Describe the systems of accounts and financial statements used to control a financial system

System of accounts:

The best way to describe the system of accounts is to understand what it does and what purpose it serves. Accounting is an art of:

  1. RECORDING the economic transactions
  2. CLASSIFYING the transactions in a significant manner
  3. SUMMARIZING them in financial statements
  4. INTERPRETING the results


Reference: What is Accounting? Definition and Meaning – AccountingVerse. (n.d.). Retrieved December 15, 2017, from


A system of accounts follows the above referred process flow in order to provide useful economic and financial information to the users of financial statements.

Description of financial statements:

In sub task A.C.1.1 familiarizes us with the financial statements. We will now describe briefly below each of those five elements:

  1. Profit and loss account:

Profit and loss account or income statement, as the name signifies, is a statement that shows us results of operations of any business organization. In simplistic terms a profit and loss account shows how much profit or loss a business has made over a period of time. Main elements in a typical income statement include:

  1. Sales revenue: Money earned by for example selling ice cream
  2. Cost of sales: Money spent on making ice cream that was sold
  3. Gross profit: Difference between sales and cost of sales
  4. Operating expenses: Spending on common organizational overheads
  5. Net profit: Net income after deducting all expenses from the operating profit.
  1. Balance sheet:Please click the paypal icon below to receive CMI Level 5, Unit 5007V1-Organisational Financial Management Assessment in full for only $15