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“Accounting Software” generally refers to financial management system or application software that records monetary transactions for an organization and provides information (reports) to the organisation’s leadership. Accounting applications provide the framework for recording and managing the revenue and expense transactions of the organization in a consistent, compliant and reliable manner. The ultimate purpose of accounting software is to: ensure internal and regulatory compliance; inform leadership of past financial performance; identify the current financial position; and, based upon key financial metrics and trends, help predict future financial performance.

Accounting software can exist by itself or as a part of a larger, more comprehensive Enterprise Resource Planning (ERP) solution. Most accounting systems are broken down into component based modules. The financial modules are loosely segregated into “core” functionality and extended functions. The core accounting modules usually include General Ledger, Accounts Payable, and Accounts Receivable (sometimes referred to as GLAPAR). Some systems include sales and purchase orders, billing, and inventory management modules. Core accounting process functions by module include the following.

  • Financial Accounting Suite Modules:
    • General Ledger (G/L) - This module aggregates financial transactions occurring throughout the accounting application and is used to create journal entries, budgets, allocations, unit accounts and produce financial statements.
    • Accounts Receivable (A/R) - This module is used to setup and manage customer accounts, produce customer invoices, create credit memos, authorize RMAs (Return Merchandise Authorizations), enter customer payment receipts and generate revenue schedules.
    • Accounts Payable (A/P) - This module is used to setup and manage vendor (supplier) accounts, enter vendors’ invoices, process payment disbursements (checks) and generate payables reporting.
    • Project Accounting - This module is tightly integrated to all other modules in order to support cost accounting (i.e. cost centers, profit centers and line of business financial reporting). Project Accounting is sometimes referred to as Job Costing.
    • Cash Management - This module manages cash position and performs bank account reconciliations. This module is sometimes called Bank Management or Bank Reconciliation.
    • Fixed Assets - This module manages and depreciates assets. Sometimes this module will manage fixed asset maintenance.
  • Distribution Suite Modules:
    • Sales Order Processing - Sometimes just called Order Entry, this module is used to enter quotes and sales orders and occasionally credit memos and Return Merchandise Authorizations (RMAs). Sale orders automatically decrement inventory quantities.
    • Purchase Order Processing - This module is used to create purchase orders and enter the receipt of goods when the items arrive to the company. Purchase order receipts automatically update inventory quantities and costing.
    • Inventory Management - This module is used to manage inventory items (e.g. their pricing, their costing, their locations, their valuation, etc.) and may also perform functions such as assembly, kiting (bundling of items) or Bill of Materials (BOMs).
    • Electronic Data Interchange (EDI) - This is use for electronic distribution of accounting transactions such as purchase orders, sales orders, invoices, credit memos and payments.

The extended functions of an accounting system include payroll processing, debt collections, cash management, expense report processing, sales tax calculation and reporting, budgeting, and advanced reporting and analysis solutions. There are also many industry specific (or “vertical” market) modules that address unique market specific accounting and business process requirements.

A full-fledged ERP software solution will typically incorporate functionality that integrates the supply chain from a procurement and scheduling standpoint as well as the operational delivery of products and services.

Because they record and report on monetary transactions, most modern accounting systems have robust security components and controls that help management enforce basic accounting principles like dual-entry bookkeeping, International Financial Reporting Standards (IFRS), Generally Accepted Accounting Principles (GAAP), and governmental mandates like Sarbanes-Oxley (SOX).

accounting Continue to Accounting Software Benefits

Accounting Software  

Accounting Software Definition

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The Core Accounting Suite
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General Ledger

Accounts Payable
Accounts Receivable
Project Accounting
Cash Management
Fixed Assets




tags Tags:
erp definition
accounting software definition, financial software, erp software, distribution suite, ifrs, sarbanes-oxley, gaap, edi, hosted accounting software, on-demand, sales order processing






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