Accounting software can vary from multi million
pound solutions for major public companies to simple managed lists of
income and expenses. Simple accounting solutions are most suitable for
small business.
The most comprehensive financial accounting packages incorporate
financial reporting information and managed by teams of qualified
accountants supported by accounts clerks, bookkeepers and substantial
input from automated data sources. At the other end of the scale a self
employed sole trader might use accounting software themselves and
produce a set of financial accounts for the year in an afternoon.
Different accounting standards are required from accounting software
dependent upon the fitness for purpose and client needs. Double entry
bookkeeping automated through a database system and probably arranged
in financial modules would normally be the choice of the majority of
public companies. Single entry bookkeeping would not be an acceptable
accounting solution for a limited company due to audit requirements and
statutory obligations.
Single entry bookkeeping does however have its place in the market
place for the smaller less complex businesses who maintain financial
control through a close intimate knowledge of every financial
transaction. The main objective of a sole trader is more likely to be
the production of the tax accounts and complete the periodic and annual
tax return forms.
The most sophisticated level of accounting software in the largest
companies mirrors the accounting functions in those organisations with
various financial modules for accounts receivable, accounts payable,
stock control, general ledger and fixed assets. These accounting
modules may also be integrated with non accounting functions such as
production and dispatch functions and also divided into separate
modules within the accounting function.
In larger companies the sales daybook and data entry of sales turnover
would often be the responsibility of one department while the accounts
receivable function might be split with a specialist credit control
function within that accounting module. A further division may also
include sales administration and customer records. Accounts payable
would normally be multi functional of the purchasing department,
purchase invoice accounts department and a legal function for overdue
payments.
Accounting software for smaller companies and organisations is commonly
a system of data entry of prime transactions which include sales
income, purchase expenses and cash and bank transactions. The prime
entry of these documents being to a database which automates the double
entry accounting principles and produces both accounts receivable,
accounts payable and general ledger databases.
Some accounting knowledge is usually required tom operate a database
accounting software system and that financial knowledge is usually
available within the company as most companies that use database
accounting software also employ a bookkeeper or accounts clerks to
input data and in slightly larger small companies also qualified
accountants to manage the accounting function.
The need for accounting knowledge in a database system is partially to
understand the data entry principles and the relevancy of the rules
that need to be followed but essentially understanding of accounting
principles is required to understand what is happening ton the
information after input. And most important, a qualified accountant has
the financial knowledge, training and experience to know what the
system should be producing and how to query the database to retrieve
that information.
A database accounting software system not only produces high quality
financial records but offfers numerous financial control alternatives
for both junior and senior business management. The accounting function
also has the security of producing trial balances, periodic profit and
loss accounts, balance sheets and other financial and statements for
tax and control purposes.
Accounting solutions requiring little bookkeeping or accounting
knowledge are available usually based uponh spreadsheets as this is the
most transparent method of viewing the accounts.
Small limited companies must obtain accounting software based upon
double entry accounting principles as in addition to producing a profit
and loss account and a trial balance to demonstrate accuracy and
integrity of the financial records plus a balance sheet is required for
reporting purposes. Accounting standards require the limited company to
have a system of financial control and accounting software is an
essential tool in achieving this.
Some accounting knowledge either from the management or outsourcing the
bookkeeping services is usually required with even the simplest
database accounting solutions eve3n if this requires the understanding
of what accounts receivable ledgers, accounts payable ledger and
control accounts mean.
There are other possibilities and those businesses with a minimum of
accounting knowledge can consider spreadsheet based accounting
software. Accounting software compiled from spreadsheets is less
flexible and often does not have the range of options a database system
has due to the lack of database queries available. These disadvantages
of flexibility being compensated by the fact that all entries are
visible, transparent and changes can be made more easily.
Financially at the sole trader and self employed end of the business
spectrum then the requirements from accounting software may be
completely different. Gone are the sophistications of control accounts,
trial balances and many aspects of financial control. The most
important aspect of self employed accounting software is often to
produce a set of accounts for tax purposes.
Self employed small business that do not require a balance sheet can
use accounting software based upon single entry bookkeeping rather than
double entry and with the reduced requirement for financial control
then less financial queries to the system are required. In these
respects the simpler an accounting solution the better and in this
market an accounting solution written on spreadsheets that can produce
the net taxable profit would meet the requirements.
Article Source: http://www.articlesbase.com/finance-articles/
suitable-accounting-software-exists-for-all-business-sizes-
298604.html About the Author
Terry Cartwright, CEO DIY Accounting, a qualified accountant designs UK Accounting Software
on excel spreadsheets and Payroll
Software for small to medium sized business providing a
complete accounting solution and also supplies Company Formation
packages for new limited liability companies |
