Accounting system

Accounting System is a methodical procedure for identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm's assets, liabilities and owners' equity.

Overview

An accounting system is a collection of processes, procedures and controls designed to collect, record, classify and summarize financial data for interpretation and management decision-making. It combines the methodologies, personnel, and systems used by an organization to track finances and business transactions.

Types of Accounting Systems

There are several types of accounting systems, including a manual accounting system, an automated accounting system, a computerized accounting system, and a cloud-based accounting system.

Manual Accounting System

A manual accounting system requires the acting accountant or bookkeeper to post business transactions to the general ledger and the various journals manually.

Automated Accounting System

An automated accounting system uses accounting software to record and store financial data, making the accounting process simpler and more straightforward.

Computerized Accounting System

A computerized accounting system is a software program that is stored on a company's computer, network server, or remotely accessed via the Internet, and it can be a great benefit for a business.

Cloud-based Accounting System

A cloud-based accounting system is hosted on the vendor's servers and can be accessed through a web browser. It's an increasingly popular option due to its scalability and affordability for small to medium-sized businesses.

Benefits of Accounting Systems

Accounting systems offer a range of benefits, such as improved financial management, compliance with tax obligations, and enhanced business decision making. They also provide a clear picture of the business's financial health, which can aid in securing investment.

See Also

• Financial accounting
• Management accounting
• Accounting software
• Bookkeeping