Accounting Software Does Not Have To be Taxing
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Many types of accounting software exist to record the financial transactions
of business and provide the management with financial control to achieve the
profit and loss performance required. The correct choice is highly dependent
upon the size of the business and the degree of sophistication and financial
The most comprehensive financial accounting packages incorporate financial
reporting information and managed by teams of qualified accountants supported by
accounts clerks, bookkeepers and substantial input from automated data sources.
At the other end of the scale a self employed sole trader might use accounting
software themselves and produce a set of financial accounts for the year in an
Different accounting standards are required from accounting software
dependent upon the fitness for purpose and client needs. Double entry
bookkeeping automated through a database system and probably arranged in
financial modules would normally be the choice of the majority of public
companies. Single entry bookkeeping would not be an acceptable accounting
solution for a limited company due to audit requirements and statutory
Single entry bookkeeping does however have its place in the market place for
the smaller less complex businesses who maintain financial control through a
close intimate knowledge of every financial transaction. The main objective of a
sole trader is more likely to be the production of the tax accounts and complete
the periodic and annual tax return forms.
The most sophisticated level of accounting software in the largest companies
mirrors the accounting functions in those organisations with various financial
modules for accounts receivable, accounts payable, stock control, general ledger
and fixed assets. The financial modules may bge integrated with other non
accounting departments of the business such as production and despatch and also
divided within the accounting sections of a company.
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 split with a specialist credit control function within that
accounting module. A further division may also include sales administration and
customer records. Accounts payable would normally be multi functional of the
purchasing department, purchase invoice accounts department and a legal function
for overdue payments.
Accounting software for smaller companies and organisations is commonly a
system of data entry of prime transactions which include sales income, purchase
expenses and cash and bank transactions. The prime entry of these documents
being to a database which automates the double entry accounting principles and
produces both accounts receivable, accounts payable and general ledger
Some accounting knowledge is usually required tom 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
employ a bookkeeper or accounts clerks to input data and in slightly larger
small companies also qualified accountants to manage the accounting function.
Database systems assume a knowledge of what happens to the financial data
after it has been input to the system to enable the accountant to be able to
extract from the system the required information for better financial control.
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.
A database accounting software system not only produces high quality
financial records but offers numerous financial control alternatives for both
junior and senior business management. The accountancy department also has the
safety net of producing a trial balance and periodic detailed financial accounts
for taxation and financial control purposes.
Accounting solutions requiring little bookkeeping or accounting knowledge are
available usually based upon spreadsheets as this is the most transparent method
of viewing the accounts.
Every limited company must produced a balance sheet for its shareholders and
consequently must acquire accounting software based upon double entry
bookkeeping principles for reporting purposes. Accounting standards require the
limited company to have a system of financial control and accounting software is
an essential tool in achieving this.
Some accounting knowledge either from the management or outsourcing the
bookkeeping services is usually required with even the simplest database
accounting solutions eve3n if this requires the understanding of what accounts
receivable ledgers, accounts payable ledger and control accounts mean.
There are other possibilities and those businesses with a minimum of
accounting knowledge can consider spreadsheet based accounting software.
Accounting and bookkeeping software produced on fixed templates is less flexible
as it is not intended to be a source of queries such as a database accounts
package would. These disadvantages of flexibility being compensated by the fact
that all entries are visible, transparent and changes can be made more easily.
Small business has different requirements from accounting software due to the
intimate knowledge those businesses the owner manager has. More sophisticated
accounting aspects such as debtor and creditor control accounts, trial balances
and financial control information are not present. The most important aspect of
self employed accounting software is often to produce a set of accounts for tax
Small business accounting that does not require the production of a balance
sheet can use single entry bookkeeping. 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
About the Author
Terry Cartwright, CEO at DIY Accounting, designs Accounting Software for
small to medium sized businesses
http://www.diyaccounting.co.uk/ and Paye Payroll Software packages for up to
20 employees at
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Article Published/Sorted/Amended on Scopulus 2008-01-14 00:11:51 in Tax Articles