Module C – the use of double entry bookkeeping and accounting
systems
A business will enter many financial transactions during a year, all of
these transactions need to be recorded to produce the financial
statements. These transactions are recorded on source documents. For
example purchase orders invoices and credit notes
There are many types of different business documentation:
• Quotation – a business makes a written offer to a customer to produce
or deliver goods or services for a certain amount of money
• Sales Order - a customer writes out or signs an order for goods or
services he requires • Purchase Order - a business orders from another
business goods or services
• Goods received note - a list of goods that a business has received from a
supplier
• Goods despatched note - a list of goods that a business has sent out to a
customer
• Invoice - An invoice relates to a sales order or a purchase order. When a
business sells goods or services on credit to a customer, it sends out an
invoice. When a business buys goods or services on credit, it receives an
invoice from the supplier.
• Statement - A document sent by a supplier to a customer listing all
invoices, credit notes and payments done by the customer
• Credit note - a document sent by a supplier to a customer in respect of
goods returned or overpayments made by the customer
• Debit note - a document sent by a customer to a supplier in respect of
goods returned or an overpayment made. It is a formal request for the
supplier to issue a credit note
• Remittance advice - a document sent with a payment, detailing which
invoice are being paid and which credit notes offset
• Receipt - a written confirmation that money has been paid.
Assets = capital + liabilities
Key features of a computerised accounting system
Transactions are entered from source documents
Automatic double entry is generated
Data is processed and posted to ledger accounts
Produces financial statements and management reports
Reduces errors and saves time
Processes in a computerised accounting system
Inputs: data entered from source documents
Processing: data posted to relevant ledger accounts
Outputs: financial statements and reports produced
Key features of cloud accounting systems
Software and data stored on external servers (the cloud)
Accessed via the internet only
Multiple users can access the system remotely
Automatic updates and backups
No installation required on local computers
Monthly subscription fee
Security provided by the service provider, usually using encryption
How an accounting system provides useful accounting
information
Records transactions accurately and consistently
Applies accounting rules automatically, improving reliability
Produces relevant financial reports for decision-making
Reduces errors and improves faithful representation
Allows information to be verifiable through audit trails
Compliance with organisational policies
Ensures transactions are recorded in line with company policies
Uses standardised methods, improving consistency and
comparability
Supports policies on areas such as pricing, pay, and asset
management
Helps enforce internal controls and authorisation rules
Compliance with procedures
Follows step-by-step procedures for recording transactions
Ensures sales, purchases, and payments are recorded correctly
Improves efficiency and reduces the risk of mistakes or fraud
Meeting deadlines
Automates processing and reporting
Produces financial information quickly and on time
Helps management meet reporting and legal deadlines