Question

Explain sourcing of Accounting Software.

Answer 1

Accounting software is an essential part of the computerized accounting system. An important factor to be considered before acquiring accounting software is the accounting expertise of people responsible in business for accounting work, People, not computers, are responsible for accounting. The need for accounting software arises in two situations:

1. Accounting Packages - Every Computerized Accounting System is implemented to perform the accounting activity (recording and storing of accounting data and information) and generate various reports as per the requirements of the user. From this perspective the accounting packages are classified into the following categories:
   • Ready to use
   • Customized
   • Tailored
   • Free & Open Source
2. Ready-to-Use - This accounting software is suitable for those organizations or firm running small-scale business where the frequency or volume of accounting transactions is very less. This is because the cost of installation is generally less and the number of users is limited. Ready-to-use software is relatively easier to learn. This also implies that the level of secrecy is relatively low and the software is prone to data fraud. The training needs are simple and sometimes the vendor (supplier or software) offers the training on the software free. However, this software offers little scope for linking to other information systems.
3. Customized: This Accounting software may be customized to meet the special requirement of the user. Standardized accounting software available in the market may not suit or fulfill the user requirements, For example, standardized accounting software may contain the sales voucher and inventory status as separate options. However, when the user requires that inventory status to be updated immediately upon entry of sales voucher and report be printed, the software needs to be customized.
   Customized software is suitable for large and medium businesses and can be linked to other information systems. The cost of installation and maintenance is relatively high because the high cost is to be paid to the vendor for customization. The customization includes modification and addition to the software contents, provision for the specified number of users and their authentication, etc. Secrecy of data and software can be better maintained in customized software. Since the need to train the software users is important, the training costs are therefore high.
4. Tailored - The accounting software is generally tailored in large business organizations with multi-users and geographically scattered locations. This software requires specialized training to the users. The tailored software is designed to meet the specific requirements of the users and form an important part of the organizational MIS. The secrecy and authenticity checks are robust in such software’s and they offer high flexibility in terms of number of users.
5. Free & Open Source - The small business need accounting software but they don’t have a big budget, then find out accounting software available on free, open-source software on the Internet. These applications you can download and install from the websites.
   For example: GNU Khata is open-source accounting software for small businesses as well as personal finance software.