Summary

Bookkeeping or accounting systems are essentially categorization systems for financial transactions that occur within a business. The double-entry accounting system ensures that all of the financial events get recorded in such a way as to ensure the basic formula (as follows) remains intact:

ASSETS = LIABILITIES + OWNER'S EQUITY

When working with an accounting system, you might run into special journals (e.g., perhaps sales transactions are recorded in a separate transaction journal for each sale made) or additional reports and ratios. However, all of the data in all of the journals and reports will be found in two key repositories: the ledger (chart of accounts) and the journals (transactions).

Roles

A bookkeeper is responsible for recording all of the journal entries. He or she will typically manage the checkbook and record expense reports. If the system is computerized, the bookkeeper is the person who is recording the transactions in the system.

However, it is the accountant who is responsible for preparing the reports and the data for the management team and for making recommendations about how to optimally organize the books, which depreciation method to use, whether or not the business should offer early pay discounts, etc. The accountant is guided by the GAAP previously mentioned so, as long the accounting maneuver could be considered generally accepted, the accountant has the flexibility to suggest whatever recording options he or she wants the company to use.

Management typically reviews the financial statements and/or ratios to make decisions as to the short and long-term direction of the company. Often, for just their divisions, line managers might want Income statements a lot of expense details, while upper management might want to compare divisions and expenses so their reports would require much less detail.

Existing Systems

Frequently, the role of the developer is to either create additional reports or interface some new system with the company’s existing accounting software. Many accounting systems provide API-level access to allow developers to record transactions within their systems. QuickBooks, the popular accounting application, has an API which exposes many types of objects including a JournalEntry object. This object is a transaction with both a debit and credit. There is also an Account object which provides access to the Chart of Accounts.

Taxes

Taxes are a fact of life in most countries and one of the major reasons that accounting systems exist. It takes a lot of people power to decide on how to record journal entries and actually record them. However, the detailed recording and documentation of expenses can often save substantial amounts of money at tax time. Because of this, companies expend the effort.

Summary

I have covered, at a high level, much of the functionality you will find in a client’s accounting system. There are a variety of accounting packages available for all sizes of business. Having a basic understanding of their functionality should assist you with integrating your software into their system. You might need to learn some of the system’s complex procedures and processes but the bottom line of every transaction will always be designed to maintain this simple formula:

ASSETS = LIABILITIES + OWNER'S EQUITY

Enjoy the wonderful world of accounting!