2.8. Accounting system
An accounting system may be defined as an orderly arrangement
and devices used for the systematic or organized collection, processing, and
reporting of financial and other information essential to the effective conduct
of the activities or transactions of a business firm. It is basically composed
of:
> A set of inter-related activities involving the originating,
processing and reporting financial and other data.
> Written records and reports necessary to collect process
store and transmit information.
> Equipment and devices used in the system to expedite the
work and provide better control. Personnel directly involved in the accounting
activities.5
2.8.1. Objectives of accounting system
· To provide means by which interested parties may be given
information on the financial position and results of operations of an
enterprise.
· To facilitate management in planning, control and
decision n making
· To comply with various laws and government
requirements
· To protect the business and safeguard its assets
· To accomplish different routine administrative activities
like billing, paying receiving, purchasing, etc.6
4 Rajeshwar kumar sharma and R.S popli, principle and
practice of financial accounting, seventh edition, 1994
5 American accounting association, a statement of
basic accounting theory, 1966, P.1.
6 Anthony, R.N. and J.S , Management accounting
principles, Taraporewala,1975,p.11
2.8.2. Characteristics of an effective accounting
system
· Comprehensive enough to supply the users with all the
information they require
· Consistent in its various components which must be
integrated so that there is no conflict in the data produced
· Flexible so that it could easily adapt to changes
occurring in the business firm and the economic environment
· Practical in providing useful information that is
balanced against the cost of providing it.
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