Accounting Software Classification and Types – Helping Small and Large Organization
Accounting software is an application or set of applications that records and processes accounting transactions according to the rules and regulations specified and takes every single transactional entry up to the final books like trial balance, profit and loss accounts and balance sheet automatically. Accounting is a part of life, it is required everywhere be it home, shop, services, companies or government departments. The books containing information about money transactions are compulsory.
Accounting software makes the task of keeping account books easy. This is done in few ways like software helping a lay man in keeping his books who has no knowledge of accounting rules. Software helping small to large organizations in maintaining books with ease by doing processing and recording on its own and relieving accounts department from repetitive work and another way is to help in analyzing the accounts data for better and profitable decisions and getting alerts for wrong decisions or pitfalls .
Accounting software generally contain modules like accounts receivables, accounts payable, general ledger, billing, inventory, purchase order, sales order, bank book and cash book. These are core modules of accounting software however non core modules may include more options like debt collection or outstanding, payment performance, expenses, payroll etc.
Accounting software can be classified as per their functionality in few categories. Personal accounting software are meant for simple accounting purposes like managing budget, expenses and income for personal accounts. These software also include reports for reconciliation like bank book and expense sheet. Inventory-accounting software is another category of software used with sales and purchase options, few of those have stock option too and use single entry system for accounting. These software are very low in terms of functionality and support only one type of regulation and currency. These software are not designed with GAAP or IFRS compliance and just provide accounting as additional feature with the software.
Accounting software used by mid level companies has multiple currency and multiple regulation options which allows the user to keep books according to international standards. Reporting of these software is robust and scalable by using external tools. These software use scalable and flexible databases at the back end like Oracle, Pervasive, MS-SQL, MySql etc. Management information systems are provided along with these software supported by capable reporting tools like crystal reports or cognos.
ERP finance software are more advanced versions of accounting software used by mid level organizations. The advantage of using such software is that these can be customized according to the user needs and requirements without disturbing the compliance with IFRS or GAAP and maintaining the accuracy and speed for transfer of vital information and analysis. Large organization may have to adopt few policies for working smoothly or covering the pitfalls, these software adjust according to such changes to allow its users work freely with same flexibility. Some accounting software are specifically designed for a particular industry, resolving industry specific problems and providing advanced features like data security and privacy. Such software are used by banks, financial institutions and government departments. These software are flexible enough to adjust according to changing rules and regulations too with greater ease.