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definition of accounting system

accountancy

It is a science within the administrative and financial sciences and is considered one of the oldest sciences related to financial matters. Accounting is the language of work and the ability to understand this language as it allows individuals inside and outside the organization to understand that language about how the institution performs and how it can improve performance in the future, and accounting is a systematic and comprehensive recording of all transactions The accounting system is responsible for regulating expenses, expenses and other financial activities. This system also provides records and reports that include all financial transactions that are used to make appropriate decisions and deal with changes and circumstances that occur in the facility.

accounting system

The accounting system is the system that is used to organize expenditures, expenses and other financial activities. The accounting system allows tracking financial transactions of all kinds, such as purchases, sales, etc. It is able to provide comprehensive reports that provide management or interested parties with clear data to assist in decision-making, and the accounting system is automated and computer-based. It uses proprietary software rather than a complex series of manual accounts and balances.
definition of accounting system
definition of accounting system

The history of the accounting system

Its history dates back to more than 7000 years, when accounting records were found in the Middle East, where it was important to keep track of revenues and expenditures, whether to determine profit or to impose taxes and fees. In the fourteenth century AD, Luca Pacioli was adopted as the father of accounting to explain the double-entry bookkeeping system By the Venetian merchants during the Italian Renaissance and in the modern era specifically the eighteenth century, the first accounting machine was invented in 1880 by Hermann Hollerith, but in the twentieth century, technological development, especially in the computer and accounting system that does everything from the beginning of the DOS-based accounting system, has become to Internet-based and using SaaS or cloud computing.

The importance of the accounting system

 To succeed in managing any business or project, there must be a strong and successful accounting system. The accounting system allows monitoring of financial health and allows the entry of all expenses, income and others. Companies of all sizes also benefit from accounting programs for easy access to information for decision-making and financial reports. The importance of the computer system lies in:

Health and accuracy

or in other words; Reducing human errors, the accounting system helps to increase the accuracy of records by reducing or eliminating human errors in the calculation, and manual bookkeeping also includes a lot of calculations manually, so the account can be incorrect and the final balance is affected by this error. However, the accounting system is not safe There are human errors as a result of data entry, but the error rate is somewhat lower.

the speed

The accounting system allows companies to process accounts more quickly than manual processing, and this speed comes from the use of computers, which are able to process numbers faster than the human brain, and also allows organizations to increase efficiency through automation.

Cost

It is natural if the system and accounting are automated to lead to a reduction in employees and thus payroll and accounting costs management as well. Speed ​​and quality contribute to reducing cost, whether in warehouse inventory, accounting, collection, or others.

Reports

Accounting system helps in providing accurate and timely financial information, as many accounting software systems have built-in financial reporting that enables users to create reports simply creating such a report manually would be a time consuming process.

Tax

The tax filing process can be complicated, as it requires closely monitoring all business transactions. Accounting software facilitates this process by verifying all financial details. In addition, there are companies that produce tax return programs that integrate with their accounting programs, and this allows the return to be calculated semi-automatically. Instead of spending time and resources doing necessary details manually.

types of accounting systems

There are several types of accounting systems, and each system performs the purpose and objective required of it in one way or another. The accounting system varies according to the size and type of the company benefiting from the accounting system, as well as according to what is intended by this system, whether it is simple or complex and comprehensive, including the following:

Data tables

To aid in bookkeeping, small businesses often use spreadsheet programs such as Microsoft Excel, Google Sheets, or OpenOffice, where they can modify the table and enter and do light math like addition and subtraction. Spreadsheet programs can also be used to list expenses, sales, and other data. Finance and handling of more advanced accounting matters In general, spreadsheets usually complement other accounting operations, and aid in the bookkeeping process rather than being paper-based and manual.

business accounting software

Business accounting software can handle most small to medium-sized accounting needs The accounting system works with almost any business Creates custom functions to fit most needs Business accounting systems often include charts that summarize data, financial reports, and forms required for taxes and vulnerabilities Vary between software specific and QuickBooks FreshBooks is a common example of such systems.

Project Accounting System

It is often used in larger companies that require more complex operations, and the project accounting system helps organizations manage this complexity. This type of program is usually used by companies that contain projects and industry, such as construction companies and various factories.

Accounting software for large organizations

Accounting is often integrated with other services provided by the company in this system, such as workflow management, insurance and banking. Often when a large company chooses this type, it follows a multi-stage protocol. Instead of using two-dimensional spreadsheets, enterprise software is based on specific databases. Examples of these systems can show the relationship between various sets of information, and Oracle, SAP, or Microsoft Dynamics GP.

Custom Accounting Software

This is done when a business creates its own accounting software. As the business grows, employees may be asked to write software to handle various accounting situations, and the company may find that it has created its own accounting system. In certain cases, a business may create a custom system for it because it did not find An accounting system that meets its needs.

Components of the accounting system

The accounting system can be thought of in terms of its connection to the accounting cycle, where each section of the system is designed to achieve one or two steps in the cycle that leads to the preparation of financial statements and reports. as follows:
  • Source Documents: These are the documents that follow business transactions and are created as a written record of a transaction that is made or a transaction is made and a record of the original transaction such as invoices and purchase orders is kept.
  • Input devices: They are tools used to enter information into the accounting system and help employees to enter source documents into the system such as keyboards and modems.
  • Information processors: They take the primary from the input devices and send them to the ledgers and reports and make accounting entries until you get a final result after processing in the form of a budget or final financial reports.
  • Information storage: This component stores and archives data after processing the information. Storage devices usually consist of servers and hard drives, and file cabinets are required for this process.
  • Output devices: They are devices that take information from system storage and display it in a way that can be used, such as monitors and printers.
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