What are some of the key accounting principles and concepts that you apply to invoice processing?

1 Matching principle

The matching principle is one of the fundamental concepts of accrual accounting, which states that the expenses of a business should be recorded in the same period as the revenues that they generate. This principle helps to measure the profitability and performance of a business over time. In invoice processing, the matching principle means that you should match the invoices that you receive from your suppliers or vendors with the purchase orders, contracts, or agreements that you issued to them. This way, you can ensure that you are paying for the goods or services that you actually received and that you are recording them in the correct accounting period.

2 Double-entry system

The double-entry system is another core concept of accounting, which states that every financial transaction affects two or more accounts in the ledger. For every debit entry, there must be a corresponding credit entry, and vice versa. This system helps to maintain the balance and accuracy of the accounting records and to prevent errors or fraud. In invoice processing, the double-entry system means that you should record both the accounts payable and the expense accounts when you receive an invoice from a supplier or vendor. For example, if you receive an invoice for $500 for office supplies, you should debit the office supplies expense account and credit the accounts payable account for $500 each.

3 Internal controls

Internal controls are the policies, procedures, and systems that a business implements to ensure the reliability, security, and compliance of its financial information and operations. Internal controls help to prevent or detect errors, fraud, or irregularities that could affect the quality or integrity of the accounting records and reports. In invoice processing, internal controls mean that you should follow some best practices and standards that reduce the risk of mistakes or misconduct. For example, you should segregate the duties of invoice processing among different staff members, such as those who receive, approve, record, and pay the invoices. You should also review and reconcile the invoices with the bank statements and the general ledger on a regular basis.

4 Materiality principle

The materiality principle is a concept that allows some flexibility and judgment in accounting, which states that an item or event is material if it could influence the decisions of the users of the financial statements. The materiality principle helps to simplify and streamline the accounting process and to focus on the most relevant and significant information. In invoice processing, the materiality principle means that you should apply some discretion and common sense when dealing with minor or insignificant invoices that may not affect the financial position or performance of the business. For example, you may not need to match every invoice with a purchase order if the amount is very small or immaterial. You may also use some estimation or rounding techniques if the exact amount is not available or practical.

5 GAAP and IFRS

GAAP and IFRS are the two main sets of accounting standards and rules that govern how businesses prepare and present their financial statements. GAAP stands for Generally Accepted Accounting Principles and is used mainly in the United States and some other countries. IFRS stands for International Financial Reporting Standards and is used in more than 140 countries around the world. GAAP and IFRS help to ensure the consistency, comparability, and transparency of the financial information and to meet the expectations and requirements of the regulators, investors, creditors, and other stakeholders. In invoice processing, GAAP and IFRS mean that you should follow the specific guidelines and criteria that apply to your business and industry when recording, reporting, and disclosing the invoices and the related transactions and events.