Accounting refers to the art or science of accounting. It is the measurement of financial transactions that are used to determine the value of the assets and liabilities. Accounting records every transaction and it describes how the assets and liabilities were obtained, how they were used, and who had the right to obtain them. Accounting also involves the process of eliminating the effect of transaction costs and identifying the sources of errors. The objective of accounting is to provide information needed for planning, forecasting, management, and control.
Accounting software refers to a kind of program software that records, processes and documents accounting transactions within functional units like accounts payable, expenses, general ledger, expense, and balance sheet. It acts as an accounting device. Every transaction in the accounting system is related to a financial data source. Financial data source refers to documents, reports, and records that support and interpret accounting activities. In simple terms, accounting software records what has been done and provides reports on the basis of that information.
Accounting is not just concerned with taxes. It also makes business decisions. So accounting software can either directly or indirectly make business decisions. A company can use its accounting reports to assess the financial health of the firm by analyzing the past performance. The results of the analysis can be used to make decisions about the future course of action.
Apart from making business decisions accounting software can also allow users to keep track of their invoices. Invoices are simply electronic documents that record the sale, purchase, or exchange of a particular item. For example, if you sell widgets on eBay then you have to keep a record of the sale and the buyer’s invoice. Accounting software can help you keep track of your invoices. This way you won’t miss out on any sales or purchases that your customers have made as they are entered into your account.
Accounting helps business owners understand their accounts better. It is one way of improving the bookkeeping practices of business owners. By using accounting software, business owners will have access to the reports that would otherwise not be available to them unless they personally visit the office. Accounting report is more comprehensive than daily financial records since it gives business owners a picture of the bigger picture.
Accounting is an essential part of any business. Without proper accounting, the profitability of any enterprise is in doubt. Thus accounting software is very crucial for any firm. Whether it is used to keep track of invoices or prepare reports, accounting software is indispensable for all types of firms. The right accounting software can help make business decisions easier.