Accounting systems are made up of manual or computerized records of financial transactions for the purpose of recording, categorizing, analyzing and reporting financial management information in a timely manner.
Examples of accounting systems
When selecting an accounting system, understand your needs and the categories of accounting systems and features available to you.
Management accounting
The purpose of managerial accounting is to provide managers with information to plan, control, and manage the operations of a business. It provides management with the information necessary to make important decisions about the business. One type of business accounting system is cost accounting. Cost accounting systems record the actual costs incurred in delivering a product or service, comparing these costs with standard or planned costs and highlighting deviations for investigation and follow-up. Another managerial accounting system is lean accounting. Lean accounting involves examining related processes and results to determine how to create more value for less cost, eliminating wasted resources.
Inventory accounting
Inventory accounting systems are used to plan and monitor inventory levels and inventory-related activities. A common inventory system is barcode scanning. Each inventory item is labeled with a barcode. As inventory items are brought into a warehouse or moved out of a warehouse, barcodes are scanned to add or subtract from inventory. Bar code systems can also be used to track and account for items as they move through a warehouse. Another type of inventory accounting system is RFID, a new technology that will increase its use. This type of system, more advanced than the barcode, has a device on each inventory item that emits a signal. Readers can detect the signal and track inventory. Unlike barcode, this system can track actual inventory movement in real time as it moves around a warehouse.
Industry specific accounting
Accounting systems also include industry-specific applications. A merchandise management accounting system, for example, has different needs than in other industries. Sales are captured at the point of sale using computerized cash registers at the point of sale. When items are put up for sale, the retail accounting system must properly track and report reductions in the price of goods. Legal accounting software also has other specific requirements, including tracking the time spent by attorneys, the amount of time billed based on an hourly rate, and the utilization rate for each attorney. Utilization rate is the percentage of time spent by an individual that is billable compared to administrative time.
Non-profit accounting
Nonprofit accounting has its own specific reporting requirements. For example, funds must be tracked so that donations designated for specific purposes are spent properly. The software should also be capable of producing donation statements that report amounts contributed by individual donors.
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The different types of inventory systems
Inventorying company resources is important because inventory is often the main asset of the company to generate income. An incorrect inventory record can negatively affect the entire company. There are many options for managing inventory that are cost-effective solutions to meet your organization’s needs.
In general, there are three types of inventory systems: the manual entry system, the barcode system, and the radio frequency identification (RFID) system. The manual entry system continues to be a cost-effective way to track and record company products. The companies that usually use the manual system are those that are small in size and register few articles or products.
Typically, the manual system uses a traditional spreadsheet program to assist in inventory management. However, spreadsheets also have weaknesses such as limited capabilities to consolidate and maintain data. Also, spreadsheets often lack controls and this leads to many errors. Manual systems are not suitable for large companies with multiple products.
Another type of inventory system is the barcode system. These systems can be very cost effective and offer many advantages over the traditional form of manual inventory. Bar code systems offer accuracy by eliminating input errors. It’s also better because scanning the codes is faster than entering data into the spreadsheet. Although buying barcode scanners can be quite expensive, their benefits appear to outweigh their costs.
The RFID system uses tags that are interpreted directly by the company’s central computer system. This computer updates automatically when labels enter or leave the facility. However, the use of the RFID system is very expensive compared to the manual entry system and the barcode system. It also offers much better results compared to the two. RFID systems are more suitable for companies that handle large amounts of goods.
There are many accounting services and inventory control systems available to all businesses, including manual entry system, barcode system, and RFID system. Small companies can use the manual and barcode system, while for large companies RFID is more suitable. However, depending on a company’s budget and inventory diversity, they may want to choose one system over another.