Accounting software is a system of recording financial transactions on a computer across a complete range of accounting options almost always dependent upon the size of business being catered for. Financial software can vary from a several million pound solution for major public companies to simple managed lists of income and expenses.
The requirements from accounts software are different with the most complicate and comprehensive financial accounting packages incorporating financial reporting information and managed by teams of qualified accountants supported by accounts clerks, bookkeepers and substantial input from automated data supplies. At the other end of the extent a self employed only 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 the software packages dependent upon the fitness for purpose and client needs. Double entry bookkeeping automated by a database system and probably arranged in financial modules would typically be the choice of the majority of public companies. Single entry bookkeeping would not be an permissible 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 complicate businesses who continue financial control by a close intimate knowledge of every financial transaction. The main objective of a only trader is more likely to be the production of the tax accounts and complete the regular and annual tax return forms.
The most complex level of financial software in the largest companies mirrors the accounting roles in those organisations with various modules for accounts receivable, accounts payable, stock control, general ledger and fixed assets. These accounting modules may also be integrated with other business roles such as production and dispatch roles and also divided into separate modules within the finance 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 divided with a specialist credit control function within that accounting module. A further division may also include sales administration and customer records. Similarly the accounts payable function might be divided between the purchasing department, accounts buy invoice department and a legal function for overdue payments.
Accounting software for smaller companies and organisations is commonly a system of data entry of chief transactions which include sales income, buy expenses and cash and bank transactions. The entry of these chief documents being to a database which automates the double entry bookkeeping principles and produces both accounts receivable, accounts payable and general ledger databases.
Some accounting knowledge is usually required to function a database accounting software system and that financial knowledge is usually obtainable within the company as most companies that use database accounting software also use 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 slightly 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.
In addition to inputting the chief income and expenditure details the most assistance of a database system is the level of control the information it contains can provide the company management and financial directorship. The accounting function also has the security of producing trial balances, regular profit and loss accounts, balance sheets and other financial and statements for tax and control purposes.
Small business accounting packages requiring little or no accounting knowledge are obtainable.
Small limited companies must acquire accounting software based upon double entry bookkeeping 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 basic tool in achieving this.
Some accounting knowledge either from the management or outsourcing the bookkeeping sets is usually required with already the simplest database accounting solutions already if this requires the understanding of what accounts receivable ledgers, accounts payable ledger and control accounts average.
There are other possibilities and those businesses with a minimum of accounting knowledge can consider spreadsheet based accounting software. Spreadsheet accounts are less flexible and often do not have the range of options a database system has due to the without of database queries obtainable. 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 only trader and self employed end of the business spectrum then the requirements from accounting software may be completely different. Gone are the sophistication of control accounts, trial balances and many aspects of financial control. The most important aspect of self employed accounting 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 instead of 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.