Accounting Flow Of Purchasing And The Accounts It Hits Accounting Software Can Be Sophisticated Or Simple But Rarely Both

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Accounting Software Can Be Sophisticated Or Simple But Rarely Both

Accounting software is a system for recording financial transactions on a computer with a full range of accounting options that almost certainly depend on the size of the business. Financial software can vary from multi-million pound solutions for large public companies to simple managed lists of income and expenses.

Accounts software needs are diverse ranging from the most complex and comprehensive financial accounting packages that include financial reporting information and are managed by a team of qualified accountants supported by substantial input from account clerks, bookkeepers and automated data sources. At the other end of the scale a self-employed sole trader can use accounting software himself and prepare a set of financial accounts for a year in one afternoon.

Different accounting standards are required from software packages depending on fitness for purpose and client needs. Automated double entry bookkeeping through a database system and often arranged in a financial module will be the choice of most public companies. Single entry bookkeeping may not be an acceptable accounting solution for a limited company due to audit requirements and statutory obligations.

However, single entry bookkeeping has its place in small less complex businesses that maintain financial control through intimate knowledge of every financial transaction. The main objective of a sole trader is to prepare tax accounts and complete periodic and annual tax return forms.

The most sophisticated level of financial software in the largest companies represents the accounting functions in those organizations with various modules for accounts receivable, accounts payable, stock control, general ledger and fixed assets. These accounting modules can also be integrated with other business functions such as production and dispatch functions and can also be divided into separate modules within the finance function.

In large companies the data entry of sales daybook and sales turnover is often the responsibility of one department while the accounts receivable function may be split 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 may be divided between the purchase department, accounts payable invoice department and legal function for overdue payments.

Accounting software for small companies and organizations is usually a system for data entry of prime transactions including sales revenue, purchase expenses, and cash and bank transactions. The entry of these key documents is in a database that automates double entry bookkeeping principles and creates both accounts receivable, accounts payable and general ledger databases.

Some accounting knowledge is usually required to operate a database accounting software system, and that financial knowledge is usually available within the company as most companies using database accounting software also employ a bookkeeper or accounts clerk to input data, and a few larger and smaller companies also have qualified accountants. To manage the accounting function.

Accounting knowledge is required in a database system partly to understand the relevance of data entry principles and rules that must be followed but to understand what is happening to the information after input is to understand the fundamentals of accounting principles. And most importantly, a qualified accountant has the financial knowledge, training and experience to understand what the system is generating and how to query the database to retrieve that information.

Apart from inputting key income and expenditure details, the biggest advantage of a database system is that the information it contains can provide company management and financial directorate. The accounting function also has the security of preparing trial balances, periodic profit and loss accounts, balance sheets and statements for other financial and tax and control purposes.

Small business accounting packages that require little or no accounting knowledge are available.

Small limited companies must obtain accounting software based on double entry bookkeeping principles apart from preparing profit and loss accounts and trial balances to demonstrate the accuracy and integrity of financial records as well as balance sheets for reporting purposes. Accounting standards require a limited company to have a system of financial control and accounting software is an essential tool to achieve this.

Some accounting knowledge either from management or outsourcing of bookkeeping services is usually required with very simple database accounting solutions although this requires an understanding of what accounts receivable ledgers, accounts payable ledgers and control accounts are.

There are other possibilities, and businesses with minimal accounting knowledge can consider spreadsheet-based accounting software. Spreadsheet accounts are less flexible and often do not have the range of options that database systems have because database queries are not available. These disadvantages of flexibility are compensated by the fact that all records are visible, transparent and changes can be made more easily.

Financially the sole trader and self-employed end of the business spectrum may have completely different accounting software requirements. Control accounts, trial balances and many aspects of financial control have lost their sophistication. One of the most important aspects of self-employment accounting is creating a set of accounts for tax purposes.

Self-employed small businesses that do not need a balance sheet can use accounting software based on single-entry bookkeeping instead of double-entry, and the system requires fewer financial queries if there is less need for financial controls. In this context the simpler the accounting solution the better and in this market an accounting solution written on a spreadsheet that can generate net taxable profit will meet the requirement.

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