What term refers to the methods used by a business to keep records of its financial activities and summarize these accounts in periodic accounting reports?

• A. Ledger
• B. Accounting System
• C. Journal
• D. Budget

Answer: (B)

An accounting system is the set of methods and processes a business uses to record all financial activities and to summarize them into periodic reports. It encompasses the entire workflow—from documenting transactions in journals, posting to ledgers, and making adjustments, to producing financial statements like the income statement, balance sheet, and cash flow report. It can be manual or computerized, but the core idea is a cohesive system that delivers accurate and timely financial information for decision-making and reporting. The ledger is just a collection of accounts, the journal is where transactions are first recorded, and a budget is a forecasted plan, not the ongoing system for tracking actual activities.