Interlocking Accounting Or Non-Integrated Accounting System(Part1of3)

July 22nd, 2007 / No comments yet
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What is interlocking accounts?

 

  • Also refer as non-integrated accounts
  • When a business keeps its cost accounts separate from the financial accounts such system is called interlocking accounts

Common features of Interlocking accounting/non-integrated accounting

 

  • In the interlocking accounts, there is no double entry connection between the cost and financial accounts
  • The cost and financial accounts are operated separately hence there are two profit figures which is the financial profit and the cost profit
  • the differences in item (2) are caused among others, by differences in stock valuation and in the method of depreciation used
  • as both cost and financial transaction originated from the same transactions, there must be only one profit figure, hence the two profit figures MUST BE RECONCILED

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