Different Types of Accounting Software

Published: 15th December 2006
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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.

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