2.24. Accounting system for SMEs
Many accounting guidelines and standards govern the recording
and reporting of transactions. Transactions and accounting ledgers are part of
a larger, complex system for controlling firms and reporting on their sources
and uses. In this system accountants are responsible for showing the movement
of funds throughout the institutions. They record how funds are received and
used and what resources are used to produce or deliver goods and services.
To do this, they need a chart (or list) of accounts. Similar to
a database structure, the chart of
accounts provides accountants with a
structure for posting transactions to different accounts
and ledger. It also determines what appears in the financial
statement. The chart of account typically designates each account by:
An account number
A description; for example national bank checking account, or
accrued salaries, HQ staff.
The type of account, such as asset, liability, equity, income, or
expenses. A bank account is categorized as an asset, for example and salaries
are categorized as expenses.
For SMEs the accounting system can be a simple manual one
based on the general journal (where transactions are recorded chronologically
as debits and credits), general ledger ( where activities from general journal
is summarized by account number) , and other journal required to manage the
business, such as purchase, payment, sales receipts, and payroll journals.
Because the expenses of maintaining multiple manual journals,
enterprises typically do not prepare all of these other journals.
A manual accounting system typically includes at least the
following: Chart of accounts
General journal
General ledger
Subsidiary ledgers ( accounts receivable, inventory, fixed
assets) Transaction reports
Financial statements22
22 Rwanda revenue authority Tax department's reports
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