What is an accounting system?

Definition of accounting system

An accounting system is how you keep your business's records. You would put into your accounting system transactions such as invoices, money spent from the business's bank account, bills from suppliers, and money you've spent yourself on business costs.

The accounting system will then take these transactions and use them to build reports, such as your profit and loss account and balance sheet, which help you make decisions about your business. For example, you might see from your profit and loss account that your rent went up sharply this year – your accounting system works that out by adding up all the transactions you put in for rent costs.

Example of an accounting system:

FreeAgent is an example of an accounting system!

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.

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