Book Keeping Software

  1. 1. What is book keeping?
  2. 2. How book keeping is done today?
  3. 3. What is book keeping equation ?
  4. 4. Which system of book keeping do we follow?
  5. 5. What is that all business owner should look for in book keeping software?
  6. 6. Conclusion

1. What is Book Keeping?

Book keeping involves the recording, storing and retrieving of financial transactions for a company, nonprofit organization, individual, etc.

The most common financial transactions and tasks that are involved in book keeping include:

  • Invoicing for goods sold or services provided to clients.
  • Recording receipts from customers.
  • Verifying and recording invoices from suppliers.
  • Paying suppliers.
  • Processing employees' pay and the related governmental reports.
  • Monitoring individual accounts receivable.
  • Recording depreciation and other adjusting entries.
  • Providing financial reports.

2. How Book Keeping is Done Today?

Today the art of book keeping is done with the use of computer software. For example, Tally.ERP 9 (from Tally Solutions) is a low-cost book keeping and accounting software package that is widely used by small businesses.

But beside software’s doing the job of book keeping, book keeping requires that the users to have the knowledge of debits and credits and a basic understanding of financial accounting, which includes the balance sheet and income statement.

3. What is Book Keeping Equation?

Modem of business Book keeping equation
Sole proprietorship Concern

#Assets = #Liabilities (+)  #Owners Equity

[ As Owners Capital fund is involved in the business ]

Corporate Companies (Listed or Unlisted)

Assets = Liabilities (+) Stock holders equity*

[ *As Share holders fund is involved in the business ]

# Assets to mean the resources owned by the business

# Liabilities to mean the amounts that business owes

# Owner’s Equity to mean the amount the owner invested plus the net income of the business minus the amounts the owner withdrew for personal use

4. Which System of Book Keeping Do We Follow?

We generally follow double entry system of book keeping which requires that the DEBIT AMOUNTS MUST ALWAYS EQUAL THE CREDIT AMOUNTS.

Today's sophisticated book keeping software such as Tally ERP 9 has the double-entry requirements written into its code. This prevents many of the errors that might have occurred in the past when book keeping was done manually.

Let’s take an example that XYZ Company borrows Rs. 10,000 from its bank. How Double entry book keeping will be done in this case

Rules of Double entry book keeping Observations
Debit amount to equal credit amount - To debit Rs. 10,000 and to Credit Rs. 10,000
Equation : Assets = Liabilities (+) Owners Equity
  • Asset Account = For Money borrowed from Bank > Cash will be inflow to the company and hence the Asset Created is Cash.
  • Liability Account = For money borrowed the company also enters into loan agreement with the bank and hence a liability is created as well which is Loan Payable Account.
  • Owners Equity = Assuming that the business generated profits of Rs. 50,000/- and the drawings made by owner during the year is Rs. 10,000
  • To solve the book keeping equation :
  •  

    Asset (Cash/ Bank)

    Loan Cash           = Rs. 10,000

    (+) Profits.             = Rs. 50,000

    (-) Drawings.        = (Rs.10,000)

    __________

       
         

    Rs. 50,000

    Owners Equity

     

    Amount invested. = Rs. Nil

    (+) Profits earned = Rs. 50,000

    (-) Drawings.        = (Rs. 10,000)

             

    Rs. 40,000

    Liability

    Bank Loan Payable

      Rs. 10,000
    Total

    Rs. 50,000

       

5. What is that all Business Owner Should Look for in Book Keeping Software?

The main purpose of book keeping software is to make small business owners’ lives easier. The required book keeping software needs to help to automate and optimize the business’s financial processes.

And the factors which affect these decision could be tabularized as under :

Factors Explanation
Online or Offline - Well, most businesses nowadays are adopting cloud based software’s as they offer lot of advantages over traditional offline software’s. But there are some businesses like retail stores which require speed and which are not always connected to the internet. For them, a book keeping software with offline POS (Point Of Sale) systems is best featured.
Data Security - This feature ensures that the data transferred from your computer to software company’s servers is encrypted and cannot be viewed by hackers.
Available Features -

One should make a list of essential features that he or she absolutely need in an accounting software. Here is the list of few features which must be part of a good accounting package.

  • Create invoices and customize the look and feel
  • Track expenses according to categories
  • Manage inventory, inward - outward stock movements and wastage
  • Perform bank reconciliation by importing bank transactions
  • Create purchase orders (PO) and record inventory purchases
  • Create and manage taxes
  • Record Journal Voucher  entries
  • Manage list of customers & vendors
  • To view account payables & receivables
  • To view Balance Sheet, Profit & Loss statement and Trial Balance reports
  • Support for multi - currency transactions
  • Option to manage employees and process payroll
User interface and complexity -

Most of the business owners do not have any accounting background. Even if you have a dedicated accountant who would be using the application, as an owner you should be able to login and browse the things.

Working with an book keeping software should also be easier enough for your employees to learn the software.

Assessment -

Most of the businesses make a mistake by buying an application which suits to their needs at the time of purchase.

But later when their business starts to grow, the accounting software fail to cope up with the progress and eventually business owners have to migrate to another software.

Data migration from an existing system to a completely new software can be painful.

Option to exit -

Suppose that the company you are buying from shuts down its operations or you discover lot of bugs few months after the purchase. To safeguard from such situations, ensure that the accounting software provides you data export facility at no extra cost.

You should be able to export ledger or other transactions at least in the form of excel as most other software’s will accept excel file for the import.

It is in good practice, you should always backup your data at regular intervals. Instead one should choose a book keeping software which comes with Auto back up feature.

Post sale support - This is the most important but most ignored thing while selecting an accounting software.

6. Conclusion

Finding a perfect accounting software for your business is not an easy task. Once you invest your time and money into one accounting system, it will be very difficult to migrate to another after some time.

So, its always better to spend more time before the purchase to save frustration a later stage. But Tally.ERP 9 is one such software which satisfy all the factors we look for in a best book keeping software as it is simple, easily understandable for employees and owners and it is within the budget even for small businesses.

SIMPLIFYING THE WAY BUSINESSES ARE RUN

With the trust of nearly 2 million businesses, Tally is truly the leading business software of choice in India. Be it accounting or GST compliance, you can rely on us to simplify all ends of your business.

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