INTRODUCTION, BRIEF HISTORY, FEATURES AND 22 TYPES OF ACCOUNTING SOFTWARE
It is a computer application that assists accountants, financial managers, and other professionals in recording, reporting, analyzing, and documenting financial transactions. Accounting software provides an integrated set of financial management functions that can be adapted to meet the needs of multiple users.
Accounting collects, organizes, and analyzes information about a company or organization's financial activities and position. Accounting information is used to make business decisions including how much to charge for products or services when to buy materials for production, and what inventory levels to maintain.
The chart of accounts lists all the accounts used in your accounting system. It includes all assets (cash, accounts receivable), liabilities (accounts payable), equity (capital stock), and income/expense accounts. The chart of accounts should have one account for each type of transaction in your business: sales revenue, purchases expense, etc.
History of accounting software
Large corporations like GE developed the earliest types of accounting software. These early systems were designed to automate information processing tasks, such as payroll calculations and billing.
Accounting records have been created and recorded by hand for thousands of years. The oldest known written record is an Egyptian papyrus from c. 2400 BC that recorded purchases and sales of livestock and grain. The Babylonians in Mesopotamia practiced another early form of accounting around 2000 BC when merchants would write numbers on clay tablets to record sales transactions for goods such as beer, oil, and spices.
Accounting software was first developed in the early 1900s. The first accounting machines were invented to add, subtract and print receipts. These machines were called adding machines or calculators. In 1918, International Business Machines (IBM) introduced its first accounting machine; it could add, subtract and print receipts from an adding machine.
In 1925, the Electric Accounting Machine Company created the first computerized accounting system. The system included a mechanical card punch and a tabulator that read data from the cards and produced summary reports. The system was designed for businesses with fewer than 100 employees to track their financial information using one machine instead of having separate machines for each function, such as payroll, accounts payable, and purchasing orders.
In 1956, IBM introduced its Model 650 Magnetic Drum Calculator, which could perform complex calculations such as depreciation calculations with minimal human intervention. The machine's design was based on research conducted by scientists at Harvard University who had been working on ways to get computers to solve problems more efficiently than humans could through brute force.
Accounting software is the cornerstone of any organization’s financial reporting and analysis, and it has been since the first companies began using computers. The first accounting software was developed in 1959 by a company called General Electric (GE) for use on its UNIVAC computer, a predecessor of today’s computer.
American businessman James J. Doran created the first accounting software in the late 1960s. The program, known as Easy Ledger, allowed users to input data into a computer and then print out reports for use in their business. However, this system was not widely used because it only worked on mainframe computers and did not have user-friendly features such as graphics or word processing capabilities.
The first integrated systems were developed in the 1970s by companies including IBM and Burroughs Corporation. They allowed a company's accounting staff to consolidate all of their financial transactions into one system, rather than using separate hardware or software for each type of transaction. This allowed them to perform more complex tasks such as journal entries or bank reconciliations that previously required manual efforts.
As technology advanced, so did accounting software programs. In 1972, Doran's company — now called Computer Concepts Corporation — developed a new CCC Payroll System (CPS) product. This program allowed users to create payroll checks and record employee hours worked more easily than previous products had done; it also had an intuitive user interface that made it easier for workers to navigate their jobs each day. Another important development occurred when legendary venture capitalist Arthur Rock invested $1 million in Computer Concepts Corporation in 1973; this helped the company grow quickly and expand its offerings beyond payroll and payroll tax services.
The first commercial software packages were developed in the 1960s and 1970s by Peat Marwick Mitchell & Co., Coopers & Lybrand, and Price Waterhouse. These firms offered their clients software that they could lease or purchase to run their businesses. As personal computers became more common in the 1980s, accounting software became available for PCs.
In 1981, Peat Marwick Mitchell (now KPMG) developed a system called ADP/1 (Accounting Data Processing 1), which allowed clients to access their financial data from remote locations via dial-up modems and telephone lines (rather than having to come into the office as before).
By the 1990s, most companies had adopted an integrated accounting system — meaning that their financial management programs were designed to work together, rather than separately — to manage their finances. Today, most large organizations use an integrated financial management system to handle all aspects of accounting operations.
Accounting software has been around for decades, but it wasn't until the early 2000s that it became more accessible and affordable to small businesses. In 2003, Intuit released QuickBooks Online Edition, the first cloud-based accounting system available to small businesses. The following year, Intuit released QuickBooks Pro 2006, which made it easier for people with little or no accounting background to start using an accounting system. QuickBooks Pro 2006 was also compatible with Windows Vista, which allowed users to run their accounts on their computers instead of having them on a separate server or in the cloud-like they do today.
Features of accounting software
You'll find several different features in accounting software, but some are more important than others.
Accounting system: This is the central feature of any accounting software. Some programs allow you to create multiple companies or organizations within one platform. Others require you to purchase multiple licenses for each company or organization.
Reporting: Accounting software should provide you with reports, including balance sheets and profit and loss statements. It should also allow you to customize these reports to be easy to read and understand.
Payroll: If you plan on using the software for payroll purposes, make sure it includes this feature. Payroll can be complex, so make sure that your chosen program has all the features required by law for your state or province.
Taxes: Tax filing is an important part of running a business, and keeping track of all your tax obligations can seem overwhelming at times. Accounting software takes care of this task for you by ensuring that all tax obligations are met.
Bank reconciliation: Reconciles bank accounts against the balance on the bank statement, showing any discrepancies between the two.
Cash flow forecast: Provides an estimate of your company’s future cash flows.
Accounts payable: Tracks invoices and payments received from vendors, suppliers, or customers.
Accounts receivable: Tracks invoices and payments sent to vendors, suppliers, or customers.
Inventory management: Tracks inventory levels, cost price, and purchase dates
Types of accounting software
There are many different types of accounting software, but they can generally be categorized into two types:
Online Accounting Software
Online accounting software is accounting software that is accessed from the Internet. It is usually accessed through an online interface, such as a browser or web-based app. The advantage of using this type of software is that it allows you to access your financial data from anywhere with an Internet connection. This means you can track your business finances from home, office, or even while traveling on vacation.
Onsite accounting software
Onsite accounting software is installed on your computer or laptop, allowing you to download information directly into your accounting system without connecting to the internet first. The downside of this type of software is that it can be more expensive than online alternatives and require more maintenance over time due to hardware issues or security concerns.
Desktop Accounting Software
Desktop accounting software is similar to online accounting software in that it allows you to access your financial data from anywhere with an Internet connection. However, desktop software does not require a browser and instead provides a stand-alone application that can be installed on your computer's hard drive.
Bookkeeping software
Bookkeeping software is designed specifically for bookkeepers who want to keep track of their client's accounts. Most bookkeeping programs allow you to enter transactions directly into your client's account online or by phone or email.
preparation software
Tax preparation software helps automate tax filing for small businesses, individuals, and freelancers who need to file their taxes themselves each year. Some tax preparation programs can be used stand-alone, while others require an accountant's assistance in preparing returns (e.g., TurboTax).
Excel Spreadsheets
Excel spreadsheets are a great choice for businesses that don't require a lot of features. These spreadsheets are easy to use and can automatically be set up to calculate figures like sales tax and inventory costs. They're also reasonably affordable since most companies already have Microsoft Office installed on their computers. The downside is that these programs aren't very secure and don't offer any built-in security features.
Accounting packages
Accounting packages are designed to handle all aspects of accounting, including accounts payable, accounts receivable, budgets, payroll, and taxes.
Enterprise resource planning (ERP) systems
Large organizations use ERP systems to manage the financials of multiple locations and business units.
Accounting cloud applications
Cloud accounting applications are web-based tools that allow users to access their financial information from anywhere there’s an internet connection.
Mobile accounting software
Mobile apps allow you to take your business books with you by downloading them to your smartphone or tablet device (provided they have enough memory space).
Payroll Software
Payroll software is a special type of accounting program that helps small business owners ensure compliance with payroll laws and regulations. Many payroll programs also include time-tracking and employee scheduling to track who's working when and for how long.
Business Intelligence Tools
Business intelligence tools help businesses make better decisions about their finances by collecting information from multiple sources and presenting it all in a single place for easy analysis. These tools might include data mining or dashboards to see how your business performs over time in sales performance or spending patterns.
General Ledger Accounting
The general ledger is a record of all financial transactions in a company's account books. This ledger includes accounts receivable (money owed to the company), accounts payable (money owed by the company), inventory, and fixed assets (cars, buildings). General ledger accounting software allows users to create accounts and assign them to specific categories that represent different types of expenses or revenue sources. The program also provides reports showing revenue, expenses, and profits over periods such as months or quarters.
Small Business Accounting Software
Small business accounting software usually includes all the features found in general ledger accounting systems but uses smaller databases with fewer records per customer or vendor than larger versions. Small businesses often use this type of program because it allows them to track sales receipts manually while they're still.
Invoicing
The invoicing module allows you to create invoices for customers who have purchased goods or services from your company. You can create an invoice template that contains all the necessary information about products sold or services rendered. When creating an invoice template, you can include a custom logo for your company so that each invoice appears professional-looking, with your logo at the top left corner of the page. After creating an invoice template, all you need to do is fill in the necessary information about each customer's purchase order, including quantity ordered and price per unit
Accounts Payable/Accounts Receivable Accounting Software
This type of accounting software is mainly used by companies that sell products or services on credit terms
Conclusions
Basic Accounting Software
Basic accounting software is suitable for small businesses with limited needs. The software can track sales, purchases, and payments, but it may not have features of inventory tracking or payroll processing. Basic accounting software is often less expensive than more advanced versions because it does not require a lot of computer resources.
Cloud Accounting Software
Cloud accounting software is available from the cloud, making it easy to access from any computer with internet access. Cloud-based services are sometimes called SaaS (or Software-as-a-Service), which means that you pay a monthly fee for an ongoing subscription rather than purchasing the software itself. Cloud accounting software is often simpler than traditional desktop programs because all functions are web-based; there is no installation process to learn or update your computer's operating system.
General ledger
This type of accounting software records all transactions in a company's general ledger, including revenue, expenses, and debts. General ledger software typically includes reporting, accounts payable, accounts receivable, and more!
Cost accounting
Cost accounting software is used to help businesses determine the cost of producing goods or providing services based on cost accounting standards such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Cost accounting is most commonly utilized by manufacturing companies but can be used by any company that sells products or provides services.
Financial reporting
Financial reporting software helps companies prepare financial statements such as balance sheets, income statements, and cash flow statements. It can also generate reports related to tax filings, such as payroll tax returns and sales tax returns.
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Conclusions of accounting software
In conclusion, the history of accounting software has been a long and interesting one, but it is important to note that the future looks even brighter. Accounting software is changing and improving every day, and there are many new developments on the horizon.
The accounting software market is expected to grow rapidly over the next few years. The economic recession has slowed the growth rate somewhat, but the industry is still expanding at a healthy rate.
In addition to this, cloud-based applications are becoming increasingly popular, with businesses moving away from onsite solutions and towards SaaS (Software as a Service) solutions.
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