Accounting software facts for kids
Accounting software is a special computer program. It helps businesses and people keep track of their money. Think of it like a digital notebook for all financial stuff. It records every time money comes in or goes out. It also shows how much money is in different accounts.
This software can do many things. It helps manage budgets, handle money in different countries, and even pay employees. It can also create reports to show how a company is doing financially. People have been trying to use computers for accounting since computers were first invented. Over time, this software has become much smarter. It now helps with real-time money tracking and detailed financial reports. In 2011, "cloud accounting software" came out. This meant you could do all your accounting online, from anywhere with internet.
Contents
What Accounting Software Can Do
Accounting software usually has different parts, called "modules." Each module handles a specific part of managing money.
Main Parts of the Software
These are the most common and important parts:
- Accounts receivable: This is where a company records money that people or other businesses owe to it.
- Accounts payable: This is where a company records bills it needs to pay to others.
- General ledger: This is like the main book for all the company's financial records.
- Billing: This part creates invoices, which are bills sent to customers for things they bought.
- Stock/inventory: This helps a company keep track of all the products it has to sell.
- Purchase order: This is used when a company orders new products for its inventory.
- Sales order: This records what customers want to buy from the company.
- Bookkeeping: This is the process of recording all money coming in and going out.
- Financial close management: This helps accounting teams check and fix money balances at the end of a time period.
Other Helpful Parts
Some software also has these features:
- Debt collection: Helps track efforts to get overdue payments.
- Electronic payment: Manages payments made online.
- Expense: Records money employees spend for business.
- Payroll: Handles employee salaries, wages, and taxes.
- Reports: Prints out financial information in easy-to-read formats.
- Timesheet: Records hours worked by professionals, like lawyers, for billing clients.
- Reconciliation: Checks if records from different sources match up.
- Bank feed integration: Connects directly to bank accounts to get transaction data.
- Document attachment: Lets you attach files, like receipts, to transactions.
Remember, different software companies might use slightly different names for these parts.
Setting Up the Software
Getting accounting software ready to use is called "implementation." This means installing it and setting it up for a specific business. For many businesses, setting up the software can cost more than the software itself. This is because it often needs special help from experts. These experts make sure the software works perfectly for the company's needs.
Using accounting software has many benefits. It helps find information quickly. It makes checking bank records easier. It can automatically prepare tax reports like VAT (Value Added Tax). Most importantly, it lets businesses see their financial health in real-time. This means they always know how much money they have.
Different Kinds of Accounting Software
Accounting software comes in different types, depending on who uses it and for what purpose.
For Personal Use
This software is made for individuals and families. It's usually simple and helps with things like paying bills, managing a budget, and checking bank accounts. It's often used for preparing tax returns, like with programs such as TurboTax. This type of software is usually not very expensive.
For Small Businesses
Small businesses often use less expensive software. This software can handle most basic accounting tasks. Many of these programs are designed for a single country's money rules. Some simpler ones might not follow all the strict accounting rules that larger businesses must follow. They might also have less security.
For Medium-Sized Businesses
Software for medium-sized businesses is more advanced. It can handle accounting rules for many countries and work with different currencies. Besides basic accounting, it might include tools for managing projects or other business information. These programs often use strong databases and tools for creating custom reports. They can also be changed or expanded to fit specific business needs.
For Large Organizations
Large companies, like big corporations, use the most complex and expensive accounting software. This software is often part of a huge system called "Enterprise Resource Planning" (ERP). ERP systems manage almost all parts of a big business, not just accounting. Setting up these systems can take a very long time, sometimes more than six months. They are highly customizable, meaning they can be changed to fit a company's exact way of doing things. This flexibility comes with a high cost and long setup time.
However, there are now many free, powerful open-source accounting programs available online. These are changing how the market works. Most of them are web-based.
Online Accounting Software (SaaS)
With faster internet, many accounting software companies now offer their programs online. You pay a monthly fee to use them, instead of buying the software outright. This is called "Software as a Service" (SaaS). More and more businesses are choosing this option. Even older software companies are now offering online versions.
Cloud Accounting Software
Cloud accounting software means your financial information is stored on central computers on the internet. You can access it from any device with an internet connection, anywhere, anytime. This is different from older software that was stuck on one computer. People like cloud software because they don't have to worry about maintaining it or upgrading their computers. It can also save money and lets many people access the information from different places. One main concern with cloud software is making sure the data is safe and private.
Keeping Your Data Safe
When your financial data is stored in the "cloud" (on someone else's computers), there's always a risk that it could be seen by others. It's important to trust the company that stores your data. Security threats can be different depending on how the cloud system is set up. It's also important to know what laws apply to your data, especially if it's stored in different countries. While cloud computing has some unique privacy concerns, the ways to keep data secure are often similar to traditional computer systems.
See also
In Spanish: Software contable para niños
- Accounting
- Comparison of accounting software
- Double-entry bookkeeping system
- Enterprise resource planning
