Accounting software is an integral part of the computerized accounting system. The accounting software should be selected after considering the level of skill and proficiency of the accounting professionals. The Following are some Generic Considerations before Sourcing an Accounting Software
Generic Considerations before Sourcing an Accounting Software
The following are some of the important points that should be taken into consideration before introducing accounting software in an organization.
Flexibility: This is the most important factor that should be considered before sourcing accounting software. The accounting software should be flexible in terms of data entry, retrieval of data, and generating the design of reports. The software should be able to run on different computers having different operating systems and different configurations. It should provide some flexibility to its users. It should also provide easy switch over between users, operating system, and hardware.
Cost of Installation and Maintenance: The selection of accounting software largely depends upon its cost to the organization. The cost of accounting software includes the cost of installing the related components and hardware, maintenance and alteration costs, cost of training the staff, and cost involved in recovering data in case of software failure. An organization needs to evaluate the benefits of the software against its costs. Based on its evaluation, an organization will introduce the software if the benefits are more than the cost and if it is in the affordable range of the organization.
Size of Organisation: The size of an organization also influences the selection of accounting software. Small-sized organizations, where the volume of business transactions is not so large, usually opt for simple and single user-oriented software. On the other hand, large-scale organizations, where the volume of business transactions is very large choose the latest and sophisticated software for meeting the multi-user requirements.
Training Needs: Another factor that affects the choice of software is the training needs. There is some accounting software that requires comparatively lesser training and is more user-friendly. Also, there is complicated software that requires continuous and thorough training.
Level of Secrecy: The level of expected security is one of the important factors that an organization bears in mind before sourcing accounting software. Software should be competent enough to prevent unauthorized access and manipulation of data. It should have in-built features of security. For example, in tailored software, the user rights may be restricted according to their work or responsibility criteria.
Exchanging Data Facility: The ability of accounting software to transfer data is another important factor to be considered in its selection. The accounting software must provide an easy and safe transfer of data from one system to another during the migration of the database.
Utilities/MIS Reports: Another factor that helps in software selection is the MIS reports and the extent to which they are used in the organization.
Vendor Reputation and Capability: The selection of software is also affected by the competence of the vendor. It depends upon the reputation of the vendor in the market, the user-reviews of the similar software, the extent of post-sales support services from the vendors, etc
Any interest paid on capital is considered as an expense and is shown in the Profit and Loss Account. Treatment of interest on capital in the final accounts is as follows.
Treatment of interest on drawings in the final accounts is as follows. Firstly, interest in drawings is shown on the credit side of the Profit and Loss Account.
Operating Profit can be defined as the profit earned by carrying the normal business activities. It is computed by subtracting the operating expenses from the gross profit.
The balance sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period
A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.