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What Is Accounting Data?
Mary McMahon
Mary McMahon
Accounting data is a body of financial documentation that backs an accounting statement. People use such data to prepare financial statements and declarations, and auditors can review it to confirm the accuracy of a statement. People with disputes about their accounts with a bank or company can also ask to see accounting information to determine how the company arrived at a given conclusion or balance. This information is subject to subpoena in cases where people suspect legal wrongdoing is responsible for accounting problems.
Some companies maintain electronic accounting data. Personnel in the accounting department enter financial activities in an electronic system and the system may also encounter automatic activity. For example, when someone swipes a debit card at the grocery store, the signal will travel to the bank's accounting system and an automatic adjustment will occur to reflect the purchase. Hard copies to back up the electronic documentation may be available.
Other accounting data is available in paper format. This can include things like personal checkbooks, receipts, and so forth. Companies with paper records store them in a secure location to prevent losses and may make copies for reference and convenience to make sure they will have access to the information when they need it. Sometimes, steps may be taken to digitize this data to make it more convenient and easy to access, and some old records may be stored on microfilm or in other archival formats because the original documentation is no longer available.
The law requires people to keep accounting data for a set period of time, such as seven years. After this period, people may choose to shred or otherwise destroy old financial records, although many companies choose to keep it, as it may be valuable in the future for investigations, comparison reporting, and other activities. People like tax auditors and regulators can ask for full accounting information if they have concerns about financial statements and want to verify the information for themselves.
When reviewing accounting data, people pay close attention to apparent disparities or confusing entries. This can include evidence of missing information, documentation on paper that does not match statements made, and other signs of wrongdoing or mistakes. When someone must review large volumes of accounting information, a team of people may be involved, to go through the material, as well as double checking the work of others to make sure nothing escapes their auditing activities.
Mary McMahon
Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.
Learn more...
Mary McMahon
Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.
Learn more...AS FEATURED ON:
AS FEATURED ON:
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![Checkbooks contain accounting data.]()
Checkbooks contain accounting data. -
![Accounting data stored on microfilm.]()
Accounting data stored on microfilm. -
![Accounting data is important for auditing and preparing financial statements and declarations.]()
By: SharpshotAccounting data is important for auditing and preparing financial statements and declarations.
Discussion Comments
@David09 - I think that seven years is a magical number in the accounting of personal financial information. For example, if you file for bankruptcy your credit is affected for seven years.
In theory however, after seven years nobody is supposed to be able to track down your information. So if you apply for a business loan eight years later, that bankruptcy information supposedly doesn’t exist.
However, I know of one guy who tried to start a business ten years after filing for bankruptcy, and the bank looked like they were about to approve his loan. However, somehow they discovered the early bankruptcy filing; they withdrew their loan approval. That’s how that cookie crumbles.
@nony - My friend works for one of the “big 8” accounting firms. He’s an auditor – he has the job that sends chills down everyone’s spine. He loves it though.
His job is to ferret through accounting reports and look for inconsistencies. He also does some examination of internal controls as well. This means that he evaluates the processes for handling the books – who controls the purse string, and is this the same person who cuts checks for the business? He has an eye for detail and thinks of auditing as a kind of detective work.
@miriam98 - For businesses I think it makes sense to keep hard copies of all your financial data. For individuals it doesn’t make sense really, except maybe for tax purposes.
Even then you’re only keeping certain pieces of information. I can’t believe how much of my life is now in digital format. This includes most of my bank statements and so forth.
Yes, I can keep the paper copies but they only add to clutter. I just keep everything in electronic format, and then I make backups and also backups of my backups. You have to practice good security if you’re going to be keeping all your records in electronic format.
I used to work for a telecommunications company, in the accounting department. Specifically I was tasked with managing policies and procedures. One of the most important policies was record retention.
The accounting department held vital information. We were a publicly traded corporation and so we knew that we could be subject to an SEC audit at any time. With that in mind, we codified and expanded our policies on record retention.
In summary, it was basically don’t throw anything away or shred anything. I don’t remember if there was a time period like seven years but I do remember that in the document they continually harped on keeping everything no matter what.
I think it was a good policy because lo and behold, two years later the company faced a financial crisis and the auditors came knocking on our doors.
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