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Human Development - Accounting

Accounting software


The basics of accounting

 

Accounting software needs to provide you with your company's financial statements - the balance sheet, the income statement and the cash flow statement.

If the package you are using or reviewing does not provide these three basic financial statements in sufficient detail for your needs you may well consider looking elsewhere.

Investors and others outside the management group will need the financial statements regularly if they are to invest in your company. You yourself need to be fully aware of the data in these statements in order to retain control of your business. We will only give a concise overview of the financial statements here.

The balance sheet

On a company's balance sheet it is shown which resources are under that company's control on any specific date and where these resources have come from. Keeping accurate record of your information is therefore vitally important of these statements are to be correct.

The balance sheet consists of three major sections and shows the company's resources from different points of view. The list of company assets must make clear where these resources have come from. This is done in the list of liabilities as well as in the owners' equity data.

The following basic equations must always be true in the list of assets:

- total assets equals total liabilities plus total owners' equity, or
- total assets minus total liabilities equals total owners' equity.

Assets are the valuable rights owned by the company, liabilities are the funds that have been or are provided by outside lenders and creditors (against the company's promise of repayment or provision of services in the future), and owner's equity are the funds that have been or are provided by the company's owners or by others on the owners' behalf.

Each of these three, assets, liabilities and equity is further subdivided into various categories such as current and noncurrent assets and liabilities, amounts receivable, accounts payable as well as fixed assets such as land and buildings and so forth. American and European equity differ so be aware of this when you are dealing with these two entities.

The income statement

A company's success is measured by its control over its assets (its goods and services). This success, or failure thereof, is measured by the profits a company generates. This is the net income to an accountant.

In a nutshell, income statements show how this profit or loss is obtained in any given period by showing how much is made by the sales of the assets and how this has cost the company, for example, the cost of producing the goods as well as the taxes that had to be paid.

Other information on the income statement can show the effects of events that are outside of the regular activities of the company. This could be anything from extra sales to extra costs.

The cash flow statement

Cash flow statements make clear how the management has made use of the company's financial resources and is used to assess the company's liquidity and its ability to cover the costs (pay the bills).

Cash flow statements show the result of the operating activities, the investing activities and the financing activities of the company. Cash flow statements and income statements can differ significantly depending on the activity so don't mistake the two in their function, but we will not go into the intricacies of the cash flow statement here.

Consolidated statements

If your company owns other companies you will need consolidated statements. This would in fact be your primary financial statement, showing the total assets, liabilities, owners' equity, net income and cash flows of the parent company and all others in the group.

Disclosure and audits

The obligation to issue financial statements are part of the company's statutes and are mandatory in most countries. In the United States the financial statements of most large and medium-sized companies falls under the jurisdiction of the federal Securities and Exchange Commission (SEC), which has a great deal of authority concerning the content and structure of these statements.

In Canada this authority is held by the provincial regulatory bodies and the stock exchanges, in the United Kingdom it is governed by the provisions of the Companies Act.

An audit is an outside review of the company's financial statements which are usually prepared by the internal accountant(s). These audits should be performed by qualified professionals (usually not a family member or neighbour who is willing "to help you out") who bear the title of Certified Public Accountant (USA) or Chartered Accountant (UK), for example.

These professionals will investigate the company's accounting data and methods in detail and will allow the company to claim that their statements are fair in showing the company's position, results and cash flow, by referring to this professional audit.

In conclusion, it is to your benefit and that of your company, your employees and your customers, as well as the tax department, that you have insight and control of your company, that you know what it is doing, where it's been and where it's going. A good accounting package can greatly help you in this.

 

Accounting software comparison

The heart of the matter - the accounting software package, preferably perfectly suited for your needs. At least, that is the idea.

There are many packages available and it is not always easy to choose the right one. There isn't a product box in the world that will say "This product is mediocre." They're all the best so it is up to you to make the right decision.

You wouldn't be on the internet right here and now if you weren't looking for information on accounting software. Besides our site there are others that specialize in helping you find the right accounting software by comparing one accounting package against others. Keep in mind what you really need for your business and don't over-buy.

Accounting software comparison

2020 Software (US)

CTS Guides (US)

ExcelCo (US)
Find Accounting Software (US)
Tax Sites

Accounting and management software

Matriset Ltd. (FI) Management software products. Programs for digital filing, paperless accounting and distance working.
The FM Company (US) Online service management system of external contractors and internal teams. It uses patented technology to provide real time  monitoring of key performance indicators for the provision of preventative planned maintenance and reactive maintenance.
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