What is a Bookkeeping System?
If you are planning to become a accountant or bookkeeper, you will need to familiarize yourself with bookkeeping systems to attract clients or to be recruited as an employee. In a world where virtually every business task is performed on a computer, it is no surprise that most bookkeeping is now done electronically. With all of the advantages of using a computer system comes the pain of learning a sometimes complex system and all of its features.
Bookkeeping systems are technically defined as single or double-entry software systems that are programmed with a set of rules that are specifically for recording financial information and various financial transactions that occur in business. Some systems are much more advanced than others, but any system that will aid in the recording of financial transactions is defined as bookkeeping software system. Read on, and learn more about the types of systems you may work with and how they can help you be the best bookkeeper or accountant.
What is a Single-entry System?
Single-entry systems, which are most commonly used in small business where the entity does not have many transactions, is a very informal type of system. The system will record the cash disbursements, sales, purchases and also cash receipts on accounts receivables. Anything else, like equipment investments or stocks, will be recorded only in the notes section of the program.
The basic single-entry system will only report to one single account when any transaction is recorded, hence the name. While this is very simplistic for those who are inexperienced with bookkeeping, it can present problems when you start to balance accounts or construct financial statements.
What is a Double-entry System?
A double-entry system is a far more advanced type of bookkeeping system that is used by most companies, bookkeepers and also by accountants with their own firms. With a double-entry system, there are fields for debits and credits so that every time that a transaction is recorded on one statement it is recorded on the corresponding account. With these systems, there are fields for everything from basics like cash receipts and sales to other transactions like the purchase of stock or buildings. It also includes tools that help with constructing the most detailed financial statements. This will help any company get fair valuation, file taxes, or secure funding for more cash flow.
Why is Computerized Bookkeeping so Popular?
In the past, the only way that records could be recorded and maintained was manually. Now, paper-based bookkeeping is a thing of the past. With computerized systems, recording all business transactions is easier than ever. When a credit is reported, the corresponding debit can be recorded as well. The only drawback is the time it takes to get technical training on the system, but once you learn you can be much more efficient.
If you are studying to be an accountant, bookkeeping is just one aspect of accounting that you will need to know. As you begin your career, it is essential that you learn how to prepare financial statements, how to file taxes and how to write internal reports. While all of these roles are important, you will also need to get technical skills so that you are able to record transactions and make changes in a bookkeeping system.