Yeah, like Skippeh said change the in game clock by talking to Isabelle when you turn your game on. I don't even know how to change my DS time settings haha >.>;
You can use both, but most prefer the in-game clock. Using the system clock will affect any other time management games you play as well. I use in-game, so if I forget to change it back afterwards, I'll be able to fix it upon starting the next session.
You can use both, but I find it's quicker to use the in-game clock. If you use the 3DS clock, you have to close your game, go through your 3DS settings and wait around for your game to load back up. In-game clock is just a simple case of going back to the start screen.
I use system clock because it's more orderly for me, except if i'm doing my cycling town, because then I don't care if I mess up so I use in-game-clock
I use the in-game clock because that's way faster, and I can't be bothered opening up another application. Half the time I TT to get items for trading/bells from people on Re-Tail, and if I used the system clock, that'd slow things down considerably, which I, of course, do not want to happen. System clock affects other games like Tomodachi Life (which I need to get back into), so that's another plus for in-game.