Accounting documents are crucial for making informed decisions and steering a business toward success. They provide a complete picture of your company's overall financial health.
This guide explores the 10 most common types of accounting documents and how they maintain internal control, prevent fraud and ensure compliance with regulatory requirements.
TL;DR: Accounting documents
- Accounting documents provide a complete picture of a company's financial health and help in making informed decisions.
- Accountants compile and evaluate financial statements, manage budgets and provide advice and recommendations.
- Common types of accounting documents include source documents, journals, ledgers, pay-in slips, financial statements, budgets, variance reports, tax returns, trial balances, and internal control reports.
- Internal control documents are crucial for preventing fraud and errors within an organization.
- Streamlining accounting document processes through clear documentation and using tools like Scribe can save time and ensure accuracy.
What is an accountant and what do they do?
Before diving into the specifics, let's explore the team that handles accounting documents—accountants. Companies employ accountants to monitor financial records and ensure rules and regulations are followed.
Accountants' key responsibilities include:
- Compiling and evaluating financial statements.
- Managing budgets.
- Providing customers or stakeholders with advice and recommendations.
- Assist the company with analyzing, generating and communicating financial data.
- Serving as internal auditors.
- Providing independent assurance to management that the organization's risk management, governance and internal control mechanisms are running successfully.
10 types of accounting documents
Some basic accounting documents are required for any form of organization and they must always be kept up-to-date and accessible. We've compiled a list of the most common types of accounting documents.
- Source documents
- General ledger
- Pay in slips
- Financial statements
- Variance reports
- Tax returns
- Trial balances
- Internal control reports
1. Source documents
In accounting, source documents are the original records that provide evidence of a financial transaction. They provide a paper trail for every financial transaction conducted by a business.
The main types of source documents in accounting:
- Invoices: The seller sends an invoice to a buyer to request payment for goods or services sold.
- Receipts: A buyer receives a receipt from a seller to acknowledge payment for goods or services purchased.
- Checks: A written order to a bank to pay a specified amount of money from a depositor's account to a payee.
- Credit memos: A seller sends a credit memo to a buyer to reduce the amount owed for goods or services that have been returned or credited.
- Debit memos: A seller sends a debit memo to a buyer to increase the amount owed for goods or services damaged or lost in transit.
- Employee timesheets: A document used by employees to record the hours they worked for a pay period.
- Purchase orders: A buyer sends a purchase order to a seller to order goods or services.
By using unique identification numbers on accounting source documents, you can help to ensure that their financial transactions are recorded accurately and that your financial statements are reliable.
The specific identification number used on a source document will vary depending on the document type. For example, invoices will have an invoice number, receipts will have a receipt number and checks have a check number.
Following the initial recording, all documents should be saved, arranged into a file and stored in a system where they can be retrieved at any time.
Journals are the primary accounting records that record all financial transactions chronologically. Journal entries are made for each transaction and usually include the following:
- Account names.
- Debit and credit amounts.
- A brief description of the transaction.
Ledgers are secondary accounting records that summarize all financial transactions in the journals. Each ledger account represents a specific asset, liability, equity, revenue, or expense.
Ledger entries are made by transferring the debit and credit amounts from journal entries to the appropriate ledger accounts.
Journals and ledgers work together to provide a complete record of a business's financial transactions. Journals provide the chronological details of each transaction, while ledgers summarize all transactions by account.
While many small business owners use Excel to maintain their accounts, automation can increase efficiency and save time. Explore the top accountant software options in our Best Accounting Software for Small Businesses blog.
4. Pay in slips
A pay-in slip is a document used to deposit cash or checks into a bank account. It typically includes:
- The name of the depositor.
- The account number of the depositor.
- The amount of the deposit.
- The date of the deposit.
Pay-in slips provide a record of the deposit, which can be used to reconcile the bank statement and to track the deposit's progress through the banking system.
5. Financial statements
Financial statements are reports that summarize the financial performance of a business over a period of time. The three main financial statements are:
- Balance sheet: The balance sheet shows what a business owns (assets), what it owes (liabilities), and the net worth of the business (equity) at a specific point in time.
- Income statement: The income statement shows how much money a company has earned (revenues) and spent (expenses) over a period of time. The difference between revenues and expenses is net income.
- Statement of cash flows: The statement of cash flows shows how much cash a business has generated (cash inflows) and used (cash outflows) over a period of time. The statement of cash flows is divided into three categories: operating activities, investing activities and financing activities.
Budgets are plans for how a business will spend its money over a period of time. Budgets help you track spending and ensure you're on track to meet financial goals. Budgets are typically prepared by the accounting department and then reviewed and approved by management.
7. Variance reports
Variance reports compare actual spending to budgeted spending. Variance reports help identify areas where there is overspending or understanding.
Variance reports can be prepared for all types of expenses, such as marketing, sales, and general and administrative expenses.
8. Tax returns
Tax returns are reports businesses file with the government to report their income and expenses and pay taxes. The accounting department typically prepares tax returns, but management should review and approve them.
9. Trial balances
Trial balances are financial reports showing the current closing balances of all accounts in the general ledger.
Modern accounting software automatically compares credit and debit balances, rendering them redundant. That said, some organizations generate trial balances as an internal review before producing formal financial statements.
10. Internal control reports
Internal control reports assess the effectiveness of a business's internal controls. Internal controls are procedures businesses implement to prevent fraud and errors.
With so many types of accounting documents, you may want to use accounting document management software that assists in organizing and centralizing all of your accounting documents.
Internal control documents: a foundation for success
Accurate and organized accounting documents are essential for maintaining internal control and preventing organizational fraud.
Internal controls are processes and procedures that businesses put in place to prevent fraud and errors and promote efficient accounting processes.
Some common internal control documents include:
- Segregation of duties: Show how the business's duties are segregated to prevent one person from having too much control over a particular area.
- Authorization SOPs: Describes how transactions and expenditures are authorized.
- Approval SOPs: Outlines how transactions and expenditures are approved.
- Recording SOPs: Documents how transactions and expenditures are recorded.
- Safeguarding SOPs: Defines how the business safeguards its assets.
- Monitoring SOPs: Describes internal controls are monitored to ensure they are effective.
Internal control helps businesses to:
- Identify and mitigate risks.
- Ensure the accuracy and completeness of financial records.
- Comply with financial regulations.
- Protect their assets.
Streamline your accounting document processes
Creating clear and comprehensive documentation of accounting policies, procedures and guidelines helps ensure that your accounting document creation is accurate and efficient.
To save time, we recommend using a process documentation template or tool. For example, Scribe helps you capture standard operating procedures for accounting.
To create your manual, identify the accounting processes you want to document, such as financial reporting, budgeting or tax financial statements, and install the Scribe extension. Click "Start Capture," and Scribe will automatically capture screenshots and log steps as you navigate the process, creating a detailed step-by-step SOP.
Using a pre-designed template, like this SOP Manual Template, will help to standardize your SOPs.
You can also ask the AI to build your accounting SOPs for you and customize them with your specific procedures and reporting requirements. You can ensure you're staying compliant by automatically redacting employee or customer data from screenshots (Pro users).
When you're finished, distribute the accounting SOP to relevant stakeholders, like accounting staff, auditors and management. You can add your team to your Scribe workspace, share the guide via a link, or embed Scribes directly into other tools like wikis or knowledge bases.
Key takeaways for accounting documents
Accurate and organized accounting documents are essential for maintaining internal control, preventing fraud and ensuring compliance with regulatory requirements. They provide a reliable source of information for decision-making, financial reporting and auditing purposes.
By creating documentation of accounting processes, companies can safeguard assets, detect errors and discrepancies, deter fraudulent activities, and enhance their overall financial integrity.
Sign up for Scribe and create accounting process documentation in seconds.