Question

Assume that you are hired as an Assistant to the Accountant at a local business.

When you start working at your new job, you find that the company has a manual bookkeeping system and the only accounting records used are a General Journal and a General Ledger.

You also find out that the reason you were hired is because the Accountant is having difficulty keeping up with all of the work and issuing monthly Financial Statements on time. The Accountant is also behind on billing customers for merchandise sold on credit. As a result, cash is short and the company is delinquent on many of their bills. Some of the company's creditors are refusing to supply additional merchandise, which is badly needed to stock the shelves at the company.

The owner of the company is very worried and asks for your suggestions to improve the accounting system. What suggestions might you make to increase the efficiency of the accounting system?

Answer 1

Since the business I am employed in works on manual accounting system due to which the organisation is facing the crunch in working of the enterprise because:

• Time consuming : manual system involves lots of time and effort to ensure that the data is accurate and up-to-date. The manual system in which the organisation is working employs only 2 ledgers where it becomes difficult to cope with the regular transactions
• Error prone: since human intervention involves more risk of errors and also since a single person is carrying out multiple tasks, errors will be frequent and difficult to manage
• No copies of data: data will not be readily available in case of need.

In view of the problems listed above, to increase the efficiency of the accounting system, organisation must switch to computerised accounting system:

• More accurate
• Less errors
• Less time
• Automated invoices, receipts
• Record keeping

Also I would like to suggest that one should analyse based on credit period got from creditors and how much credit period should be offered to customers based on the analysis and in line with the industry norms. So that the organisation itself do the fall short of funds for carrying out its daily business operations. Debtors must be realised on time.

This will solve the problem of working capital and would also suggest if the organisation needs to borrow funds for working capital needs in case of long operating cycle.

Do give your feedback ! Happy learning :) :)