Comparing Anglo-Saxon and Continental Accounting
Systems
by Bilal Akmal
Accounting practices differ significantly across the world. Two major accounting systems used by businesses around the world are the Anglo-Saxon accounting system and the Continental accounting system. While both accounting systems aim to help businesses manage their finances, they differ in their approach to accounting principles and practices. In this article, we will explore the differences between these two accounting systems and how they are implemented in Odoo, a popular business management software.
Anglo-Saxon
Accounting System
The Anglo-Saxon accounting system is primarily used in English-speaking countries, such as the United States, Canada, Australia, Ireland, New Zealand, and the United Kingdom. This accounting system is also known as the accrual accounting system, where revenue and expenses are recorded when they are earned or incurred, respectively. In the Anglo-Saxon Accounting system, the focus is on profit and loss, and the financial statements are prepared to show the income and expenses for a specific period.
The Anglo-Saxon accounting system distinguishes itself from other accounting methods by recording the cost of goods sold at the time of customer invoice posting, rather than at the time of vendor bill posting. This means that the expense is recognised only when the customer is invoiced for the goods, rather than when the vendor bill is received. This approach provides a more accurate view of a company's profitability by focusing on the revenue generated from the sale of goods, rather than the cost of acquiring or producing them.
Continental
Accounting System
The Continental accounting system is commonly used in European countries such as France, Germany, and Spain. This accounting system is also known as the cash accounting system, where revenue and expenses are recorded when cash is received or paid, respectively. In the Continental Accounting system, the focus is on the cash flow, and the financial statements are prepared to show the cash inflows and outflows for a specific period.
The continental accounting method recognises the cost of a good as soon as it is received in stock. This means that the cost is recorded when the goods are acquired, rather than when they are sold. By recognising the cost of goods as soon as they are received in stock, the continental accounting method provides a more comprehensive view of a company's financial position and inventory levels.
Closing Thoughts
Odoo accounting supports both the Anglo-Saxon Accounting system and the continental accounting system, allowing businesses to choose the accounting system that best suits their needs. While both accounting systems have their advantages and disadvantages, it is important to choose the system that best reflects your business's financial situation and goals. By using Odoo, you can streamline your accounting processes and ensure that your business's financial data is accurate and up-to-date.
Note: To optimise the functionality of both accounting systems, it is recommended to enable automated inventory valuation and process the complete Procure to Pay and Order to Cash cycle in Odoo. By automating inventory valuation, businesses can ensure that the cost of goods sold and inventory levels are accurately tracked, regardless of the accounting method used. Additionally, integrating the Procure to Pay and Order to Cash cycle into Odoo streamlines the accounting process and ensures that all transactions are captured in a timely and accurate manner.