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Simple English definitions for legal terms
Manual Accounting System
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A quick definition of Manual Accounting System:
A manual accounting system is a way of keeping track of a business's money without using a computer. Instead, people write down all the transactions in special books called ledgers. These books have different sections for different types of transactions, like sales or payroll. Each transaction is recorded with the date, the type of account, the amount of money, and whether it's adding or subtracting from the total. This information is used to make financial statements for the business. Manual accounting systems are often used by small businesses because they are cheaper than computer systems and don't require as much training.
A more thorough explanation:
A manual accounting system is a way of keeping track of a business's financial transactions without using a computer or specialized accounting software. Instead, transactions are recorded by hand in accounting books, using ledgers, physical records, pads of paper, and books.
For example, a small business may use a manual accounting system to reduce expenses such as computer equipment costs, software license fees, and employee training. They may have several ledgers with separate books to record different types of accounts, such as payroll or sales. The information recorded in these ledgers will be used to prepare the financial statements for the business.
Commonly, accounting pages of a manual accounting ledger have four or more printed columns with multiple rows to record the date of the transaction, type of account, the amount, if it's a debit or credit, and to make any observations.
Overall, a manual accounting system may be less costly than specialized accounting software, and a small business may use it because it may not have a high volume of transactions to record in the accounting ledgers.