Various Types of Accounting Systems

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As a business owner, it's your responsibility to keep track of your finances and pay taxes on time. Depending on your preferences, you can do your own accounting, hire a professional or designate someone in your organization to handle this job. No matter what option you choose, take the time to familiarize yourself with the various accounting systems out there. Make sure you have a clear understanding of the differences between single-entry systems and double-entry systems in addition to manual and computerized accounting software programs.

What Is an Accounting System?

There are different types of accounting systems, and each has distinctive features. However, they all have a common purpose: to manage the financial activities of a business, such as its revenue, expenses and liabilities. In this digital age, most accountants use sophisticated systems featuring overdue payment reminders, advanced reporting capabilities, automated data backups, cloud-based services and more.

Without an accounting system in place, you'd find it difficult to get your books ready for monthly and yearly reporting, keep track of your day-to-day expenses and assess your company's financial performance. Manual calculations are obsolete and prone to human error. Computerized accounting systems, on the other hand, are accurate and make everything a lot easier. You or your team will save time and money while preventing costly mistakes.

These programs can handle all types of accounting information and generate detailed reports. You can use them to calculate the wages paid and payable to employees, record transactions, check credit turnover ratios and process data related to sales, payroll, inventory and other key aspects of your business. Some accounting systems are designed for small businesses and freelancers, while others appeal to large enterprises, government agencies or specific industries.

Types of Accounting Software

  •        Single-entry systems
  •        Double-entry systems
  •        Manual accounting systems
  •        Computerized accounting systems :

Manual vs. Computerized Accounting Systems

Computerized systems, on the other hand, record financial transactions electronically and can streamline your operations. Users can choose to view data in different formats, store it in the cloud and access it on the go. Examples include:

  • FreshBooks
  • Zoho Books
  • FreeAgent
  • QuickBooks
  • Xero
  • ActivityHD