements made by the company will be inaccurate and this can be grounds for legal and financial penalties.
Procedures known as generally accepted accounting principles (GAAP) must be followed when maintaining, handling, and using accounting records. These procedures standardize basic accounting tasks to ensure they are performed uniformly by all accountants everywhere, eliminating the possibility of using so-called “creative accounting” to conceal losses and otherwise misstate financial facts for personal benefit.
When an audit is ordered, all accounting records are requested for review. Auditors will look the material over and they take note of any missing material, confusing records, or records maintained improperly. All of this information is weighed when developing an audit opinion. Regulators interested in financial practices can review audit results to collect information. This information may be used in prosecution of companies suspected of fraudulent accounting practices, or to exonerate companies facing such accusations.
Individuals are usually advised to retain accounting records, as they can be audited by tax authorities. If people do not have the records to support claims made on their taxes, they can be subject to penalties. At the very least, their tax liability may be adjusted, forcing them to pay more in taxes. If their records appear to be fraudulent, rather than simply sloppily kept, they can face legal penalties.
When I was involved in a multi level marketing business, I got in the habit of keeping good accounting records. If you get in the habit of writing things down as they happen, it is not nearly as overwhelming to get ready for your taxes.
I have never been audited, but always try to keep my records in such a way that there would be no questions, and all of my business records would be easy to find and keep track of.
Keeping accurate accounting records is one of the most important things to have a successful business. My husband has his own construction company, and I am responsible for keeping most of the books.
This is a big responsibility and must be done on a regular and consistent basis. If you keep accurate records every day, it is much easier when tax time rolls around and you have to enter all the information that is required.
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