A sound accounting system is indispensable to provide information on the financial performance of a company as well as its profitability and profitability trends. At the same time, it would be effective in minimizing accounting errors and fraud or irregularities in the operations of a business concern. Therefore, a business concern or organization needs to have an effective accounting system in Malaysia that maintain records of company transactions and financial reports. The following are some of the critical features of a good accounting system.
This involves automating several operations or tasks in accounting for a company that otherwise would be carried out manually. This includes creating accounts, recording transactions, controlling the various accounting activities, and publishing financial reports. In addition, a systematic flow of accounting information is incorporated from multiple departments and branches of a company. This can be done through computers, accounting software, or other automated systems.
Journals and ledgers are accounting books of the first entry that record all details of transactions to facilitate the preparation of other financial statements. In a good accounting system, journals and ledgers should be complete enough to include all relevant recording details. Otherwise, there is a high probability that transactions may go unreported without the owners or managers noticing it for some time. Moreover, if the recording is incomplete or irregular, there would be errors in preparing financial statements due to insufficient information.
Real-time or current dashboards are reports that are updated regularly based on input from the financial statement. This would allow business managers to identify trends and patterns in day-to-day operations and make quick decisions to address particular problems or situations. It is an essential feature of a good accounting system to have a real-time dashboard so that business managers can keep track of the overall performance of an organization without having to view all its statements separately.
For information to be helpful, it has to be reliable and credible. Therefore, a good accounting system would have a high level of data integrity, reliability, and credibility in financial statements through the effective control of internal processes that affect the accuracy and completeness of financial records. This is so that the information provided in financial statements is accurate and will not cause misunderstandings between business managers, owners, investors, and other stakeholders.
Credibility in financial statements means that the requirements of law or regulation such as the Financial Reporting Act, Regulations, and Accounting Standards are met by a company. Consistency in financial reporting also means that
accounting practices and procedures are the same for all financial statements a company will prepare, whether monthly, quarterly, or yearly.
The critical feature of transparency in a good accounting system is to allow the preparation of reliable financial statements without any manipulation or preference. Financial reports should be independent and objective, without any personal interest of the business manager and other insiders (owners, investors) being reflected on them. Therefore, in a good accounting system, all information should be readily available in the prepared financial report. Likewise, all information provided to the financial statement preparer should also be easily accessible.
In Malaysia, the Accounting Standards Council of Malaysia (ASC) was established in 1990 to develop and publish Accounting Standards for Malaysian companies. This would be useful for preparing general purpose financial statements under the Financial Reporting Act 1993.