Design and Maintenance of Accounting Manuals: A Blueprint for Running an Effective and Efficient Department (4th edition)

By Steven M. Bragg and Harry L. Brown

Published by John Wiley & Sons, Inc.; ISBN 0-471-41559-6; $170; 493 pages (hardcover); 2006 cumulative supplement ISBN 0-471-72895-0; 178 pages (softcover) $75

Reviewed by Allan M. Rabinowitz

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When one considers the many shortcomings of allowing policies and procedures to be communicated orally, the value of this guide is evident. People too often lack the ability, time, inclination, or occasion to clearly and effectively communicate to others what must be done or avoided. The more dynamic an entity or its operating environment, the more substantial the risk of inadequate current documentation.

This book is an excellent resource for creating or upgrading manuals, particularly for small and midsized entities and the advisors who serve them. Easy to read and understand, it offers many practical examples. The supplement contains many control procedures vital to corporations, along with new or revised procedures. The book devotes separate sections to the development, implementation, and maintenance of nine accounting manuals. The first two are considered most essential.

General accounting manual. This section describes the accounting system, a chart of accounts numbering and descriptions, commonly used accounting terms and definitions, position descriptions that indicate individuals’ responsibilities, annual and monthly activity calendars, policy listings, and policy/procedure statements for transaction process cycles.

Accounting procedures. This section discusses cost-effective presentation of commonly used procedures in a clear and readable fashion, elements of their physical appearance, identifying or retrieving numbers, proper use and design of flowcharts, suggested procedures and their indexing, and layouts and formats for procedures and flowcharts.

Period-end manual. This section presents the means whereby accurate financial statements can be expeditiously generated by tightly controlled and continually improved procedures. It details month-end and year-end due dates and responsibilities by position and closing-task descriptions. Tasks are also shown in flowchart format by position.

Budgeting manual. This section stresses good management planning by showing how budgets for all areas in an entity are linked together, how sample budgeting formats for numerous organizational areas interact with pertinent statistical measures, how flexible expense budgeting can best be used, how the budgeting process can be streamlined or modified to enhance the speed of its construction or updating, and how budgets can be used for control purposes.

Property accounting manual. The authors think that this is generally the area of weakest documentation. It includes a variety of recordkeeping forms and accompanying instructions on how to track project costs for land, land improvements, buildings, and factory and office equipment. The book provides forms and instructions for vehicles, leasehold improvements, and leases.

Forms manual. Creation of this manual can best begin by preparing a form survey worksheet (an example of which is provided) for each form initiated or processed by the accounting department. The authors offer guidelines for creating forms as well as for creating this manual.

User manual. This manual reviews a number of documents dealing with transactions having accounting implications, such as expense reports, petty cash vouchers, and supplies requisitions. Formulation of this manual, or series of manuals, depends on the nature of the entity, the number of different forms in use, and the manual’s intended distribution. The authors include policy/procedure statements for the proper completion of sample forms.

Information technology (IT) manual. The authors included this chapter because the IT function often reports to a financial executive. They outline steps to be taken to ensure a successful system-development process and present a policy/procedure statement to this effect. System survey forms are shown for studying current data-processing installations and practices before coming to replacement, updating, or consolidation decisions. Policy/procedure statements are also included for managing development projects and common computer-related activities.

Completed samples of output report description forms are given, containing, in part, their frequency, distribution, retention, disposition, and purpose. A computer-reports questionnaire form is displayed for asking output recipients for detailed remarks about whether the output continues to be useful. The authors also stress the need for a disaster recovery manual. They also outline this manual’s components and its periodic testing for continuing validity.

Human resources manual. Close ties between the human resources and accounting departments are responsible for the inclusion of this manual. Twenty-eight policy/procedure statements relating to employment, payroll and budget, fringe benefits, grievances, drugs, disabilities, jury duty, and elections are included, as are 11 statements on human resources procedures.

Another chapter covers maintaining these manuals for additions, deletions, and changes, as well as who bears the responsibility for maintaining the manuals. The book also considers maintenance instructions, the use of manual binders, creating and storing master manual copies, determining who should receive manuals and how distribution should occur, retrieving manuals, and the benefits and disadvantages of electronic manuals.