Accounting systems are a key part of the Processing Bookkeeping Transactions course, Accounting Trainees and Bookkeepers need to thoroughly understand accounting systems.
What are accounting systems?
Good question – what do we mean by an accounting system? Well, essentially most businesses buy and sell goods and/or services. Money comes in and money goes out. All the accounting system does is record this movement of money. A large building contractor may only issue one invoice a month for a substantial amount of money, whereas Amazon the online shopping company makes 12 sales a second and every sale needs an invoice!
So the accounting system used depends upon the nature of the business.
All businesses carry out financial transactions such as selling goods and services. Can you list some other financial transactions a business may undertake?
If these transactions are not recorded accurately, the business owner will not know how much his customers owe him and HMRC will not know how much profit he is making and how much tax is due.
Remember this is only an introduction to Accounting Systems.
You will learn a lot more about accounting systems as the course develops. But you should be aware that an accounting system is about recording data and producing information.
There are five stages to the accounting system. You will need to learn them:
Books of prime entry
Don’t worry if you find these terms confusing, it is very early in the course and we will go into much more detail as the course progresses. By the time you get to the end of the course you will be using these terms like an old hand.
Earlier we said that there are five stages to the accounting system.
What is the third stage called?
Answer: The third stage of the accounting system is to record financial transactions into the Books of Prime Entry.
Financial transactions and Documents
There are a wide variety of financial documents used in bookkeeping, can you think of four?
I suggest that you Google each of the terms below:
a credit note,
a petty cash voucher
a day book
a cash book
a petty cash book
Print them out and learn the definitions and keep them in your study folder.
Books of Prime Entry
Now that you are aware of financial transactions ( eg the buying and selling of goods and services) and that these transactions result in the creation of financial documents (eg Invoices etc), we now need to record the data on the documents into what we call “Books of Prime Entry”
The main books of prime entry are _________ __________?
The bookkeeping entries in these books will be covered later in the course but for the moment you just need to know they exist and become familiar with their names.
After entries have been recorded in books of prime entry, we use a system called double entry bookkeeping to record them into “Ledger Accounts” such as the _________________ and __________________
Again we will cover the ledgers as the course progresses.
At the end of each month the bookkeeper will list all the totals (or balances) in the ledger and produce what is called a Trial Balance.
You should Google “trial balance” and get a print out and keep an examplein your study folder.
A trial balance is used by the company accountant to check that all entries are correct and that we have not missed a transaction. Again we will do much more on the trial balance as the course progresses.
You may at this stage realise that Accounting is full of fancy terminology such as double-entry, assets and profits etc. Accounting is said to be the language of business, so I’m afraid you will have to learn these terms eventually – but we will do it gradually over the duration of the course so don’t panic and enjoy the quiz below on the introduction to the accounting system.
QUIZ: ACCOUNTING SYSTEM
Leaderboard for Introduction to the accounting system1. Sana-36 Points
2. -36 Points
3. -36 Points
4. Ann Smith-36 Points
5. Susan-36 Points
- PROCESSING BOOKKEEPING TRANSACTIONS COURSE: lesson 1
- Accounting systems – lesson 2 (this page)
- Sales documents – lesson 3
- sales returns – lesson 4
- Processing customer transactions – lesson 5
- supplier documentation – lesson 6
- purchase return – lesson 7
- paying suppliers – lesson 8
- Cash book accounting – lesson 9
- Petty cash – lesson 10
- Balancing off accounts – lesson 11
- Draft initial trial balance – lesson 12