An accounting system is the system used to manage the income, expenses, and other financial activities of a business
An accounting system allows a business to keep track of all types of financial transactions, including purchases (expenses), sales (invoices and income), liabilities (funding, accounts payable), etc. and is capable of generating comprehensive statistical reports that provide management or interested parties with a clear set of data to aid in the decision-making process.
Today, the system used by a company is generally automated and computer-based, using specialised software and/or cloud-based services. However, historically, accounting systems were a complex series of manual calculations and balances.
What an accounting system manages
Expenses: The amount of cash that flows out of the company in exchange for goods or services from another person or company are the expenses. In older accounting software or with a manual system such as Excel, it is necessary to manually enter, balance, and categorise each expense. An automatic accounting system allows quick entry, categorisation and automatic balance of expenses.
Invoices: Creating a professional looking invoice is an important part of developing a positive brand image and building confidence with customers. Today, some accounting systems such as Debitoor allow for instant invoice creation with the ability to customise and automatically keep track of paid invoices and income.
Funding: All the business liabilities, whether accounts payable, bank loans taken to support the business, or mortgages, etc. An accounting system keeps track of these liabilities as payable values and automatically updates the balances as soon a payment is made and accounts are settled.
