Question

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Q3: What is an accounting system? List all the six types of operational accounting systems and explain them in your own words.

Answer 1

Accounting system means a system that helps you record the day to day transactions in the systematic form and manner which would give you ultimately meaningful results with regards to the profitability and financial position of the entity. An accounting system is a system that is employed in a company to organize financial information. It can be either manual or computerized. The main reason why you should be using an accounting system is to keep track of expenses, income, and other activities. Basically keep an eye on all data that affect the finances of a business organization.

Considering the recording aspect of the transactions in the books, the operational accounting systems are discussed as follows:

Manual System - In this system the whole accounting process is done in physical books of accounts which are maintained by the accountant. From the basic journal entry till the end result everything is recorded and prepared manually.

Single Entry System - Only one aspect of the transactions are recorded in the books of accounts which is called as single entry system of accounting. Mostly personal nature accounts are certain important real accounts like cash account is maintained in this system.

Double Entry System - Both the aspects of Debit and Credit are recorded with regards to a particular transaction in the books of accounts, the system is called as double entry system of accounting.

Computerized System - It is the use of software to record the transactions. Here the accountant passes the entry and software does the effect till the end of the financial statements. Eg: Quickbooks