Accounting systems

As is known, accounting is concerned with provid ing economic information for decision-making purpose s. The accounting system must gatherrelevant economic information; shape this information into form which is suitable for users, communicate the information to users.

In practice, accounting systems can vary. Thus, the accounting system of a small grocery store may be totally different to the accounting system of an international oil exploration and refining business. However, there are certain elements which are common to all accounting systems and which need to be identified in order to appreciate the functioning of these systems.

These common elements are: information collection; information recording; information evaluation; information reporting.

When designing an accounting system for a business, many factors have to be taken into account: the cost of the system; the complexity of the system; the amount of detailed information the system needs.

A senior manager in an international oil exploration and refining business, however, may be responsible for different trading operations throughout the world, and cannot, therefore, be closely involved in day-to-day operations. In order to overcome the problem of remoteness the accounting system can become a manager's 'eyes and ears' providing information concerning the financial position and performance of trading operations. The complexity of the business and the needs of the manager for detailed information will mean that the accounting system is likely to be both sophisticated and expensive to operate. However, the benefits of the system in terms ofimprove d economic decision-making should outweigh its costs.