## Integrated Accounting System
### What is Integration?
An Integrated Accounting System merges cost accounting and financial accounting into a single unified set of books. There is no separate cost ledger — both types of information flow from the same source documents, producing a single profit figure.
### Prerequisites for Integration
1. Management decision on the scope of integration (up to prime cost, or full integration of all records)
2. Coding system for financial and cost accounts enabling seamless retrieval and cross-referencing
3. Agreed treatment for accruals, prepaid expenses, and interim period adjustments (ensures consistent, reliable data)
4. Staff coordination between financial and cost accounting personnel for efficient document processing
### Subsidiary Ledgers Used
Under integration, the separate cost ledger is eliminated. Instead, subsidiary ledgers are maintained:
| Subsidiary Ledger | Purpose |
|---|---|
| Stores Ledger | Records materials and supplies held in stock |
| Stock Ledger | Tracks finished goods inventory |
| Job Ledger | Monitors costs for specific projects/jobs |
### Accounts Replacing the Cost Ledger Control Account
In a non-integrated system, the Cost Ledger Control Account represents all impersonal accounts. Under integration, actual real accounts replace it:
- Bank Account
- Receivables (Debtors) Account
- Payables (Creditors) Account
- Provision for Depreciation Account
- Fixed Assets Account
- Share Capital Account
> Key distinction: integrated accounts do not use any notional/fictional account to represent impersonal items.
### Features
- Complete analysis of costs and sales maintained
- Full details of all cash payments retained
- Complete record of all assets and liabilities
### Advantages Summary
| Advantage | Explanation |
|---|---|
| No reconciliation | Single profit figure — cost profit and financial profit are the same |
| Less effort | One set of books eliminates duplicate recording |
| Faster information | Data comes directly from books of original entry; no delay |
| Economical | Centralisation of accounting function reduces overhead |
| Decision support | Detailed cost data supports management decisions at all levels |
| Comprehensive analysis | Full cost breakdown per product, job, process, or activity |
| Legal compliance | Data satisfies statutory P&L and balance sheet requirements |
| Effective control | Unified view enables better management of assets and liabilities |