What is an Accounting Note?

An accounting note is a piece of information added to a financial statement to clarify or expand upon it for the benefit of a reader. Accounting notes can be formatted and presented in a number of different ways. Most accounting software has a system for inputting accounting notes and people can also enter notes in ledgers and other records that are maintained by hand. If accounting notes are present, it is important to review them when examining accounting records as they may provide important information.

The basic format for keeping accounting records is fairly rigid. This can create situations where there is necessary information but no convenient place to put it. In these cases, an accounting note is used to provide the information in a way that will be understood by readers. These notes are presented along with the rest of the account so that they can be considered by people reviewing the account.

Accounting notes can provide contextualizing information that makes accounting entries easier to understand. It may explain or expand upon a piece of information so the reader understands why it is included and how the accountant arrived at a given number. It can also provide information about changes in terms that might affect an accounting entry. When creating accounting entries, people decide whether or not additional information is relevant or important, and can opt to add an accounting note to communicate that information as needed.

Another use of an accounting note can be in an accounting system used by a large company where many different people have access to records and need to be able to communicate information. Notes can be used to track interaction with specific customers or companies and to provide background information that may be useful for people in other departments. For example, a client record could include an accounting note stating that the client is working on a payment plan to get current, or that part of a client's account was forgiven and is no longer considered outstanding.

Sometimes an accounting entry is marked with a small superscript number that corresponds to a footnote found at the bottom or end of the report. In other cases, accounting notes may be entered in the same line as the entry to make them easier to see. Accounting notes can also provide useful historical context; historians get much more out of annotated accounting ledgers than terse accounting records.