If you are asked to create and design an accounting system for a company , what are the steps you will follow to accomplish this task?

You need to have a chart of accounts/ codification system/ data base, you need to know , depending of the type of activity, their  internal procedures to  adapt your  system to it.

get in touch with people and ask them questions about how they perform their tasks, and their needs, what type of information is required and comming out,

then you make your analysis/ plan  on how to improve them , so that your accounting system will be a plus to the organisation, make your prototype, then start testing with all users, take not of gaps and points of improvements, keep testing  again till you get something with no bugs or mistakes.

To design an accounting system for a company you need to define the requirements of the company departments regarding GL, AR, AP, Cash & banking, Stock, Purchasing, & production. You must ensure that the system satisfies the Critical requirements and define any gaps and how to handle them (by changing the current processes or madefying the system.

To implement the system you need to start with the master files (Chart of accounts, chart of cost centers, banks, cash boxes, currencies, customers, suppliers, taxes, item master file, & opening balances) and system customization parameters to meet your business process requirements.

Then comes end user tarining using a pilot system followed by cutover to production.

After that you need to monitor you success implementation criteria and take corrective actions as and when required.

The five step process:

1. Determine your start date.
2. Assemble your business records.
3. Set up your financial accounts.
4. Enter transactions.
5. Verify account balances.

In the first instance, if you are a novice  to financial and accounting matters it is recommended to hire the services of a professional accountant to help setup or create an accounting system for your company.

What an accountant should do  when contracted to setup an accounting system for a small and large business whether " not for profit" or" for profit " is to first prepare an "accounting manual". Accounting  Manual  is a  handbook containing policy guidelines, procedures, and standards for accounts of a company or an individual and for you to prepare a good accounting manual  you need to consider the following steps:

Step1: The first decision to be made is which type of accounting method to choose, there are2 choices:

The Cash Method or Cash Basis — this means that you count income when you actually receive it (either as cash,  check) and your expenses are counted when you actually pay them. This is the most common method for small businesses, especially those that take immediate payment for a product or service ( check, cash, etc.)

The Accrual Method or Accrual Basis- this means that you count income when a sale is made (regardless if you actually receive the money for it) and expenses are counted when you actually receive the goods or services (instead of paying for it immediately). This method is common for larger businesses or small businesses that utilize "invoicing" and frequently deliver a product or service before being paid for it.

You are free to choice  either method provided you have less than $5 million in annual sales or you maintain inventory (in that case, then you must use the accrual method).

The accrual method is generally considered to give you a more accurate picture of your company’s financial situation but requires you to take extra steps like maintaining accounts receivable and accounts payable records. The cash method is generally easier to maintain and is the preferred method for small businesses.

2.Choose a Method for Recording Transactions

After you’ve decided on an accounting method, the next step is to decide how you are going to record transactions. You may choose to  Hand-Recording Transactions (you actually hand-write each transaction in a ledger) or  Software (you enter transactions in a software program which then automates many routine tasks).

3.Setup Your "Chart of Accounts"

After choosing a method for recording transactions, it’s time to setup your "chart of accounts". A "chart of accounts" is simply a listing of all the various accounts in your accounting system. There are income accounts, expense accounts, asset accounts, etc.

4.Learning and Maintaining Your Accounting System

Once you’ve chosen your accounting system, the next step is learning and maintaining your accounting system. Learning the system will obviously depend on what solution you’ve adopted, but maintaining the system is accomplished primarily by2 things:

You Have to Use the System — once you’ve taken the time and energy to setup an accounting system, you have to actually utilize it properly. This means entering every transaction, check, bill, charge or refund.

Reconcile Your Bank Statement — the best way to maintain your accounting system is by reconciling your bank statement with your accounting system every month. This means that you compare each transaction from your bank account or accounts with your accounting system and make sure that they balance. This process alone will force you to properly account for the company’s money.

Note: The above steps are what is contained in Accounting manual prepared by an accountant and handed over to company as a policy guidelines, procedures, and standards of account of a company

For each kind I should know

A non-profit

--Income resource

-outcome

-activities

-create balance sheet

Partnership

-same above

share for each one

profit & lose statment

Stock corporation

above details plus

how many share they have

to know each share how much profit or lose

For setting up of accounting system, we need to analyse the type of business and then establish a Chart of Accounts detailing the assets, liabilities, Revenue and expenses retaled to that industry and in line with the local statutory obligations.

Then we need to establish accounting controls and decide on the type of reports to be generated for management and meeting statutory obligations.

Then design type of forms to use to support accounting controls and whihc capture the data required for reporting and passing information to customers, suppliers, internal departments all of course in line with the statutory requirements of the country of business

for non profit we need to adopt the deeds and bye laws as prescribed by the statute (in india Charitable Societies Act)

for partnership, we need to drawn a partnershipdeed and register it

for JS conamnies, we need to have Memorandum of Association and Articles of Associattion to be prepared signed and registered

System users, deep training to have people on demo system and  have to choose a due cores to action of implementation new system . 

Procedure and Instructions - methods for retrieving and processing data.

 Can refer to the use of automated methods to process commercial data. Typically, this uses relatively simple, repetitive activities to process large volumes of similar information. For example: stock updates applied to an inventory, banking transactions applied to account and customer master files..

Data - information pertinent to the organization's business practices.

In order to understand how these systems work, you have to understand the accounting terms "business transactions" and "business processes" and how they come together to design proper COA and generate financial reports.

Software - computer programs used to process data.

Organization must be chose suitable software and fitting with business operation , analysis' flowchart of documents to design proper software to organization .

Keep in touch with old system and compare process data result with old system.

Information Technology Infrastructure - hardware used to operate the system.

Works closely with IT Manager on automation/ system and prepare heavy duty PCs  and other computer supplies to AIS.

Internal policy for Security system and keep backup in several place with safety .