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 Purposes of Accounting Systems 
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Joined: Fri Aug 20, 2010 9:44 pm
Posts: 33
Location: uk
Post Purposes of Accounting Systems
General Accounting was created some 60 to 70 years ago and has always referred essentially to the needs of Financial and External Accounting. This financial structure is perfect for external users of the company - those who are interested in the economic entity. Therefore it can be said that External Accounting was never defined as an internal cost related accounting system.

As a consequence of this reality, CPAs and auditing companies have during the last 50 years shown little if any interest in helping manufacturing industries in their need to create an adequate Internal accounting structure.

The terminology in Financial Accounting is still totally inadequate. Terms such as "overhead accounts" and "work in process inventory accounts" were created by general accountants just to include in the Financial Accounting's frame some terminology that would refer to an Internal Accounting structure.

Financial Accountants said these few subsidiary accounts would be good enough for managerial information. Unfortunately, these statements were not at all correct.Many of the small-business managers I know view accounting this way. It's overhead and really doesn't contribute to the bottom line. Or does it? The people who run the accounting system speak in an unintelligible blur of debits and credits. They have little grasp of the operation that generates the money to pay their salaries.

Sound familiar? Maybe you're one of the entrepreneurs who share these thoughts. Welcome. I'm not out to convert you to the good of accounting. However, my guess is that once you see how to set up an efficient accounting system for your small business-one that really does contribute to overall profitability-you'll convert yours


Fri Aug 20, 2010 9:58 pm
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