HomeProductsAccountingAccounting System - Definition, Element, Benefits, Characteristic, and Feature

Accounting System – Definition, Element, Benefits, Characteristic, and Feature

Finance is one of the most important things for a company in managing its business always to run smoothly. Companies generally use accounting systems to organize financial information. In doing business in an organized manner, organizations need a plan to keep track of all the transactions.

Definition of the accounting system

An accounting system is a tool that helps businesses to track and manage their financial transactions and makes accountants’ work more accessible. Business processes and transactions such as sales, purchases, assets, and general ledgers usually run manually can be simplified with these automated solutions.

Accounting applications are beneficial in making financial reports, an essential element in running business operations. Especially when you want to make a decision. Previously, every financial assignment and journal entry the employees had to do themselves made financial reporting impractical. Now you can enter, modify, and interpret data only through an accounting system you can access anywhere.

Is accounting software important?

The main reason why companies should use accounting systems is to track expenses, income, and other activities. Oversee all the data that has an impact on the finances of a business organization. The bigger the size of a business, the cash flow will also be faster and involve a lot of money.

Performing calculations manually will make them vulnerable to errors that cost the company a loss. Therefore, this system will help minimize and even correct human errors and increase its financial management accuracy.

Source: idp.com

Accounting system elements


Forms are documents that are useful for recording all transactions. Besides, it also serves to realize and maintain the company’s internal financial controls. Examples are cash sales invoices, quotation requests, purchase orders, credit sales invoices.


Are physical records or digital documents stored as books, spreadsheets, or data in accounting applications. Useful for systematically recording all accounting transactions before entering the general ledger. It consists of several types, such as public accounting journals, adjusting journals, transaction journals, special journals, closing journals.


An accounting ledger is an account or record for storing bookkeeping entries for balance sheet transactions and income statements. Accounting ledger journal entries can include cash, charges receivable, investments, inventory, accounts payable, company accrued expenses, and customer deposits. Valid for all types of balance sheet and income statement transactions.

Subsidiary book

This element stores the details of a specific account and is an extension of the general ledger. It also makes it easier to prepare reports and balance sheets.


It is the final result of the entire process that the accounting system runs. Some examples of reports are balance sheets, income statements, marketing expense reports, changes in capital reports, cost of goods sold information, and accounts payable.

Which companies can use accounting software?

Businesses of all sizes can implement this system. Choose the most appropriate software and by company conditions. If it is too complex or packed with features that may not be needed, there will be a waste. Customizable accounting software is the best choice. So that in the future, the software can anticipate financial-related challenges and have the potential to emerge in the future.

The following are some of the characteristics of a good accounting application:


If employees experience difficulties in operating the accounting system, the company is more prone to making mistakes. User-friendly and easy-to-understand software will allow you to manage your employees and business efficiently.

Easy to access

When running a business, you need to access data quickly and efficiently when you want to make crucial decisions. The handy system allows you to access your critical financial information anytime, from anywhere, because all data and information is encrypted and stored safely on the server.

Be accurate

Accuracy is the most crucial element of good software. To be commensurate with the time and investment that has been spent, the accounting system must maintain accurate and up-to-date balances in individual accounts and ledgers. Discrepancies may occur due to database crashes or server problems, but a sound accounting system must identify and correct errors that could lead to data inaccuracies.

Benefits of accounting software

Business efficiency

In conventional accounting systems, employees have to perform manual processes such as transferring data from one spreadsheet to another. Using accounting software can save your company time and prevent mistakes. The company also has all transaction information in one centralized platform. You can easily see what has run out or what has gone into business, and you always know where to find this information.

Using accounting software helps to use resources in their accounting department efficiently and can reduce bookkeeping errors. With the Business Intelligence (BI) feature, companies can also gain a comprehensive insight into business operations, thereby increasing their productivity and efficiency.

Simplify tax processing

Dealing with business taxes can be a complex process, as it requires you to keep track of all business transactions. The benefits of accounting software include making this process easier by ensuring that your business’s financial details are in one place. This allows you to calculate company revenue semi-automatically instead of manually wasting time and effort working on the required information.

The software also offers industry and even country-specific solutions to comply with applicable laws and regulations. For example, a business accounting application for companies based in Indonesia must comply with Indonesia’s existing tax regulations.

Accurate estimation

That’s one of the main advantages of accounting software. Understanding in detail the patterns and trends of your financial performance will take a long time to resolve without a solid system.

Accounting software helps you understand where to cut expenses or where to invest more. With a clear picture of your current financial status, you will find it easier to develop intelligent strategies and allocate resources in the right way.

Save cost

Accounting and finance systems automate core accounting and administrative procedures and control your revenue framework, not to shift financial management to external experts. In parallel, they also reduce costs associated with printing and distributing documentation and storing sensitive data in a secure, monitored location.

Full financial transparency

From the accountant or auditor’s point of view, the main highlight of a sound accounting system is preventing fatal and recurring human errors. Calculating inaccurate numbers or failing to report data on time can easily lead to a business crisis, and this is where automated solutions come in most useful.

Features of the accounting system

Interactive dashboard

Monitor your business finances as a whole, such as income, cash balances, accounts payable, and accounts receivable.

Cash flow monitor

This feature helps monitor the company’s cash flow in real-time, whenever and wherever you are accessible.

Bank reconciliation

Reconciliation is an essential step in ensuring the accuracy of financial data. It is no longer the era of manual bank reconciliation because it takes a long time and is prone to human errors. Automate the business reconciliation process with financial applications.

Complete financial report

Create income statements, cash flow, balance sheets, changes in capital, and more in seconds. The system also allows the creation of reports in various formats such as tables, graphs, lines, and circles.

Budget management

Accounting software can integrate with purchasing management to simplify purchasing budget management and setting approval matrices.

Automatic follow-up

Send automatic notifications to clients to complete payments according to the time limit that has been there.


Generate electronic invoices and send them to clients automatically as proof of payment.

Multilevel analysis

It helps monitor business profit and loss per division to determine which divisions are performing well and which need to be improved.

How secure is the accounting system?

Financial data is the company’s most valuable information and must be prevented from falling into the wrong hands. That’s what accounting and economic systems do for their users, controlling accounting from the risk of fraud or error. Companies can provide access to people who have the responsibility to manage finances.


Accounting software is a tool that makes it easy for business people to manage some business financial processes and automate various financial tasks appropriately. Choosing the right software can make the job easier for financial managers to be more productive at work.

Interest in getting savvy tips for improving your business efficiency?

Anatha Ginting
A full-time Content Writer at HashMicro. Strive to develop my writing skill and knowledge in terms of business, technology, and other relevant issues.


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