accounting software

CLOUD ACCOUNTING – a new participant inside the financial CONTEXT

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CLOUD ACCOUNTING – A New Participant Inside The Financial CONTEXT

The monetary context that we are witnessing nowadays is an increasing number of dynamic and aggressive. Because of the need for performance and performance, each area has followed a few form of information technology. One of the maximum revolutionary IT gear, brought forward in the final decade, is cloud accounting. This new commercial enterprise version has been embraced via diverse financial entities way to it’s a couple of blessings. Alternatively, the accounting region has continuously tailored to the financial context and the need to present a real-time evaluation of a business has discovered an ally in cloud technology. Consequently, the cloud accounting epitome has emerged as a reasonable result in the sort of difficult subject. On this paper, we argue the meaning and fee of cloud accounting answers in an ever-converting surroundings.

Through a theoretical have a look at, we’ve underlined both the usefulness of cloud-based

Accounting software and some of its downsides consistent with the accounting professionals. Change is one of the few certainties in life. In particular in our worldwide economy, adapting to the ever-converting environment is crucial. according to Charles Darwin‘s idea presented in his paintings, on the foundation of Species, ―it is not the strongest of the species that survives, nor the most smart, but the one that is maximum adaptable to change. The need to evolve is particularly led by means of the irreversible and fulminant growth of generation. Individuals, companies and international locations alike are forced to preserve the tempo with this expanded increase of modern facts generation. Because this rhythm is not likely to slow down, human beings have to stay in contact with the state-of-the-art traits inside the IT domain and be equipped to apply them of their high-quality interest.

During the last decade, the virtual revolution has reshaped our international, more than everyone may want to have imagined. The upward push of the net might be considered the development that had the most important effect on almost every location, even for our each-day lives.

In only some years, the net has grown to be a large-scale ―product, an asset that everybody should find the money for. We may want to now say for sure that our modern-day society is significantly dependent on net-based answers and world-extensive collaboration is important. Such IT traits are continuously changing the manner that we get right of entry to assets and services and how we proportion information and reports. Moreover, this trend is very probable to head on inside the foreseeable future. As we flow forward into the 21st century, present technology will honestly transform or converge, and even if we can’t accurately expect the destiny, we need to recognize that everyone alternate calls for the potential to evolve and to consciously evolve.

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An Overview of Computerized Accounting Systems

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An Overview of Computerized accounting systems

There are many different ways of implementing a computerized accounting system. This description is based on the system used by ACCPAC accounting software. A computerized accounting system records the same financial information as a manual accounting system, but with a different method. The general ledger is maintained in a database. The database contains information on each account in the chart of accounts. Information kept in the database includes account number, account name, budget figures, and account balances. Computerized accounting systems are able of keep more than one balance per general ledger account. For e.g. a balance is kept for each month for each account hence financial statements can be produced for any month. Balances for previous years can also be stored.

 

For this, a general journal is not required. Transactions are entered into subsidiary ledgers or transaction batches before being posted to the general ledger. For better management control, transactions are sometimes recorded on paper-based journals and got approved by the appropriate authority before they are entered into the computerized accounting system. Because this extra step is quite time-consuming, it is often bypassed, and other forms of internal control are substituted. For example, the transactions can be entered electronically, then printed and reviewed by a supervisor prior to posting.

Transactions are recorded into the computerized accounting system by one of two methods:

  • Batch method — Enter transaction to a batch and then post each transaction batch to the master table. Or
  • Direct-entry method — Enter each transaction directly into the master table.

Each method has its advantages and disadvantages. The batch method enables you to check the transactions before we enter (post) them to form the permanent record. Also, the transaction entry can be delegated to clerks while the accountant retains control by reviewing each batch prior to posting. However, batching requires an extra step.

The direct-entry method enables you to enter the transactions directly, which reflects the results of the transactions immediately. The disadvantage, however, is that control over transaction entry is significantly lighter than with the batch method because there is no means to verify each transaction entry before it is reflected in the general ledger. Errors are also more difficult to correct once they are discovered.

Whichever method is used, a computerized accounting software system is designed to keep the general ledger continuously in balance by only allowing transactions to be recorded or posted if they are in balance. That is, the debit and credit totals of each transaction should be equal before the program allows them to be posted. A manual accounting system has no comparable safeguard.

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Factors considered in selecting Accounting Software

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Factors considered in selecting Accounting Software

Accounting software will give small business with several economical ways that of managing daily financial tasks, likewise as offer management and possession with helpful reports to assist analyze business performance. While not correct thought, business house owners generally build pricey mistakes by investing in the wrong accounting software system, then they struggle to create the software package work or incur even a lot of value by changing to totally different software.

Scope of Business

The first and most vital issue business owners ought to document before selecting accounting software is that the scope of the business and what accounting tasks the software ought to ideally perform. In addition to basic accounting needs, build an inventory of different things you wish the accounting software package to handle, like payroll, inventory management and value accounting. Think about the longer term of the business in your call likewise as current operations. Software system that fits absolutely nowadays might not be enough a year from currently. Keep business growth and enlargement in mind once making your scope list.

Modules enclosed

Once you’ve got outlined the scope of the business and also the purpose of the accounting package, screening software package prospects becomes a better task, as a result of you’ll simply eliminate those who don’t cowl things on your scope list. For every accounting package that covers your scope, verify that modules are enclosed within the base value and that modules have a further value. As an example, some software package makers charge a further price for a payroll software module. Build a note of the complete value of every software package so you’ll accurately compare the packages.

Access and movableness

If you’ve got one business location and don’t expect that to vary, any accounting package that installs on a network server is appropriate for your business. However if you’ve got, or will have, multiple locations, you wish to contemplate however field staff can access the accounting software package, if needed. If you are doing not have associate degree data technology employee, putting in place exchange server logins could also be too difficult a method to put in or troubleshoot after you have issues. Within the case of a tiny low business with multiple locations, or staff that job from home, Internet-based software package could also be the simplest selection.

Knowledge needed

Powerful, do-it-all accounting software remains useless if your employees cannot learn to use it. Once selecting accounting software package, you want to take under consideration the education level of your staff and also the problem of the software package alternatives. Some accounting software package needs high-level accounting information for setup and use, whereas different software package packages are double-geared toward business house owners and employees who don’t have accounting education or expertise.

Cost

Once you’ve got eliminated software packages by scope, portability, module and information needs, the last issue to contemplate is that the value of the remaining software packages. Once considering value, take under consideration fees for upgrades, annual licensing and support details. Compare technical support packages and issue extra fee support packages into the general value of the accounting software package. If you can’t perform the installation and setup of the accounting software package yourself, get estimates for installation and setup and issue those figures into the general value.

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Management Accounting

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Management Accounting

Institute of Chartered Accountants of England and Wales defines management accounting as:

Any form of accounting which enables a business to conduct more efficiently can be regarded as Management Accounting.

American Accounting Association defines management accounting as:

Management Accounting includes the methods and concepts necessary for effective planning, for choosing among alternative business actions, and for control through the evaluation and interpretation of performance.

Characteristics of Management Accounting

Management accounting provides data to the management on the basis of which they take decisions to achieve organizational goals and improve their efficiency. In this section, we will discuss the main characteristics of management accounting.

To Provide Accounting Information

Information is collected and classified by the financial accounting department, and presented in a way that suits managerial needs to review the various policy decisions of an organization.

Cause and Effect Analysis

One step further from financial accounting, management accounting works to know the reasons of profit or loss of an organization. It works to find out the causes for loss and also study the factors which influence the profitability. Therefore, cause and effect is a feature of management accounting.

Special Technique and Concepts

Budgetary control, marginal costing, standard costing are main techniques used in financial accounting for successful financial planning and analysis, and to make financial data more useful.

Decision Making

Studying various alternative decisions, studying impact of financial data on future, supplying useful data to management, helping management to take decisions is a part of management accounting.

Achieving Tasks

Financial data is used to set targets of the company and to achieve them. Corrective measures are used if there is any deviation in actual and targeted task. This all is done through management accounting with the help of budgetary control and standard costing.

No Fixed Norms

No doubt, tools of management accounting are same, but at the same time; uses of these tools depend upon need, size, and structure of any organization. Thus, no fix norms are used in application of management accounting. On the other hand, financial accounting totally depends on certain rules and principals. Therefore, presentation and analysis of accounting data may vary from one organization to another.

Increasing Efficiency

While evaluating the performance of each department of an organization, management accounting can spot the efficient and inefficient sections of an organization. With the help of that, corrective step can be taken to rectify the inefficient part for better performance. Hence, we can say that efficiency of a concern can increase using accounting information.

Informative Instead of Decision Making

Decisions are taken only by top management using information provided by management accountant as classified in a manner which is useful in decision making. Decision making does not come under preview of accountant, it is only the top management, who can take decision. Thus, decision of an organization depends on caliber and efficiency of the management.

Forecasting

Management accountant helps management in future planning and forecasting using historical accounting data.

Objectives of Management Accounting

Let us go through the objectives of management accounting:

Planning and Formulating Policies

In the process of planning and formulating policies, a management accountant provides necessary and relevant information to achieve the targets of the company. Management accounting uses regression analysis and time series analysis as forecasting techniques.

Controlling Performance

In order to assure effective control, various techniques are used by a management accountant such as budgetary control, standard costing, management audit, etc. Management accounting provides a proper managerial control system to the management. Reports are provided to the management regarding the effective and efficient use of resources.

Interpreting Financial Statement

Collecting accounting data and analyzing the same is a key role of management accounting. Management accounting provides relevant information in a systematic way that can be used by the management in planning and decision-making. Cash flow, fund flow, ratio analysis, trend analysis, and comparative financial statements are the tools normally used in management accounting to interpret and analyze accounting data.

Motivating Employees

Management accounting provides a selection of best alternative methods of doing things. It motivates employees to improve their performance by setting targets and starting incentive schemes.

Making Decisions

Success of any organization depends upon accurate decision-making and effective decision-making is based on informational network as provided by management accounting. Applying techniques of differential costing, absorption costing, marginal costing, and management accounting provides useful data to the management to aid in their decision-making.

Reporting to Management

It is the primary role of management accounting to inform and advice the management about the latest position of the company. It covers information about the performance of various departments on regular basis to the management which is helpful in taking timely decisions.

A management accountant also works in the capacity of an advisory to overcome any existing financial or other problems of an organization.

Coordinating among Departments

Management accounting is helpful in coordinating the departments of an organization by applying thorough functional budgeting and providing reports for the same to the management on a regular basis.

Administrating Tax

Any organization must comply with the tax systems prevailing in the country they are operating from. It is a challenge due to the ever-increasing complexity of the tax structure. Organization need to file various kinds of returns with different tax authorities. They need to calculate the correct amount of tax and assure timely deposit of tax. Therefore, the management takes guidance from management accountants to comply with the law of the land.

SOURCE: TUTORIALSPOINT

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Accounting Conventions

Accounting Conventions

Accounting Conventions
Convention of Consistency

To compare the results of different years, it is necessary that accounting rules, principles, conventions and accounting concepts for similar transactions are followed consistently and continuously. Reliability of financial statements may be lost, if frequent changes are observed in accounting treatment. For example, if a firm chooses cost or market price whichever is lower method for stock valuation and written down value method for depreciation to fixed assets, it should be followed consistently and continuously.

Consistency also states that if a change becomes necessary, the change and its effects on profit or loss and on the financial position of the company should be clearly mentioned.
Convention of Disclosure

The Companies Act, 1956, prescribed a format in which financial statements must be prepared. Every company that fall under this category has to follow this practice. Various provisions are made by the Companies Act to prepare these financial statements. The purpose of these provisions is to disclose all essential information so that the view of financial statements should be true and fair. However, the term ‘disclosure’ does not mean all information. It means disclosure of information that is significance to the users of these financial statements, such as investors, owner, and creditors.
Convention of Materiality

If the disclosure or non-disclosure of an information might influence the decision of the users of financial statements, then that information should be disclosed.

For better understanding, please refer to General Instruction for preparation of Statement of Profit and Loss in revised scheduled VI to the Companies Act, 1956:

A company shall disclose by way of notes additional information regarding any item of income or expenditure which exceeds 1% of the revenue from operations or Rs 1,00,000 whichever is higher.

A Company shall disclose in Notes to Accounts, share in the company held by each shareholder holding more than 5% share specifying the number of share held.

Conservation or Prudence

It is a policy of playing safe. For future events, profits are not anticipated, but provisions for losses are provided as a policy of conservatism. Under this policy, provisions are made for doubtful debts as well as contingent liability; but we do not consider any anticipatory gain.

SOURCE: TUTORIALS POINT

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