Every organization whether profit or non-profit making a consistent accounting system for it to succeed. The accounting system offers accountability as it records all activities taking place in the organization. This includes monetary inflows, outflows, expenses and revenues operating at a particular period of time. The accounting system is significant in every business as it provides financial information required in evaluating effectiveness of the business. This enables the management to plan ahead, and focus on past failures to avoid repeating them in future. Additionally, the accounting system presents information and financial reports showing assets, liabilities, ownership equities, loss, profit as well as revenues and expenditures among others (Bodnar & Hopwood, 2009).
In the past, accounting systems required effectiveness which was achieved using extensive manual work. This was not only time consuming, but also aggravating and tedious. The transactions relied on personal effort to record transactions, addition, and subtraction, summarizing and checking errors. Advancement in technology has eased this as computers are now used in almost all business. Computers are preferred as they have high speed, reliable, and enough space for data storage. This has reduced operation cost since fewer workers are employed to do accounting work. Accounting software has been developed which enhances financial reports, error checking, calculations and data storage. There is more cost-effectiveness and efficiency in accounting systems as compared to the past centuries. Managers can now have direct control of financial and accounting system with ease (Merchant 1985).
Financial accounting deals with recording, and analyzing financial transactions taking place in a business. This helps in decision making as well as general effectiveness of the business. Financial accounting presents business information inform of income statements, balance sheets and other statements directed to external stake holders including governmental agencies, creditors, suppliers, stockholders and lenders (Larson et al., 1996).
Financial accounting defines the principles, procedure, broad rules and concepts required in managing accounting systems. This requires cooperation from all workers in the financial department to enhance decision making, effective and efficient operations which will favor profit making in the business. An account refers to a record which shows the current status of the business at a particular time. The accounting system gives detailed information regarding every account opened in the organizations. It governs reporting, recording and operation of all accounts opened in that organization. The accounting period refers to the particular period which a certain financial statement covers. It represents liabilities, assets, owners’ equity, expenses and sales revenue. Firms must monitor money. That is, how much money they have and how this money is being used (Schreyogg 1980).