Accounting Systems

Objectives of a Basic Accounting System
Keeping track of how your business is going is not difficult if you have in place a basic system.
Your accounting (or bookkeeping) system share the same 2 basic objectives.
These are:
  1. To keep track of all income and expenses and increase the chances of your business making a profit
  2. To collect all the necessary financial data from your accounts so that financial statements can be drawn up and a profit arrived at for taxation purposes.
The actual process of keeping your books involves 3 steps:
  1. Keep receipts or other acceptable documentation which confirms the receipts and payments of your business
  2. Make sure you summarise your income and expenditure for each period
  3. Complete summaries for your accountant or financial adviser so that financial statements and annual reports can be completed

Overview - Basic Accounting System

Your Accounting System Monitors Periodically these areas:
A good accounting system allows you to extract correct information to help you monitor on a daily, weekly or monthly basis various areas of your business. 

Each Day

  1. Balance of the cash you have in your bank account.
  2. Balance of cash that you have on hand.
  3. A daily summary of all your sales and income received.
  4. A daily summary of all your expenses and monies paid out.
  5. Other daily matters that require attention.

Each Week

  1. Details of people that owe you money for sales you have made to them on credit (accounts receivable).
  2. Details of people that you owe money to for purchases you have made on credit (accounts payable).
  3. Details of your staff and payroll.
  4. Details of the taxes due by your business and the Fed Income Tax and Sales Tax due to the IRS.

Each Month

  1. Details information extracted from your accounting system so that monthly financial reports and accounts can be prepared by your accountant.
  2. Receive copies of your profit and loss accounts and balance sheets for the month.
  3. Review your balance sheet for the month so that you can see what the assets and liabilities are.
  4. Reconcile your bank account by doing a full Bank Reconciliation.
  5. Balance your petty cash.
  6. Review various positions of the business especially as regards its accounts receivable to ensure that debt collection is not slow and that bad debts do not arise.