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The Strengths & Weaknesses of The Revenue Accounting System: Small Business Accounting & Bookkeeping Accounting

The revenue accounting system allows a business to track money received and make financial decisions. It has strengths like checking revenue progress and analyzing sources, but weaknesses include human errors causing inaccurate financial statements and risk of embezzlement if not monitored properly.

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Ben Ritche Layos
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33 views

The Strengths & Weaknesses of The Revenue Accounting System: Small Business Accounting & Bookkeeping Accounting

The revenue accounting system allows a business to track money received and make financial decisions. It has strengths like checking revenue progress and analyzing sources, but weaknesses include human errors causing inaccurate financial statements and risk of embezzlement if not monitored properly.

Uploaded by

Ben Ritche Layos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Small Business»
2. Accounting & Bookkeeping»
3. Accounting»
The Strengths & Weaknesses of the Revenue Accounting
System
by Amanda McMullen

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A small business typically keeps records of its transactions using a revenue accounting system. Such a system
allows the company to record the money it receives during each accounting period. The company can then use
the information the system provides to make important financial decisions. The use of the revenue accounting
system in business has both strengths and weaknesses.
About Revenue Accounting

Revenue accounting is the process of recording the revenue a business receives from financing, cash advances,
investments and the sale of goods and services. Some revenue accounting systems also deduct certain expenses
from the revenue received, such as the cost of producing goods or providing services. Businesses use their
revenue accounting systems to evaluate their financial situation during each accounting period. They may also
use these systems in tax preparation.

Strengths

Using the revenue accounting system, a business can check on the progress of its revenue at any point during
an accounting period. A business can also use the system to determine which sources provided the most
revenue. By comparing revenue accounting reports from multiple periods, a business can analyze changes in
revenue patterns and use the information in decision making. Finally, having a separate accounting system
devoted to revenue provides a business with better organization, which can be helpful during tax preparation
and corporate audits.

Weaknesses

If the revenue accounting system is not computerized, human error is likely and may result in inaccurate
calculations. Even if the system is computerized, employees may input information incorrectly, which can also
cause the company's financial statements to reflect errors. Errors in the financial statement can lead to poor
decision making and tax complications. Revenue accounting systems also subject the company to
embezzlement, especially if an employee has unrestricted access to the company's accounts.

Considerations

To prevent problems in the revenue accounting system, a business should require multiple employees to check
the entries made into the system. If the system is not computerized, at least two employees should perform all
calculations to reduce inaccuracies. To prevent employees from embezzling, businesses should not allow any
employee to have unlimited access to the company's financial accounts.

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