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1.Maintain and update existing chart of accounts, customer, supplier, inventory and fixed asset records and subsidiary accounts
2.Maintain secure record of all processed transactions for audit purposes

Double Entry Bookkeeping In An Integrated Accounting System

An integrated accounting system is a software application, which standardises the processes to record transactions along with disseminating financial information. The following steps would be followed to implement an integrated accounting system:

  • Firstly, the accounting method needs to be selected, which might be cash or accrual accounting.  Cash accounting records cash receipts and cash payments at the time of occurrence, in which accounts payable and accounts receivable are not needed. Accrual accounting realises revenue at the time it is earned and not received and expense at the time they are incurred (Ahmad et al. 2016).
  • Secondly, it is necessary to decide whether to use accounting software program or manual accounting ledger system. It is relatively easier to purchase an accounting software system due to less number of issues involved. In this case, the user does not have to possess accounting knowledge for using various software programs of accounting on the market. Hence, accounts would be formed for each type of activity like expenses, revenue and owners’ equity.
  • Thirdly, a method needs to be created in order to enter bills, invoices and revenues. The parameters need to be created around the personnel to be held responsible for data entry in the accounting system and the time of data entry. In this case, a process-mapping format could be used with the help of either Microsoft Visio or a graphing tablet. With the mapping out of this process, staffs could be trained easier in providing training to the staffs about the way of following the process and it would help in keeping track.  
  • Finally, an accountant needs to be selected for reviewing the books either once in a month or once in a quarter. Hence, the accountant needs to be chosen for gaining effective references and close to the location of the business. In addition, the accountant has to be certified and credentialed in the operating market of the organisation (Arcega et al. 2015).

In an integrated accounting system, the recording of transactions is made depending on double entry bookkeeping and costs are categorised depending on function that enables the organisation in determining product cost with essential classification. For instance, the purchase of raw material is assessed by its nature and rather than posting it to the purchase account, it is posted into “stores ledger control account”, “overhead account” or “work-in-process ledger control account”. In a similar manner, the payment related to direct wages is posed directly into “overheads control account” or “wages control account” rather than posting into “direct wages account”.  

There are two ways through which computerised accounting system could be maintained within an organisation and they are demonstrated briefly as follows: 

One of the most significant prerequisites of computerised accounting system  is the formation of an effective accounting framework, which is related to the principles of accounting, grouping and coding structure. This is the environmental application related to the computerised accounting system (Lehman et al. 2014).

An effective and designed operating procedure coupled with appropriate operating environment is crucial to combine with the computerised accounting system. It is a database-oriented application, in which the transaction data is kept in a database, which is organised properly. With the help of the needed interface, the user is involved in operating on such database. In addition, the needed reports are obtained with the help of appropriate transformations of stored data into information. Thus, computerised accounting system takes into account the primary needs of any database-oriented application in computers.  

With the help of computerised accounting system, a business could remain organised. The following series of steps are followed for generating reports in a computerised accounting system:

  • Firstly, information is entered into the system, which helps in easy search for information. Thus, the staffs could search for any financial information, when required.
  • Secondly, a single accounting entry is needed for all the transactions rather than multiple entries needed in a manual accounting system. This minimises the room for errors.
  • Finally, there is automatic update of the accounting records and as a result, the account balances like the customer accounts are updated automatically as well (Nias Ahmad et al. 2016).

Computerised accounting system helps in recording financial transactions, since it is a consistent, reliable and transparent system. Hence, in order to maintain the integrity of the computerised accounting system, the following features need to be present in the system:

  • Automated detection of exceptions to general operations
  • Suspicious activity patterns
  • Automatic cross-referencing of personal identification numbers related to fraud
  • Cross-reference related to asset inventories along with purchase of equipment
  • Rules related to automated disbursement of cash
  • Detection of  ghost workers

The chart of accounts lists all the accounts that are used in the general ledger of a company (Pabst and Perrin 2015). The accounting software uses this chart for aggregating information into the financial statements of an organisation. Account number is used to sort out the chart for easing the task of identifying particular accounts. The assets, liabilities, shareholders’ equity, revenue and expenses are included in the chart of accounts.

Prerequisites Of Computerised Accounting System

The accounting reports are the compilations of financial information, which is  obtained from the accounting records of an organisation. These reports could be custom-made reports and brief, which are aimed for particular purposes like detailed sales analysis by region or the profit margin of a particular product line (Sekyere, Amoateng and Frimpong 2017). Two examples of the accounting reports include the following:

This report depicts the revenues made in a period from which all the expenses are deducted for obtaining profit or loss. This report is used widely, as it helps in judging the overall business performance.

This statement depicts the closing assets, liabilities and equity balances as stated in the date of this statement. This report is used for judging the financial reserves and liquidity of an organisation.

A store is a ledger account, which is a computer and manual record of production supplies and raw materials stored in a production facility (Ware 2015). The warehouse manager is involved in maintaining these assets. In addition, it is valuable to maintain a perpetual inventory system, as it detects the existing quantity of items on hand.  

  1. Raw materials, factory consumables, subcontract labour, purchases 

Accrual accounting is a method of accounting, which gauges the position and performance of an organisation by realising economic events irrespective of the occurrence of cash transactions. The general principle is that the matching revenues to expenditures help in realising economic events during the occurrence of the transactions, instead of the time of the payment received or made. This method enables the present cash inflows or outflows to be merged with the future anticipated cash inflows or outflows in providing an accurate overview of the present financial position of the organisation.

The requirement for this method arises due to the rising complexity of business transactions and intention for highly accurate financial information. Hence, credit sale and projects providing revenue streams for greater timeframe influence the financial condition of the firm at the transaction point. Hence, such events need to be depicted on the financial statements in the identical reporting period that such transactions take place.  

This is the reverse of cash accounting, which realises transactions only at the time of cash exchange in relation to a computerised accounting system. For instance, a consulting firm is considered, which provides a service of $5,000 to a client on 1st January 2018. The bill for services is provided to the client and cash payment is made on 25th January 2018. For entering this transaction, the record is different under the accrual and cash methods. The revenue generation of the consulting services would be realised, if the company receives the amount under cash method. Conversely, the accrual method realises revenue at the time the services provided for the client are inferred despite the unavailability of cash at bank. On the general ledger, at the time the bill of payment is made, debit is made to accounts payable and credit is made to cash account.  

Generating Reports In A Computerised Accounting System

The fundamental principles of double entry accounting associated with a computerised accounting system are depicted briefly as follows:

Each transaction engages two parties, which include debit and credit. As per the primary principles of this system, each debit of some amount develops corresponding credit or each credit develops corresponding debit for the identical amount.

All the transactions need to have one receiver and one giver for exchange.

The money that a party provides in a transaction is identical to the money the party receives.

Distinct entity:

In this type of system, the business is taken into account as a distinct entity from the owner. Thus, the business is adjudged as a distinct entity (Wells 2018).

Dual aspects:

Each transaction is segregated into two aspects. Debit is placed in the left side of the transaction, while credit is placed in the right side of that transaction.

Outcomes:

In the double entry system of bookkeeping, the debit side is equal to the credit side. In this, the ascertainment of outcomes is easy.

Complete accounting system:

Double entry bookkeeping is a complete and scientific system of accounting. 

Source documents are taken into account as the physical basis on which the recording of business transactions is made (Yaftian, Mirshekary and Mihret 2017). The following are the main features of financial data entry into the computerised accounting system:

  • Brief description of the business transactions
  • An authorising signature
  • Date of the transaction
  • A particular amount of money 


The following information is incorporated in pertinent source documents into the computerised accounting system:

  • Cancelled cheque
  • Cash register receipt
  • Invoice
  • Credit memo related to a customer refund
  • Deposit slip
  • Staff time card
  • Purchase order
  • Computer-generated receipt 

References:

Ahmad, M.A.N., Smith, M., Ismail, Z., Djajadikerta, H. and Roni, M.S.M.M., 2016. Computerised Accounting Information Systems and Firm Performance: The Mediating Role of Transparency. In Regional Conference on Science, Technology and Social Sciences (RCSTSS 2014) (pp. 49-59). Springer, Singapore.

Arcega, C.K., Datinguinoo, E., Guerra, J., Guno, C., Mayuga, H.J., Villamena, E. and Manongsong, J.L., 2015. Computerized vs. Non-computerized Accounting System of Small and Medium Enterprises in Lipa City, Philippines: A Comparative Analysis. Asia Pacific Journal of Academic Research in Business Administration, 1(1).

Lehman, G.P., Chauhan, N., Benvenuto, A. and Ziff, P., Dun and Bradstreet Corp, 2014. Process and system for automated collection of business information from a business entity's accounting system. U.S. Patent 8,799,116.

Nias Ahmad, M.A., Smith, M., Ismail, Z., Djajadikerta, H.G. and Roni, M.S.M.M., 2016. Computerised accounting information systems and firm performance: The mediating role of transparency.

Pabst, W. and Perrin, B., 2014. E-Generation: A Computerised Accounting Practice Set Using MYOB Accountright Plus Version 19. John Wiley & Sons.

Pabst, W. and Perrin, B., 2015. Accounting Made Easy With Reckon Accounts 2014: Learn the Basics of a Computerised Accounting Package.

Sekyere, A.M., Amoateng, A.K. and Frimpong, K., 2017. The Determinants of Computerized Accounting System on Accurate Financial Report in Listed Banks on the Ghana Stock Exchange. International Journal of Finance and Accounting, 6(4), pp.104-110.

Ware, E.O., 2015. Computerised accounting system an effective means of keeping accounting records in Ghanaian banks: A case study of the Ga Rural Bank. International Journal, 111.

Wells, P.K., 2018. How well do our introductory accounting text books reflect current accounting practice?. Journal of Accounting Education.

Yaftian, A., Mirshekary, S. and Mihret, D.G., 2017. Learning commercial computerised accounting programmes: Perceptions and motivations. Accounting Research Journal, 30(3), pp.312-332.

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