PROJECT ON

financial management and

accounting

FACULTY NAME:
P. MUNDA
 What is Accounting System?

An accounting system is the system used to manage the income, expenses,

and other financial activities of a business. It allows a business to keep track
of all types of financial transactions including purchases(expenses),
sales(invoices and income), liabilities(funding, accounts payable), etc. and is
capable of generating comprehensive statistical reports that provide
management or interested parties with a clear set of data to aid in the decision
making process.
 Definition Of Accounting System
Organised set of manual and computerized accounting methods,
procedures, and controls established to gather, record, classify. analyze,
summarize, interpret and present accurate and timely financial data or
management decisions.
 Accounting System In History
The earliest known accounting records were found in the Middle East and date
back over 7,000 years! It was important for early rulers, businesses, and individuals
to be able to keep track of income and expenditure, whether due to a desire to
determine whether a particular activity was profitable, to tax citizens or to impose
customs fees. In the late 1400s, the Italian friar Luca Pacioli earned his
accreditation as the 'Father of Accounting', for describing the structure of the
double-entry bookkeeping system used by Venetian merchants during the Italian
Renaissance, which has served as the direct predecessor of modern accounting
practices. He is perhaps best known for stating the Golden Rule of Accounting:
'Do not go to bed before the debits equal the credits'
 Modern Accounting Systems
Jumping ahead to 1880, the first accounting machine was invented by a
man named Herman Hollerith. Known as the tablulating machine, it used
punch cards to add numbers to a card that could then use to determine the
total. Hollerith also founded a company that later merged to become a
component of IBM. In the 20th century, developments in computer
technology and especially the introduction of the PC meant that it was
possible for "ordinary people" to gain access to a definite system. That is:
an accounting system that does it all. From the first DOS-based
accounting systems such as PcPlus to today's Internet-based accounting
systems such as Debitoor, which uses SaaS (or cloud computing), all
serve as models for the distribution of accounting systems.
 Application Of Accounting System
The accounting system is applied in the following fields:
1. Financial Accounting
Generally, Financial accounting is used in accounting work and works to show those
accounting figures on a certain date of business. financial accounting includes preparation of
financial details to interpret and Communication of information to the outsiders. where the
work of bookkeeping ends. there starts the activity of accounting.

2. Cost Accounting
Cost accounting is also a branch of accounting. The process of determining this cost and
technical planning decision making and control is the basic managerial task.
Thus, The main purpose of cost accounting is to determine the cost of the item or service. Cost
accounting includes classification, recording, allocation, and reporting of the current cost.
3. Management Accounting:
Cost accounting keeps accounts pertaining to cost and makes available the analysis of
various information related to cost.
Management accounting assets the management in the formation of
policies,planning, and control of the operations of the business.

4. Social Responsibility Accounting

It is a new concept but in this part of accounting social costs spent by the organization
and accounting of social profits accrued by them. its report it includes Social
Responsibility Accounting includes evaluating the impact of Corporate Social
Responsibility measuring of social cost and impact of business on society and social
reporting.
5. Inflation Accounting
Inflation Accounting information is based on historical cost but due to changes in price
level, the purchasing power of money is declining. due to inflation and declining of
purchasing power of money, prices of commodities changes accounting for price level
changed.

6. Tax or Value Added Accounting

It is a new concept in which value-added statement shows the value created and the
distribution of it to interested groups example: to employees, shareholders, promoters
of capital and the government.

7. Human Resources Accounting

Human resource accounting shows the cost and monetary value of peoples or partners
for the business organizations.
Thus, it is the process of identifying and measuring data about human resources and
communicating this information to interested parties of the organization.
1)Owners: They use it to know the financial soundness of the business.
2)Potential Investors: They want informations which helps them estimate
how much income they can expect in future.
3)Creditors: These people supply goods and services on credit.
4)Lenders: In modern times banks and financial institutions lend money to
the business.
5)Employees: They need information about the profits of the businessto
assess the abilityof the business to pay higher wages.
6)Government: It is interested in the financial ststements of the business for
the assessment of income tax.
7)Researchers: These people want to make an indeapth study of the
financial operations of an enterprise.
8)Public: Public seek to know the trend of employment opportunities
provided by the enterprise.
 Importance Of Accounting System

An accounting information system is typically a computerized accounting

program that keeps records for a company. The information is entered into
the system and the system tracks and organizes the accounting
information. The accounting information system is used also to provide
detailed information about the company, including financial statements.
Business Transactions
An accounting information system is designed to record all transactions of
a business. An accounting clerk enters all business transactions into the
program and the transactions automatically are posted to the corresponding
accounts. This is important because any time information is needed, it can
found on the computer and is organized.

Accounts Payable
An accounting information system allows for easier payments made on
accounts payable. Many systems are designed to pay all bills due with a
click of a button. A date is selected and checks are automatically made out
for all bills due. Most systems allow a clerk to unselect certain bills if a
company is not ready to pay a specific bill.
Accounts Receivable
This type of system also allows for easier billing. Information is recorded
on the system and a clerk chooses when to print bills. This is done daily,
weekly or monthly, depending on the business. The system generates all
bills efficiently and easily for the clerk.

Financial Statements
An accounting information system generates all financial reports without
the clerk calculating anything. The dates for the reports are entered into the
system and the computer generates reports for that specific period. This
comes in handy when a report from a different period is needed
immediately. The system has the capability of producing reports for any
period that the information was recorded for.
Year-End Closing
Year-end closing is often a tedious process for an accountant. An
unadjusted trial balance is created, adjusting entries are made and
recorded, an adjusted trial balance is calculated, closing entries are made,
and, finally, a post-closing trial balance is generated. This process is
complicated and time consuming, but with an accounting information
system, the computer does most of the work on its own.
 Challenges of Accounting System
The modern accounting system i.e computerized accounting system, is subject to
following challenges.
Theft of Computer Time: Information created by one person may be easily copied
by another person who can claim that the data is his own and he is the actual creator.

Manipulation of Programs: An intruder, rival or competitor can manipulate, modify

or delete one or more programs of a company making the complete software
unusable.

Theft of Data: Data stored in a computer can be copied into floppies and could be
delivered to competitors. With modern communication networks available, insiders of
the company may send confidential information of a company to another.
Stealing Software: This is the most commonly committed crime in
computers. An employee of the company may copy the software purchased
by a company and copy it in his home computer.

Controlling Access: Physical and electronic access control techniques

including keyboard locks, automatic logs, restricted access to systems and
limited after-hour use.

Passwords: Passwords should be provided at all levels of system. They

should be changed frequently or as and when needed so that unauthorized
users cannot enter into the system.
 Backup Copies: Backups are often taken on tapes and are used to restore
data when the primary data from the system fails. Software programs
should also be taken if necessary.

Backup Control:
Most companies may have computers that exchange data with each other
using a networking architecture.
5 Challenges Accounting Firms are facing after
GST Roll-out
1) Advancement of Technology: They keep on struggling with the evolving technology and
automated systems to meet their client expectations.
2) Attracting and Retaining Clients: After the implementation of GST, there is a tough
competition among the accounting firms as the businesses are in search of a reliable and
efficient firm that can handle all the business accounts and finance departments on its own
3) Acquiring New Talent: The hiring of new employees who are experienced and have good
knowledge of GST rules and regulations
4) Greater Client Expectations: Most businesses or the clients not only expect much but
want their work to be done on the mentioned deadlines. Sometimes, they expect much from
the accounting firms apart from the deal which they have done with them in the start. To
overcome this challenge, you must know the entire business information such as about the
client and the business
5) Wrapping up: Whether it is all about meeting client’s expectations, using
complicated GST accounting software or adopting the new technology each challenge
can be handled and taken care with the help of right people and employees. These are
the common challenges of the accounting industry and therefore, effectively resolving
them will help your clients under the GST regime as well as gives an opportunity to
grow your company more.