Definition – What does Accounting Software mean?
Accounting software is a type of computer software used by accounting professionals to manage accounts and perform accounting operations.
Accounting is the systematic practice, work or process of communicating and recording financial information. In a business setting, this is done for the purposes of internal and external audits, required reports and financial analysis to meet legal or internal managerial requirements. Accounting may also include systematic and diverse measurement, classification, verification, summation and interpretation of financial information.
Accounting software can range from simple, single-entry programs used for individual record-keeping to more sophisticated, double-entry systems that can process accounts receivable, accounts payable, payroll and inventory, among other functions.
Corporate accounting has become highly regulated and is more important than ever because it allows companies to track their financial transactions and receive almost instantaneous reporting and analysis. Before accounting software existed, accounting tasks had to be performed by hand. By automating these tasks, accounting software reduces the cost of accounting. It also provides more accurate and timely reporting, allowing companies to better use the information to make financial decisions.
In 2001, a number of major corporations, including Arthur Anderson, Enron, Quest, WorldCom and Sunbeam, were involved in accounting scandals, which defrauded shareholders out of billions of dollars and resulted in major review of accounting standards, auditing regulations and corporate accounting practices. These also resulted in the passage of the Sarbanes-Oxley Act of 2002, which set new and more stringent accounting standards for public companies.
While smaller companies may opt for off-the-shelf accounting software packages, large companies tend to develop custom programs to fit their individual needs.