Question

What are the various types of accounting software?

Explain the classification/types of accounting packages.

Answer 1

1. Readymade software:
   1. These packages are standardized or readymade packages which can be used by the business enterprises immediately on procurement. These packages are used by small and conventional business enterprises.
   2. The cost of installation and maintenance is very low. The training cost is negligible and sometimes the vendor provides free of cost training.
   3. This software is used by enterprises where financial transactions are simple, uniform, and routine in nature. Few examples of such type of software are Tally, Busy, Marg, and Profit books.
2. Customised software:
   1. Many a time, it is not possible that ready-to-use packages suit the requirements of the business enterprise.
   2. In such circumstances, customized packages may help the business enterprise for fulfilling its requirements. Customized packages can be modified according to the need of the enterprise.
   3. For example, software can record attendance of the employees and on the requirement of the customer it can also count the absence of employees in a month, etc.
3. Tailor-made software:
   1. Large enterprises have their own way of functioning.
   2. For effective management information systems, varied and specific information is frequently required by many users which may not be needed in the case of small or medium scale enterprises.
   3. In such enterprises, depending upon their functioning, need-based software known as tailored packages are installed.
   4. The cost of these packages is very high and specific training for using these packages is also required.
4. Free and Open Source: The small business need an 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 examples: GNU Khata is the open source accounting software for small business as well as a personal finance software.

Answer 2

The choice of accounting software is determined by the specific financial needs and the scale of the business organization. These packages are generally classified into four categories:

1. Ready-to-use: This is suitable for small organizations with a limited volume of transactions. It is highly cost-effective and easy to operate, requiring minimal training. However, it offers low data secrecy and limited integration (linkage) with other systems.
2. Customized: When standard software is modified to meet the special requirements of a customer, it is termed customized software. It is ideal for medium and large businesses. While it offers better security and connectivity, the costs for installation, maintenance, and training are relatively high.
3. Tailored: This software is developed specifically for large enterprises with geographically scattered locations and multi-user requirements. It is a vital component of a company's Management Information System (MIS). It provides high flexibility and robust security but demands specialized training for staff.
4. Free and Open Source: This is the best option for small firms with budget constraints. These applications are available on the internet at no cost and can be easily downloaded to manage basic accounting functions without a heavy initial investment.