Interlocking accounting system is a system in which company records his transactions on the basis of financial accounting principles and cost accounting principles separately. It means, there will be two records of accounts. One is financial accounts record and second is cost accounts record.
Features of Interlocking Accounting System
Advantages of Interlocking Accounting System
Main benefit of interlocking accounting system is for big companies. Big companies keep double record by independent accountants. So, there is less chance of fraud and mistake because in reconciliation process, such fraud and mistake can be found by auditor. So, both cost and financial accountants will be more careful about this.
Disadvantages of Interlocking Accounting System
1. Because we keep double set of accounts, so there is more need of reconciliation of cost and financial accounts for finding the reason of not matching cost accounts records with financial accounts records. So, this time may be saved in integrated accounting system.
2. This is costly system because we need separate accounting staff for keeping separate set of two accounts.
3. Sometime, all the users of our accounting records may be confused by seeing cost profit and financial profit in our interlocking accounting system.
Example of Interlocking Accounting System
To make financial account in financial ledger is not so difficult. At accounting education, we have passed lots of its journal entries and also made special section of accounting examples in which we have explained many examples. Now, it is the time to explain all the journal entries examples which are relating to cost accounts.
Features of Interlocking Accounting System
- In interlocking accounting system, two set of accounts are prepared.
- In interlocking accounting system, all big organisation, take benefits of cost accounts separately from financial accounts. So, it can more control on cost.
- In interlocking accounting ledger, cost accounts are maintained in cost ledger and financial accounts are maintain in financial ledger.
Advantages of Interlocking Accounting System
Main benefit of interlocking accounting system is for big companies. Big companies keep double record by independent accountants. So, there is less chance of fraud and mistake because in reconciliation process, such fraud and mistake can be found by auditor. So, both cost and financial accountants will be more careful about this.
Disadvantages of Interlocking Accounting System
1. Because we keep double set of accounts, so there is more need of reconciliation of cost and financial accounts for finding the reason of not matching cost accounts records with financial accounts records. So, this time may be saved in integrated accounting system.
2. This is costly system because we need separate accounting staff for keeping separate set of two accounts.
3. Sometime, all the users of our accounting records may be confused by seeing cost profit and financial profit in our interlocking accounting system.
Example of Interlocking Accounting System
To make financial account in financial ledger is not so difficult. At accounting education, we have passed lots of its journal entries and also made special section of accounting examples in which we have explained many examples. Now, it is the time to explain all the journal entries examples which are relating to cost accounts.
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