There are many types of accounting software applications on the market today. Some applications are intended to perform accounting functions for large corporate organizations. Others are meant for personal use. Still other applications fall somewhere in between, performing functions suited to small businesses, as well as those suited to the average person. Available software ranges from the very simple to the very complex, with much variation in price as well.
Accounting software is typically composed of various modules, different sections dealing with particular areas of accounting. Among the most common are:
Core Modules
•Accounts receivable: Accounts receivable is one of a series of accounting transactions dealing with the billing of customers who owe money to a person, company or organization for goods and services that have been provided to the customer. This is typically done in a one person organization by writing an invoice and mailing or delivering it to each customer.
•Accounts payable: Accounts payable is one of a series of accounting transactions covering payments to suppliers owed money for goods and services. The average household performs this task by writing cheques each month to such suppliers to the electric company, telephone company, cable television or satellite dish service, newspaper subscription, and other such regular services.
•General ledger: The general ledger, sometimes known as the nominal ledger, is the main accounting record of a business which uses double-entry bookkeeping. It will usually include accounts for such items as current assets, fixed assets, liabilities, revenue and expense items, gains and losses.
•Billing: The process of sending accounts to customers for goods or services is called billing. The document used is called an invoice. The invoice may be attached to the goods or forwarded separately.
•Stock/Inventory: In business management, inventory consists of a list of goods and materials held available in stock.
Non Core Modules
•Debt Collection: where the company tracks attempts to collect overdue bills (sometimes part of accounts receivable).
•Expense: In accounting, an expense represents an event in which an asset is used up or a liability is incurred. In terms of the accounting equation, expenses reduce owners' equity.
•Inquiries: where the company looks up information on screen without any edits or additions.
•Payroll: In a company, payroll is the sum of all financial records of salaries, wages, bonuses, and deductions.
The next step up in the realm of accounting software consists of applications capable of performing a variety of functions important to business accounting. Referred to as mid-market software, accounting applications in this class perform general business accounting functions and frequently include integrated management information systems. Many software applications at this level are capable of providing for accounting in several different currencies. Mid-market accounting software is usually purchased from a dealer.
Higher-end accounting software is more expensive than other types and is usually much more complex. Generally designed for use by large businesses with millions of dollars in transactions, high-end accounting programs usually have very sophisticated features and options. Software in this class also allows for a high level of customization. Typically, higher-end software is sold through a dealer.
Some companies choose to develop their own accounting software, gearing it completely towards their unique needs. Other companies choose to purchase ready-made software packages. Many organizations employ a combination of the two, purchasing software and applying local modifications to make it more efficient.
Accounting software is rapidly becoming an essential element for a vast number of businesses. With so many accounting packages on the market today with a huge array of different software applications, the choices can be almost limitless. Some of these software packages are suited for use by large corporations while others are perfect for personal accounting functions. Software that is available ranges from the sublimely simple to the ultimately complex; it is important to recognise your needs before making any purchase.
Accounting software is usually categorised by the functions it performs. These different functions are usually referred to as core modules, the following gives definitions of these functions and which should be included in your package.
One function your software should perform involves accounting transactions. The core module labelled 'accounts receivable' is the billing of customers automatically. This would normally done by sending out invoices and the like, it is possible with accounting software to optimise the process so less time is spent calculating charges and all you simply must do is pop it in the post.
Another accounting function is the 'accounts payable' module. This works in much the same way as the accounts receivable but instead of customers it is the funds that must be paid to suppliers of energy. Put simply it is the expenses that your company must pay out.
A 'general ledger' is also referred to as a nominal ledger. Put simply this is the main accounting record for a business and in most cases will use a double entry bookkeeping method. Included are figures for fixed and current assets liabilities, revenue and expenses. With use of efficient software it should be able to surmise your businesses gains or losses from the general ledger.
Billing is another function that accounting software should possess, this is generally the production of bills and receipts for customers. Invoices also fall into this category and should be used by businesses that do a lot of delivery orders as part of their commercial operation.
Accounting software should also be able to help with stocktaking and inventories. By recording and updating a list of stock constantly the software should be able to produce a list of all the items you currently hold in stock.
So far we have looked at the fundamental applications your software package should include. There are however peripheral functions that the package should be able to carry out.
One of these functions is 'debt collection'; where the software is able to track any debts that may be owed to the company. Some software packages will also be able to record information on customer enquiries including what kind of goods and services they were looking to buy.
Payroll information should be included in your accounting software package. Put simply this is the recording of all the salaries and wages that are paid to staff members, including information on tax paid, bonuses and any deductions that may have to be made.
Naturally not all accounting software will include these applications. Depending on your business requirements it may not be essential to use all of these functions. Packages usually come dedicated to the size of the business. Usually in terms of large, medium or small business operations; while the small business software may be cheap it doesn't always fulfil your needs while larger businesses will benefit from the extensive range of applications contained in top flight packages.
It is worth remembering that when you are looking at buying an accounting software package to factor in the growth of your business. Packages can be expensive and if you do not get one that is efficient enough to cope with the growth of your business for a number of years you may find yourself upgrading in six or twelve months time. Considering the functions your need the software to carry out is important, make sure the package suits your immediate needs and can cope with growth. By following this advice you should be able to find a package to suit your business requirements perfectly.
Both Vinay Choubey & Thomas Pretty are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Vinay Choubey has sinced written about articles on various topics from Marketing, Nutrition and Web Development. Vinay ChoubeyContent WriterFind more about Accounting Software atOur Partner site:. Vinay Choubey's top article generates over 110000 views. to your Favourites.
Thomas Pretty has sinced written about articles on various topics from Formula One, Debts Loans and Interior Design. Financial expert Thomas Pretty looks into the functions and applications that your package should perform for efficient business. Thomas Pretty's top article generates over 1500000 views. to your Favourites.