Different types and methods of accounting systems

As the owner of a newly started business, knowledge of the different types of accounting systems will be able to help you decide the type of accounting system you can choose for your business transactions. You can also get information related to the various accounting methods adopted globally. In fact, there are two types of accounting systems, namely single entry accounting systems and dual entry accounting systems.

Single entry accounting systems. If the type of business you just started falls into the small-scale category, a single accounting system would be very helpful. This type of system maintains a record of business transactions related to cash disbursement, cash receipt, purchase and sale. This type of system is more of an informal system suitable for small business transactions. The bookkeeper usually uses this system to maintain a daily record of cash income and cash payments and also a monthly record of cash income and payments. In a single posting procedure, each transaction will affect only one account. In the case of a double entry transaction, each transaction would have an entry on both accounts.

If there is a sale of a particular item, the cash account or cash deposit account will only be updated with the amount received. The corresponding entry in a sales account is not created in a single accounting system.

Therefore, it does not give the full financial status of the various systems in the industry. If you want a detailed account of the various systems involved in business transactions, you can choose a double entry system.

Double entry accounting system. This is the type of system most commonly used by the bookkeeper or a bookkeeper in any business organization. This system is used by the bookkeeper to keep complete accounting information on the business transactions. This system also introduces the concept of debit and credit. Because there are many accounting systems in one business, a charge in one of the accounting systems will usually be accompanied by a credit record in another accounting system or in more than one accounting system. Similarly, an accountant may be required to make more than one charge for a single credit entry. The company’s financial performance can be clearly determined based on the accounting information obtained from the double entry accounting systems.

Basically, there are two methods of accounting. One is the manual accounting method and the other is the computerized accounting method.

Manual bookkeeping is the oldest form of bookkeeping, where the bookkeeper will use a diary or ledger to record the various accounting records related to the business transactions. Small business owners still prefer manual bookkeeping, as it is economical and suitable for maintaining less complex business transactions.

Computer-controlled bookkeeping helps the bookkeeper perform complex business transactions in a much easier and faster way. An accounting software system is usually used to perform the accounting records. The advantage of this system over the manual accounting system is the ease of generating reports and performing calculations. Complex calculations can be done accurately and quickly.