Accounting System

What is an Accounting System?

An accounting system is a financial software application that records, processes, tracks and reports on accounting activity and transactions, entered into a digitised ledger.

Ultimately the accounting system software should produce statutory and management reports based on the operating results, and other compulsory returns related to the nature of the organisation. Most reports are used internally to assess profitability and make strategic decisions. Other accounting system reports may be made available to external bodies such shareholders and investors, and government departments (tax, pensions, regulators, etc.).

Such systems usually have in-built processes to automate or speed up processing, such as:

  • Fixed Asset Register
  • Reconciliation
  • eBanking
  • eProcurement
  • Debtor Management
  • Cost Allocations
  • Financial Report Writers

It is also essential that an accounting system has sufficient internal controls and security measures in place. This is to safeguard the data, protect against malpractice, and provide an audit trail.


The advantages of modern accounting systems include:

  • Built using efficient relational databases, so processed transactions are easily retrievable in detailed or summarised form.
  • Users get a familiar programme interface, such as Microsoft Excel. This means a shorter learning curve, faster usage and easier collaborative working.
  • Information is easier to keep up-to-date, enabling more accurate financial reporting and decision making, and greater visibility.
  • Where the ledger is unified (i.e. no separate Nominal, Purchase and Sales ledgers), data can be retrieved from a single source. Therefore, control account batch processing is unnecessary and data is delivered in real-time, for reporting and enquiries.
  • Reporting tools can be easily used by Finance and other staff. Spreadsheets and browsers can be dynamically linked to the financial database. Reports are generated without relying on IT staff and external developers for help. Ad-hoc reports can be created on the fly.
  • The usual difficulties associated with consolidated reporting, are dramatically simplified through the use of a unified ledger stored in a properly indexed single database. This is particularly advantageous for organisations comprised of several legal entities. These can consolidate quickly and efficiently, dealing with any inter-company considerations, and posting adjustments.
  • Stricter controls over data auditing, user access, creation of bank details, authorisations, etc., and a separate integrated module to handle user administration. This is intended to meet the tighter requirements of regulatory bodies, and the rulings of the Sarbanes-Oxley Act 2002, in response to several high-profile financial scandals of recent years.