Common Accounting Practices & Procedures – A Brief Overview

There are a lot of common practices and procedures in accounting, but some are absolutely necessary to understand for anyone stepping into the accounting area.

Here we give you the common accounting practices and procedures.

1. Maintaining a general ledger

Maintaining a general ledger is the prime duty of a company. It’s one of the building blocks of accounting. A general ledger is a place where a business stores all its accounts: expense, revenue, liabilities, equity, and assets. All transactions are recorded in the general ledger.

It can be physical or electronic as well. It serves as the prime reference for finding transaction details and financial reporting.

What’s equally important as having a general ledger is maintaining it. That’s to say, keeping it current and updated with all happenings. Each outflow and inflow marked, each withdrawal and account closing properly obvious – a general ledger is good only as long as you’re keeping it updated.

Chartered accountants are specially hired to take care of maintaining the general ledger.

2. Releasing financial statements

Releasing financial statements is the blood that runs through the veins of your business. Without it you’re dead. Many companies release various financial statements at the end of each month, some take longer than that, but all release them at the end of a fiscal year.

Generally, there are two major types of financial statements:

·        Balance sheet: The balance sheet is a picture of the company’s worth. It includes its assets, equity, and also liabilities. You can say that a look at the balance sheet of a company paints an accurate picture of where the company stands.

·        Income statement: The income statement of a company displays its income generation over a specific period of time. It’s released quite frequently and gives a clearer picture to investors and prospective clients regarding the company’s income.

There are more types of financial statements as well, like owner equity statements, cash flow statements, and so on.

3. Self-Audit and External Audit

Auditing is necessary to be successful. At the end of a time period, you close the books (closing accounts, adjusting unaccounted balances, and starting those accounts afresh for the next time period). While book closing is done, any mistakes or overlooked details are compensated and adjusted, and the general ledger is tried to synchronize with the actual position of the company.

Sorting these mistakes out means an audit. You can’t let all left transactions being carried over to the next time period.

Although self-auditing is important, hiring auditors to do the work increases the trust value of your business. External auditors do pretty much the same stuff, they correct mistakes, clear temporary balances, adjust the general ledgers for any inconsistency – but they also look for fraud.

If you’re clean and have nothing to fear, consider hiring an external auditor.

4. Abide by the Accounting Standards

Needless to say, each company needs to abide by the accounting standards. Read our article, The Importance of Accounting Standards, and you’ll know why.

Tell your chartered accountants the importance. The accounting shall be comparable, reliable, and verifiable. And for that, the accountants need to abide by the Standards. It’s an accounting best practice you have no reason to disregard. 

Contributed by Shawn Terry. Shawn is a skilled maths loving senior accountant. His strongest point is perhaps his affinity for using cloud-based modern tools to deliver faster results. His accounting methods are as swift as his fingers are on the keyboard. He is an explorer and always keeps finding something new to his accounting processes. To know more about his work, visit:

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