Accounting Policy Manual Template

Each entry answers three questions. The policy says what the company does, such as capitalizing equipment above a set cost. The procedure says who does the work, when and with what evidence. The approval limit says who signs off, and up to what amount. Most manuals group entries by cycle, the business process each one belongs to.

Revenue usually needs more than a paragraph, so keep a summary here and the full treatment in a separate revenue recognition policy.

Before you write anything, collect the decisions that already exist. Find the old manual, even if nobody has opened it in years, and the memos and emails where someone settled a question. Then check your accounting system's settings, because some policies were never written down. The inventory costing method, for example, may live only in a setup screen.

If you are audited, your auditor will want the same picture. In a private company audit, the AICPA's risk assessment standard (AU-C 315) requires the auditor to understand your accounting policies and the reasons for any changes¹. The auditor must also evaluate whether they are appropriate and consistent with your reporting framework, such as US GAAP.

1. 1

   Cite the memo

   If a memo or email settled a question, cite it by title and date. That date is when the policy was last touched.

2. 2

   Keep the old manual's dates

   If only the old manual states a policy, keep the date that section was written, not today's.

3. 3

   Read the books for unwritten rules

   If nothing was written, check how the ledger is coded and how the system is set up. Document a consistent practice and say where you found it.

4. 4

   Flag conflicts and gaps

   Where the written rule and the postings disagree, record both. Where there is no consistent practice, mark the policy for a decision instead of inventing one.

A policy someone can apply has numbers in it. "Significant purchases are capitalized" leaves the judgment to whoever codes the invoice. Give every policy a rule, a procedure, an approver, a source, an owner and a review date, as in the example below.

Capitalization shows why the numbers matter. In the US, a business can elect the IRS de minimis safe harbor and deduct items costing up to $2,500 per invoice or item². With an applicable financial statement, such as audited statements, the limit is $5,000.

The safe harbor only works if your books expense those amounts under a consistent policy in place when the tax year begins. A business with an applicable financial statement must have that policy in writing.

Say what counts as one item, too. A warehouse racking system invoiced as 40 lines at $900 each is either one $36,000 asset or 40 small expenses, and your policy has to say which. The tax regulations treat using the safe harbor on invoices created to split up property normally bought as one unit³ as manipulation when the total would exceed the limit.

Once an item is capitalized, track its cost, life and depreciation in a fixed asset register.

A threshold with no named approver is a suggestion. Collect every approval limit in one table, often called a delegation of authority. It says who approves a purchase, a manual journal entry or a write-off, up to what amount, and which policy each limit enforces.

Then check who does what. The Government Accountability Office's Green Book, the internal control standard for US federal agencies, calls for separating authority, custody and accounting⁴. The person who approves a payment shouldn't also record it or control the bank account.

Where a small team can't split those duties, the Green Book calls for other controls instead. In a three-person office, that might mean the owner reviews every bank statement and payment run.

Manuals go stale one policy at a time. The Green Book expects policies and procedures to be reviewed on a periodic and ongoing basis⁴. It also expects a timely review after a significant change, such as new people, new systems or a new law.

Give each policy its own cycle, often 12 months, and date it to its last real review, not to the day you assembled the manual. Copying a policy into a new document doesn't review it.

Take leases. FASB's lease standard, ASC 842, made lessees record assets and liabilities for operating leases⁵. Most private companies using US GAAP had to adopt it for fiscal years beginning after December 15, 2021⁶. A lease policy untouched since 2019 can still describe rent as an expense, with no word about the balance sheet.

Keep that policy in step with your ASC 842 lease schedule, and log every change: what changed, why, who approved it and when. The log is your answer when an auditor asks why a policy changed.

To skip the blank page, open the template on this page in River and send your old manual, memos and chart of accounts. River drafts the register, manual and review calendar from them, with each policy traced to its source.