Integrated Accounting System(Part 2 Of 3)

Part 1 looks at what’s interlocking or non-integrated systems.

This Part 2 looks at what’s integrated system accounting, its pre-requisites of installing the system and some of the advantages.

Part 3 explains some of the reasons for the differences/discrepancies/disagreement of profits as per cost accounting book and the financial books.

Integrated Accounts

  • A system of accounting where the cost and financial accounts are kept in the same set of books.
  • This system avoids the need for separate set of books for financial and costing purposes.
  • Able to provides or meets the information requirement for costing plus financial accounts.

Pre-requisites/requirement of Integrated Accounting System

  • Top management needs to decide the extend of integration of the two set of books re: to integrate until the stage of primary cost or factory cost or full integration.
  • A suitable coding system must be developed to serve the purposes of both financial and cost accounting
  • An agreed routine, with regard to the treatment of provision for accruals, prepaid expenses, other adjustments necessary for the preparation of interim accounts
  • Proper coordination should exist between the staff responsible for the financial and cost aspect of the accounts

Advantages of Integrated Accounts:

Basically, in an integrated accounting system, the financial and cost transactions are recorded in an integrated ledger which is self balancing.The advantages are as follows:

  1. Savings in clerical work because one set of accounts is kept thereby reducing clerical costs;
  2. No need to reconcile financial and cost profits;
  3. No confusion arises from different stock valuations, method of depreciation and profits
  4. The probability of error is less because recording takes place in one set of accounts and
  5. Information produced on an integrated system is quicker, thus helping management in decision making


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