Accounting System Definition: A Comprehensive Overview

Accounting systems are integrated procedures and controls that cover accounting processes. It is the primary function of an accounting system to keep track of a company’s business transactions, summarize them into an aggregated form, and generate reports that allow decision-makers to monitor, analyze, and improve operations.

In the early days, the accounting system used by businesses was utterly paper-based. Nowadays businesses use cloud-based automated accounting software to manage their accounting.

What does an Accounting System do?

Accounting systems track a company or organisation’s day-to-day financial transactions including the sale of goods and services, purchase of goods, payments to employees and vendors, expenses, and Financial activities including acquiring debt, managing working capital etc. With accounting systems, decision-makers or management get a better view of their situations and can take the next step. Collected information and reports from the system can help during annual audits.

The major activity of an accounting system consists of Sales and purchases, payroll, Inventory management, billing and invoicing, growth tracking and tax filing.

Depending on the amount of transactions companies assign trained staff for managing each module.