What Are The Basic Components Of Accounting System?

Accounting is a fixed plan system of recognizing, recording, estimating, categorizing, organizing, systematizing, verifying, explaining and communicating financial information. It tells profit or loss of a specific period. It is considered as the accounting in terms of how it relates to the accounting cycle. Each section of the accounting system is meant to complete successfully one or two steps within the cycle ultimately come to a head within the preparation and issuance of monetary statements.

There are three major elements of accounting: assets, liabilities and capital.

1. Assets:

Assets is an item or piece of property specially belongs to a person, company or country. For example, cash, land, building, equipment, supply and vehicle.

2. Liabilities:

Liability is usually a sum of money belongs to a company or person.
If obligation is a determined amount, it is recorded in an entity’s accounting record as a liability.

3. Capital:

In financial assets, capital is considered as deposit accounts or funds collected from specific sources. Deposited accounts, tangible machinery, production machinery etc. But raw material is not considered as capital.

Components Of Account

Basic components of accounting
Basic components of accounting

A component is a part of accounting that enables the general system gather financial data, shape it into useful information, and transfer to decision makers and policy maker.

Meaning Of Components Of Accounting System

The point is that a harmonic relation between accounting and accounting cycle is most necessary. It means each and every part of the system should take one or two steps within the cycle to achieve the goal of preparation and issuance of monetary statements.

Example

Five main components in accounting.

In accounting, every part has a specific job and takes different steps within the financial reporting procedure. Information processors, documents, input devices, storage, and output devices are the five main components.

1. Source documents

Business documents that track business transactions are known as source documents. These documents are considered as a written account of a deal when any transaction happens. A record of the transaction are invoices, purchase orders and receipts. All these are very important to maintain a financial record.

2. Input devices

At first, we use these devices such as scanners to punch in information in the accounting systems. These devices are the main source of entering documents into the system for employees.

3. Information processors

They are responsible for sending data to journals e.t.c. Processors process the information to be used by decision makers in later stages.

4. Information storage:

All important information such as ledgers and reports are stored in latest computerized systems. Even today, file cabinets are considered as storage devices.

5. Output devices:

Modern day output devices take information from the system storage and display it during a useful way.

Account system implementation

Procedure of “implementation “as it is mentioned must include to integrate a replacement and effective accounting into a corporation.
The process of accounting system implementation includes a number of steps that begins with an idea and ends with the achievement of a goal.

Plan for implementing an accounting

When you begin with anything, it’s imperative to plan a proposal within the sort of a project plan and perform an analysis of the entire project. Make sure, the advantages far outreach the prices if you’re serious about running knowledgeable business. Keep in mind all of your plan before starting the project .You should know the all timeframe, events to be achieved, and an inventory of all required resources for the project. Planning is that the most crucial phase of the entire implementation.

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