Accounting software is a system for recording financial transactions on a computer through a full range of accounting options that almost invariably depend on the size of the business served. Financial software can range from a multi-million pound solution for major public companies to simple managed income and expense lists.

Account software requirements are diverse with the most complex and comprehensive financial accounting packages incorporating financial reporting information and managed by teams of qualified accountants supported by account clerks, bookkeepers and substantial input from automated data sources. At the other end of the scale, a self-employed sole trader could use accounting software and produce a set of financial accounts for the year in an afternoon.

Different accounting standards of software packages are required depending on the fitness for purpose and the needs of the client. Automated double-entry bookkeeping through a database system and probably organized in financial modules would normally be the choice of most public companies. Single entry accounting would not be an acceptable accounting solution for a limited company due to auditing requirements and legal obligations.

However, single entry bookkeeping has its place in the market for smaller, less complex businesses that maintain financial control through intimate and close knowledge of every financial transaction. The main purpose of a sole trader is more likely to be the production of tax accounts and the completion of periodic and annual tax return forms.

The most sophisticated level of financial software in larger companies mirrors 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 the production and dispatch functions, and also be divided into separate modules within the finance function.

In larger companies, the sales journal and sales invoicing data entry would often be the responsibility of one department, while the accounts receivable function might be split with a specialized credit control function within that module. accounting. An additional division may also include sales management and customer records. Similarly, the accounts payable function could be divided between the purchasing department, the billing department for account purchases, and a legal function for late payments.

Accounting software for smaller businesses and organizations is often a data entry system for major transactions that include sales revenue, purchase expenses, and cash and bank transactions. Entry of these primary documents is done in a database that automates double-entry accounting principles and produces 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 that use database accounting software also They employ a bookkeeper or accounting clerks to enter data and in slightly larger small businesses also qualified accountants. to manage the accounting function.

The need for knowledge of accounting in a database system is partially to understand the principles of data entry and the relevance of the rules that must be followed, but essentially an understanding of accounting principles is required to understand what happens with information after entry. And most importantly, a qualified accountant has the financial knowledge, training and experience to know what the system should produce and how to query the database to retrieve that information.

Apart from entering the main details of income and expenses, the greatest benefit of a database system is the level of control that the information it contains can provide to the financial and managerial direction of the company. The accounting function is also assured of producing trial balances, periodic profit and loss accounts, balance sheets, and other financial and control statements.

Accounting packages are available for small businesses that require little or no accounting knowledge.

Small limited liability companies should obtain accounting software based on double-entry accounting principles, as in addition to producing a profit and loss account and trial balance to demonstrate the accuracy and completeness of financial records, it requires a balance sheet for reporting purposes. Accounting standards require the limited company to have a financial control system and accounting software is a fundamental tool to achieve this.

Some knowledge of accounting is usually required, either from management or outsourcing accounting services, even with the simplest of database accounting solutions, even if this requires an understanding of what the accounts receivable ledger, accounts payable ledger, and control accounts.

There are other possibilities and those businesses with a modicum of accounting knowledge may want to consider spreadsheet-based accounting software. Spreadsheet accounts are less flexible and often don’t have the range of options that a database system does due to the lack of available database queries. These disadvantages of flexibility are offset by the fact that all inputs are visible, transparent, and changes can be made more easily.

From a financial standpoint, accounting software requirements can be completely different for independent and self-employed traders across the business spectrum. Gone are the sophistication of control accounts, trial balances, and many aspects of financial control. The most important aspect of self-employment accounting is usually the preparation of a set of accounts for tax purposes.

Small self-employed businesses that do not require a balance sheet can use accounting software based on single entry accounting instead of double entry and with the reduced requirement for financial control, fewer financial queries are required to the system. In these respects, the simpler an accounting solution the better, and in this market an accounting solution written in spreadsheets that can produce net taxable profit would qualify.