Accounting Software

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Accounting Software

Computers were developed to perform routine tasks over and over based on a set of instructions and data provided by the user. Accounting and bookkeeping consists of a series of routine tasks (transactions) performed over and over with new data. Given the automation provided by computers and the routine nature of accounting, it was inevitable that the two would match up. In fact, the earliest applications of computers were for accounting purposes. American inventor Herman Hollerith's original tabulating machine was used to count the U.S. Census population numbers in 1890.

The first computer software designed for accounting purposes dealt with basic computations and accumulation of numbers. The large early computing systems added and subtracted numbers to help companies keep track of their financial information. As capabilities advanced, more complex systems were used for tracking customer transactions and related calculations.

Typical Applications

Accounting consists of some basic calculations and accumulation of numbers. Items such as loan interest computations, loan payment amounts, and tax due can be calculated with accounting software. In addition, there are several categories of general accounting tasks that any accounting software should support. These include general ledger, accounts payable, accounts receivable, payroll, inventory, job cost estimating, fixed assets, sales orders, and budgeting.

General Ledger.

The general ledger is the final accumulation of financial data for an organization. It allows the organization to view the overall status of all accounting data.

Accounts Payable.

The accounts payable area handles payments to be made to vendors or others who provide goods or services to an organization. Data such as vendor information, payment amount, and related items are tracked by this software. Summaries of payments are posted to the general ledger on a periodic basis.

Accounts Receivable.

The accounts receivable area processes money due to an organization from customers or other parties. Data related to the reason for money due and the due date are contained in accounts receivable records. The accounts receivable software posts summaries of the data to the general ledger on a periodic basis.

Payroll.

Payroll deals with the calculation and payment of money to employees for work performed for the company. In addition, payroll records may also house demographic information related to employees (human resources data). Payroll accounting involves a series of calculations for taxes, benefits, and other payroll items. The accumulation of payroll data is posted to the general ledger on a periodic basis.

Inventory.

Inventory software tracks the goods and supplies an organization keeps on hand to either supply customer needs or for internal use. The basic calculations handle additions and subtractions from the quantity in stock at any given time.

Job Cost Estimating.

Job costing helps project managers and others deal with the process of analyzing and estimating data to provide a cost estimate for a given project. Job costing software analyzes costs such as labor, equipment, supplies, and materials.

Fixed Assets.

Fixed assets are the physical components of an organization—property, plant, and equipment. The purchase costs associated with each item, along with any improvements made to the item, would be tracked by accounting software. Also, depreciation of the item over the years would be calculated. The accumulation of fixed asset and depreciation data is posted to the general ledger on a periodic basis.

Sales Orders.

Sales orders can be tracked and credited to individual salespersons in an organization. Each order is entered to show details such as the quantity ordered, price, and other financial data. The accumulation of sales data is posted to the general ledger on a periodic basis.

Budgeting.

Budgeting software allows the organization and its managers to accumulate data on projected revenues and expenditures for a future time period. Usually, this period is a one-year look into the future. Budgeting software allows actual revenue and expenditure data to be posted so that fluctuations between budget and actual values can be reported.

Accounting software is available for use on various operating systems and for a wide variety of computer types, from stand-alone computers used for small business or home accounting needs to mainframe computers that process accounting data for multinational corporations. Selecting the appropriate software for an organization is a matter of carefully matching the needs of the organization with an accounting software package that provides the functions and features needed by the organization at a price that is in proportion to the benefit to be gained.

see also IBM Corporation; Office Automation Systems; Tabulating Machines.

Richard Archer