A System of Internal Accounting Control
Internal accounting controls are designed to process business transactions efficiently and insure a proper accounting of the assets, liabilities, revenues, and expenses resulting from those business transactions.
Whether simple or complex, an internal accounting control system should provide a company with reasonable assurance that:
- Transactions are carried out according to the owner's or management's authorization;
- Transactions are recorded in the proper amounts and within the accounting period during which they were executed;
- Transactions are appropriately classified to facilitate the preparation of financial statements in accordance with generally accepted accounting principles (GAAP) or a comprehensive basis of accounting other than GAAP; and
- Employees' access to assets is allowed only in accordance with the authorization of owners or management.
An effective system of internal accounting control for a small business with less than $10 million in annual revenues should have the following basic controls.