As you know, there are different types of accounting, the
two main being cost and financial accounting. While cost accounting keeps
record of how much money has been spent in running the business, financial accounting
keeps track of financial transactions through balance sheet and income
statement. This helps to evaluate a company’s performance. Information related
to financial accounting is usually shown to a third party organization who wish
to invest in the company. In short, financial accounting plays a critical role
in decision making for investors.
In an integrated accounting system, the financial and cost
accounting are combined into a single accounting system. This means both the
cost and financial transactions are present in one set of accounting records.
One can say, it is a composite system that maintains accounting information associated
with both financial and cost accounting.
While accounting software
integration with
your existing system can help to reduce operational costs, it is important that
you implement an integrated accounting system to streamline business operations
in the accounts department.
Advantages
of Integrated Accounting System
A wholesale office supply
distributor not
keeping cost & financial accounts separately in an integrated accounting
system has several advantages. Since both types of accounts exist at one place,
this can help to improve the efficiency, accuracy and productivity of your
accounts department.
Eliminate Duplicate Information
Duplicacy of information in both financial and cost
accounting is one of the biggest problems in non-integrated accounting system.
This never happens in an integrated accounting system because everything is
stored at one place in one set of records. While entering data in an integrated
accounting system, duplication check functionality is always implemented. This
ensures that the records entered in the system are always unique.
Reconciliation not required
In a non-integrated accounting system, since both cost
and financial transactions are maintained in separate accounting records, many
times profit/loss data differs in both the records. To resolve the issue,
reconciliation is needed, that involves tallying the profit/loss mentioned in
both set of accounts. This is a tedious and time-consuming process. However,
with integrated accounting system, the question of reconciliation does not occur.
This is because there are no two profit figures, since all the information
related to financial and cost accounting is present in one set of accounting
records.
Decrease in Administrative Effort
With issues related to reconciliation and duplication of
accounting information not arising in integrated accounting system, it is far
easier to manage integral accounts. Hence, the amount of administrative efforts
and time required to maintain integrated accounting system are substantially
less.
Speedy Reporting
When all the information related to cost and financial
accounting is available in one set of accounting records, it becomes much
easier to retrieve and report information. On the other hand, storing
information in a separate set of books can cause a lot of delay in reporting
due to difficulty in obtaining information.
All in all, with an integrated accounting system at your
disposal, you get correct and reliable data, provided the cost and financial
accounting records are well integrated. So the next time, you go for a QuickBooks
integration, make sure you adopt an integrated
accounting system in order to manage your financial operations easily.
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