A loan, a bank and a blue notebook
Sarah Mitchell has run her catering business for four years. She writes everything in a notebook with a blue cover: what she charges, what she pays and what she is owed. The notebook has never let her down, until the Tuesday she applies for a loan to buy a refrigerated van. The loan officer is friendly and precise: she needs a balance sheet and an income statement for the last two years.
That night Sarah opens the notebook on the kitchen table. Every figure is there, but neither of the two documents she was asked for. She is not missing information: she is missing a system that turns that information into statements another person can read and check.
What an accounting system is
An accounting system is the set of rules, records and tools a business uses to turn every transaction into useful information. The tool is only one part; what makes it a system is that every sale, purchase or payment always follows the same path, from the document to the report. It has five pieces:
- The chart of accounts: the business's list of accounts, grouped into assets, liabilities, equity, income and expenses.
- Supporting documents: invoices, receipts, contracts and bank statements that prove each transaction.
- The books: the journal book, which records entries by date, and the general ledger, which sorts them account by account.
- Procedures: who records, how often the books are reviewed and when a month is closed.
- Reports: the trial balance, the income statement and the balance sheet.
Single entry or double entry
Single entry works like a chequebook: a list of money in and money out. It tells you how much cash there was, but not what the business owns, what it owes or how much it has really earned, and it cannot produce a balance sheet.
In double entry, every transaction is recorded in two accounts for the same amount: on the debit side of one and the credit side of another. That is why total debits always equal total credits, and when they do not, the system flags an error. Double entry produces both statements Sarah's bank asked for. Many commercial codes require companies to keep formal double-entry books; the guides on El Salvador, Spain and Japan explain what each country asks for.
Four ways to keep the books
| Option | What it offers | Its limit |
|---|---|---|
| Notebook | Costs nothing and is easy to read | It does not add up, does not balance and never flags an error |
| Spreadsheet | Adds up by itself and sorts with a click | A broken formula or a deleted row goes unnoticed |
| Installed software | Full bookkeeping on one computer | Backups, updates and the licence are up to you |
| Online system | Opens from any browser and is always the latest version | Needs an internet connection |
The spreadsheet night
Sarah decides to move the notebook into a spreadsheet. She copies two years of transactions, builds her formulas and, three nights later, her balance sheet is off by 350. She searches for hours. The error turns up at one in the morning: the sum formula of one column stopped a row short and left out the payment for a wedding.
Sarah had not done the bookkeeping wrong. The tool simply did not stop her. That is the difference that matters when choosing: a good accounting system is worth as much for what it refuses as for what it does. It does not accept an entry whose debits and credits differ, and it does not let a recorded figure vanish without a trace.
Six questions for choosing
- Does it keep double entry and refuse an entry that does not balance?
- Does it keep the history? A posted entry is not deleted: it is cancelled with a reversal, and both stay visible.
- Does it give you what the law, the bank and your accountant ask for: journal book, general ledger, trial balance, income statement and balance sheet?
- Can it keep more than one company, if you or your accountant need them?
- Can you download all your data whenever you like, without asking anyone?
- Does it speak your language? A system that explains every term is learned faster and used better.
How the story ends
Sarah opens her company in an online system, enters the opening balances and records month by month with the documents in hand. Every entry that does not balance is sent back before it goes in. Two weeks later her accountant reviews the books, and she takes the bank a balance sheet and an income statement anyone can check. The blue notebook is still in a drawer, as a keepsake.
Where Aconta Online comes in
Aconta Online is an online double-entry accounting system. It refuses any entry whose debits and credits do not match, never edits a posted one (a mistake is corrected with a reversal and both remain), and keeps the journal book, the general ledger, the trial balance, the income statement and the balance sheet up to date with every entry. It works in fourteen languages, explains every term in its glossary, and lets an office keep several companies. Your data can be downloaded whenever you like. It does not file tax returns: that is still your accountant's job. The first company is free, no card required.
Questions
What is an accounting system, in a few words?
It is the orderly way a business records every transaction, with its documents, books and reports, so it knows at any moment what it owns, what it owes and how much it earns.
Is a spreadsheet an accounting system?
It can serve as a tool, but it is not a complete system: it does not require every entry to balance, and it does not stop a formula or a deleted row from changing the results without a trace.
Which accounting system suits a small business?
One that keeps double entry, refuses entries that do not balance, keeps the history of every correction and produces the books and statements your country requires. Being online avoids depending on a single computer.
Does an accounting system replace the accountant?
No. The system records and organises; the accountant interprets, advises, prepares the tax returns and signs whatever the law requires. With books in order, that work is quicker and cheaper.