Accounting System

Accounting rests on a set of concepts for identifying, recording, classifying, reporting, and interpreting transactions and other business events relating to enterprises. While a transaction involves a transfer or exchange between two or more entities, an event generally is the source or cause of changes in assets, liabilities, and equity.

The process of recording, classifying, and summarizing financial transactions into a usable form that provides financial information about a business or an individual is known as bookkeeping.

Accounting System is organized set of manual and computerized accounting methods, procedures, standards, and controls established in order to gather, record, classify, analyze, summarize, interpret, and present accurate and timely financial data for management decisions. Regulatory requirements may exist on how a particular accounting system is to be maintained.

Accounting systems also include industry-specific applications. A retail accounting system, for example, has different requirements than in other industries. Legal accounting system has other specific requirements as well, including the tracking of time spent by attorneys, dollar amount of time billed out based on an hourly rate and the utilization rate of each attorney.

Not-for-profit accounting has its own specific set of reporting requirements. For example, funds must be tracked so that donations designated for specific purposes are properly spent. The system should also be able to produce donation statements that report on amounts contributed by individual donors.

While implementation of accounting system was previously a paper-based process, in this age of computers most businesses use computers and accounting software. This computerized accounting system is also referred to as accounting information system (AIS). It is a computer-based system that collects and process transaction data and then disseminates the financial information to interested parties. The accounting information system combines traditional accounting practices with modern information technology resources. Information technology infrastructure (hardware) and computer program (software) are employed to operate the accounting system and process data.

Tags: accounting, bookkeeping, automated accounting system, electronic accounting system, computerized accounting system, accounting information system, AIS