UNIT1:INTRODUCTION TO ACCOUNTING SOFTWARE
Learning Activity 1.6Key Competences of the Unit: Identify and classify the accounting software
Introductory activity
Companies are adopting innovative enterprise solutions to help
them stay ahead of their competitors. Nevertheless, many still rely on
spreadsheets to perform vital financial functions. It is not a promising
way for companies to remain relevant in this new digital economy.
1. Why does your company need accounting software?
2. What type of accounting software that you can recommend to your
company?
Accounting software is a computer program that maintains account books on
computers, including recording transactions and account balances. Accounting
software describes a type of application software that records and processes
accounting transactions within functional modules such as accounts payable,
accounts receivable, payroll, and trial balance. It functions as an accounting
information system. The software program records and processes business
transactions and keep them in well-designed database.
Software that records and processes accounting transactions within functional
modules such as accounts payable, accounts receivable, payroll, and trial
balance. It functions as an accounting information system. The softwareprogram records and processes business transactions and keep them in welldesigned database
1.1. Classification of accounting software
Learning Activity 1.1
1. What are the classes of accounting software?
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Accounting software is used to collect information about and report on
the financial viability of the business. This software is critical to the proper
administration of an organization. Businesses whether large or small, decide
the type of accounting software depending on the type and the circumstances
under which each type would be used.The accounting software is classified into the following four categories:
a) Spreadsheets
To help with bookkeeping, businesses often use Spreadsheet programs such
as Microsoft Excel or Google Spreadsheets. It can be used to almost any basic
accounting need. For example, it can be used to list expenses, sales or other
relevant financial data, and even to handle more advanced accounting functions.
Generally, only a very simple business should rely solely on Spreadsheets to
handle accounting; for most others, spreadsheets usually complement otheraccounting processes.
b) Commercial Accounting Software
Commercial accounting software such as QuickBooks or Peachtree can handle
most, if not all, of a small- to mid-size business’s accounting needs. Accounting
software work with almost any business, and allow to create customizedfunctions to fit a commercial entity’s specific needs.
c) Enterprise Accounting Software
Larger companies may have enormously complex operations, and enterprise
accounting software helps in managing this complexity. Accounting software
for larger enterprises often integrates accounting with other services provided
by the software, such as workflow management, business intelligence andproject planning.
d) Custom Accounting Software
Sometimes, a business creates its own accounting software. In that case, the
software is called custom accounting software. Most popular accounting software
are QuickBooks, Sage line (50, 100,200, 1000), Tally, Sage Pastel, Best books, Cashflow manager, Xero, Fresh books, SAP and Account Mate
Application activity 1.1
1) Give an example of an Enterprise Accounting software and explainwhat such a software can do
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1.2. Types of application software and examples
Learning Activity 1.2
1) What do you understand by accounting software?
2) Identify any 3 types of accounting software used in computerized
accounting and give at least two examples per each?
An application program (software application, or application, or app for short)
is a computer program designed to carry out a specific task other than
one relating to the operation of the computer itself, typically to be used
by end-users. Word processors, media players, and accounting software are
examples.
The following are the main types of application software:
a. Word Processing Software: Google Docs, Microsoft Word, WordPad
and Notepad
b. Database Software: MySQL, Microsoft SQL Server, Microsoft Access,
Oracle, IBM DB2 and FoxPro
c. Spreadsheet Software: Google Sheets, Apple Numbers and Microsoft
Excel
d. Multimedia Software: Media Player, Winamp, QuickTime and VLC
Media Player
e. Presentation Software: Google Slides, Microsoft Powerpoint, Keynotes,
Prezzy
f. Enterprise Software: customer relationship management (CRM)
software (HubSpot, Microsoft Dynamic 365)), project management
tools (Jira, Monday), marketing automation tools (Marketo, HubSpot),
enterprise resource planning (ERP) software (SAGE, Oracle, Microsoft
Dynamics), treasury management system (TMS) software (SAP
S/4HANA Finance, Oracle Treasury), business intelligence (BI)
software (SAP Business Intelligence, MicroStrategy, Microsoft Power
BI)
g. Information Worker Software: Documentation tools, resource
management tools
h. Communication Software: Zoom, Google Meet, Skypei. Educational Software: Dictionaries – Encarta, Britannica; Mathematical:
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MATLAB; Others: Google Earth, NASA World Wind
j. Simulation Software: Flight and scientific simulators
k. Content Access Software: Accessing content through media players,
web browsers
l. Application Suites: Apache OpenOffice, Microsoft Office365, Apple’siWork, LibreOffice, G-Suite, Oracle E-Business Suite
Application activity 1.2
1) Give at least two examples for each of the following types of software:
a) Word Processing Software
b) Database Softwarec) Spreadsheet Software: Google
1.3. Types of Software Required for Business Activities:
Learning Activity 1.3
In a business, the use of the program is to develop business productivity.
From slight to large-scale companies, computer program needs for
companies can vary depending on conditions.
1) Identify and explain the most 5 types of software required for the
business activities?
In a business, the use of the program is to develop business productivity. From
slight to large-scale companies, computer program needs for companies can
vary depending on conditions.
Here are the most vital tools for business activities, among others:
a) Accounting software
It is undeniable that recording finances in the business is the most sensitive thing
for the company—financial records related to money in and out money services
for daily business and long-term activities. The manual accounting process is
very time-consuming, such as bookkeeping, calculating the depreciation of
assets, and others. The larger the business, even the existence of branches, it
is crucial for a company to have an automated accounting system to reduce thecreation time.
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b) Inventory management software:
Developers develop program stock goods to help the company know how many
items entered, the number of goods that came out, and the remaining stock of goods
stored in the warehouse. HashMicro provides an Inventory Management System
that offers accurate stock control, raw material management, and other advanced
features to ensure you always get a comprehensive view of your inventory. With
inventory apps, there’s no need to guess when and how much inventory you should
repost. Through the use of an easy system, you can control the business more optimally.
c) Software CRM
CRM software can help a company improve its customer satisfaction. With the
CRM system, all corporate affairs related to customer service, marketing, and
sales are carried out more regularly and systematically.
So CRM systems allow upselling for companies that take advantage of
customer’s buying habits and give customers premium products that fall into
their previous purchase category. Furthermore, this system facilitates crossselling by interacting with customers to determine their needs.
d) Software HRM
The more complex the organizational structure of your business, the more
difficult it is to manage human assets. Making hundreds of invoices, pays
lips, taxes, and reimbursements is something that management happens
periodically. Thus, all activities related to human management require a more
practical system. With the complete HRIS Software, automate your company’s
HR and employee administration tasks.
e) Software ERP (Enterprise Resource Planning)
is a package of systems and software companies use to manage their daily businessactivities, such as financial management, procurement, production, projects, HR, etc
Application activity 1.3
a) By doing a research explain in detail ERP by showing what it can do.b) Give examples of ERP software
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1.4. Use of Accounting Software
Learning Activity 1.4
Mr. Kamana is a bookkeeper of Tuzamurane rice processing company located
in Kigali city. He is in charge of recording and keeping various companies’
transactions related to purchases of raw materials and other inputs, sales
revenues, inventory movements, business debtors and creditors, payroll
processing and diversified expenses incurred by the business either by
cash or cheque as well. He uses manual method of keeping and maintaining
those records; i.e recording in handbooks writing with pen. This requires
him to have each book for each particular journal, ledger and for final
reports. Additionally, it becomes difficult for him to meet the deadline for
preparing and submitting end of period reports, since he needs to get data
from many scattered books. One day, he wakes up early morning and went
at work as usual, and he was surprised of finding some of the accounting
books that were kept in shelves were burnt in the office due to fire short
circuit in the administrative building. All data recorded in those books
were lost and he was obliged to review the source documents and ask some
concerned people to try to restore some lost information, but he managed
to get only little information back.
1. Identify the problems that prevented Kamana from assuming his
responsibilities timely and effectively
2. What are the negative impacts of using manual method of keeping
and maintaining accounting records for Tuzamurane rice processing
company?
3. What would Tuzamurane ltd company have helped Kamana to
perform well his duties?
Learning Activity 1.4
1.4.1 General purpose Application software
Application program software is a computer program designed to carry
out a specific task other than one relating to the operation of the computer
itself, typically to be used by end-users. Word processors, media players, and
accounting software are some of examples. Application Software is a program
that does real work for the user. It is mostly created to perform a specific task
for a user. Application Software acts as a mediator between the end-user and
System Software. It is also known as an application package. It is a user-specificand is designed to meet the requirements of the user.
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General purpose application software is software used to perform a broad
variety of tasks and is useful to nearly all computer users such as Word
Processing, Graphics Editing, and Spreadsheets applications. Word-processing
is general purpose software since it makes use of a computer for creating,
modifying, and viewing, storing, retrieving, and printing documents. Similarly,
graphic software is general purpose software since it allows computer systems
for creating, editing, drawings, graphs, etc.
Additionally, accounting software is also classified under general purpose
application software category because it is designed to perform accounting
operations from basic invoicing and billing, to tax calculations and project
management, accounting software is an essential tool for your business’
financial data. It also helps manage clients, reconcile bank accounts, and
generate insightful financial reports that help your business grow smoothly
and continuously.
1.4.2 Special purpose application software
Special purpose application software is a type of software created to execute
one specific task. Special purpose software is typically created to meet a
specific business need and does not need to perform a wide range of other
duties. Because it will only be purchased by users who require the specific
capabilities it provides, special purpose software is frequently more
expensive than general purpose software.
For example, printing tax notices, a camera application on your phone will only
allow you to take and share pictures and a chess game which only allow you to play
chess.
1.4.3 Custom application Software
Is a type of application software made for an individual or business that performs
tasks specific to their needs? For example, if you had a home business, you may hire
someone to create a custom software program to help print and view invoices. By
creating custom software, you can have a program that does exactly what you needand not most of what you need
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Application activity 1.4
Mr. RUKUNDO has recently finished his secondary studies in Tourism
department at JIJUKA secondary school. He knows little on computer
software, except some basic skills about Microsoft Word and Excel, learnt
in computer skills module while at school. Before going to University,
he wants to improve his skills in computer literacy especially in gaining
knowledge about different software used in real world business if he
wants to join the faculty of Accounting.
1. How will you explain him the meaning of application software?
2. What are the types of application software will you recommendhim and how are they differentiated?
1.5 Manual and computerized Accounting Me
Learning Activity 1.5
Many years ago, people used traditional methods of keeping accounting
records, which is keeping hard copies of books like sales day book,
purchase day book, cashbook ledger and others. But today people are using
accounting software installed into their computers to record and keep
accounting information.
1. What is the difference between those two methods?
2. What are the advantages and disadvantages of each of them?
1.5.1 Manual accounting
Accounting is a means of collecting, summarizing, analyzing and reporting in
monetary terms, information about the business transactions.”
It is the analysis and interpretation of book-keeping records. It includes not only
the maintenance of accounting records but also the preparation of financial and
economic information which involves the measurement of transactions and
other events relating to the entity. It is a science of keeping the business records
in a regular and most systematic manner so as to know the business results
with minimum trouble.Accounting is done manually where the accountant keeps different books of
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account or can be computerized where the accounting software is installed into
a computer and the books of account are managed in the computer.
1.5.2 Computerized accounting
Computerized accounting refers to carrying out accounting functions or
processes using computers. It involves recording and analyzing financial
transactions electronically over accounting software. The computerized
accounting uses the concept of databases. For this purpose, an accounting
software is used to implement a computerized accounting system. It does away
the necessity to create and maintain journals, ledgers, etc., which are essential
part of manual accounting.
Summary difference between Manual accounting and Computerized accountingdata
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Accounting framework is the application environment of the computerized accounting
system. A healthy accounting framework in terms of accounting principles, coding
and grouping structure is a pre-condition for any computerized accounting system.
The computerized accounting is one of the database-oriented applications wherein
the transaction data is stored in well- organized database. The user operates on such
database using the required interface and also takes the required reports by suitable
transformations of stored data into information. Therefore, the fundamentals of
computerized accounting include all the basic requirements of any database-orientedapplication in computers
Application activity 1.5
1. What do you understand by manual accounting?
2. Define the term computerized accounting.
3. Give the merits and demerits of both computerized accounting andmanual accounting.
1.6. Characteristics of accounting data
Learning Activity 1.6
1. Basing on the accounting principles, how are accounting data
differentiated from other data
2. What are the characteristics of accounting data?
3. How can they be kept safely and easily found and interpreted?
Accounting data are raw facts, events, numbers and transactions, which have
been collected, recorded, stored but are not yet processed. Accounting data
consist of numbers and characters (i.e. alphabets and special symbols) which
are used to record facts and events about activities occurring in a business.
The following are some characteristics of accounting data:
1.6.1 Uniqueness
Data uniqueness is achieved when information in the dataset only appears once.
This data quality dimension measures the extent of duplication. Uniqueness
points out that there should be no data duplicates reported. Each data record
should be unique; otherwise the risk of accessing outdated informationincreases.
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1.6.2 Codes
This is a system of words, letters, figures, or symbols used to represent others,
especially for the purposes of secrecy. Codification is used to distinguish an
accounting element from another.
1.6.3 Statutory requirements
Statutory requirements are those requirements which are applicable by virtue of law
enacted by the government. These are enacted by passing the law in the legislative
assembly or parliament. A regulatory requirement can be termed as administrative
legislation that constitutes or constraints rights and allocates responsibilities.
1.6.4 Editing restrictions
Editing restrictions are usually used to prevent unwanted changes to a Word document as they allow people to view the contents of the document but not make anychanges. Accounting data must not allow every people to change them
Application activity 1.6
1. Briefly explain the characteristics of accounting data
1.7 Role, strengths and weaknesses of accounting software
Learning Activity 1.7
Betty is an accountant at ABC Agro-processing industry since 2015. Since
she become an employee of that company, she used manual system in
recording and keeping company’s accounting information, until 2020 where
the company adopted computerized accounting method and purchased
Sage line 100 software. Since then she could store the documents in welldesigned database, sharing them easily to the manager of the company, and
prepare income statement, cash flow statement and balance sheet easily.
Nevertheless, she is constrained by the lack of power which stops her work
sometimes, damages of computer operating system which causes her to
lose some data and fear that other people may hack her user name and
password and access her data.
1. What were the benefits of replacing manual accounting with
computerized accounting to Betty and to the ABC industry in
general?
2. What are the challenges faced when using accounting software inbookkeeping?
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1.7.1 Role of accounting software
The role of accounting software in today’s business world is immense and
enormous. As businesses have become larger and expanded their activities,
technology developed, it is almost impossible to run cross-border business
without using accounting software.
The importance of accounting software can be summarized as follow:
a. Large Volume of Transactions
In the present-day business environment, the transactions of a business are
normally large in volume. The accounting software can store and process such
voluminous transactions with speed and accuracy.
b. Scalability
Accounting software is scalable to handle the growing transactions.
c. Security
The accounting data under the computerized environment is safer than the
accounting data under the manual system. The data can be kept secure by using
a password, i.e., allowing only authorized users to access the data.
d. Timely Reporting
Availability of reports on time enables the management to take quick decisions,
which is an important element for the success of an enterprise. Accounting
software makes these reports available as and when required.
e. Lower Cost
The cost of maintaining books of accounts under the computerized process
using accounting software is lower in comparison to the manual process.
f. Less Paper Work
Under the computerized process, there is less paper work as compared to the
paper work in the manual process. Information can be shared digitally without
printing hard copies.
g. Flexible Reporting
Reporting under the computerized process is flexible in comparison to the
manual process. The database can be processed further to obtain the desired
report. For example, data relating to debtors can be analyzed to ascertain the
list of customers to whom sales above certain balance has been made in anaccounting year or of the regular customers of the enterprises and so on
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h. Queries
Replies to queries based on external factors can be obtained easily under a
computerized process. For example, list of debtors who have not paid on time
can be taken out by processing the database.
i. Accurate
Computer statements are far more accurate in comparison to manual statements.
j. Updating:
Updating and treatment of wrong transactions are easily done.
k. Financial Statements
From the day book, the Voucher Posting software can manage the general
ledger, trial balance and balance sheet.
1.7.2 Strengths of accounting software
Accounting software has a wide range of strengths, internal factors that enable
the user of accounting software to perform his/her tasks efficiently. These
include:
• Simple data entry: It is typically fast, straightforward and only required
once
• Fast processes: delays, for example between a sale and invoicing, are
minimal
• Digital record keeping: essential for Making Tax Digital for VAT
• Automation of reports and analysis: eg on profit and loss, debtors and
creditors, customer accounts, inventory counts, sales, forecasting, etc
• Automation of tasks: eg calculating pay, producing payslips, calculating
and submitting VAT, etc
• Reduction of errors: eg transposition of figures, incorrect or incomplete
recording of transactions, etc
• Integration with other systems: such as online banking and e-filing.
Using accounting software can help you save time and money, and offer
you valuable insight into your business. If you choose the package carefully,
investing in a computerized accounting system can be one of the best
decisions you can make for the business.
1.7.3 Weaknesses of accounting software
In spite of its importance in managing both small and larger businesses,
accounting software has also some weaknesses in its use. Some of them includeICT in Accounting | Student Book | Senior Five
cost of installation, cost of training, power failure, data corruption, and high
cost of training software operators, some limitations of the software are selfdecision making and maintenance.
a. Cost of Installation
Computer hardware and software needs to be updated from time to time with
availability of new versions. As a result, heavy cost is incurred to purchase a
new hardware and software from time to time.
b. Cost of Training
To ensure efficient use of computer in accounting, new versions of hardware
and software are introduced. This requires training and cost is incurred to train
the staff personnel.
c. Power failure
Computers cannot work without being connected to electrical power. Therefore,
accounting software cannot be used in areas where there is no electrical line
d. Data Corruption
The data can get corrupted through viruses that may come in through the
internet or the use of external input devices without scanning them for viruses.
e. High cost of training software operators
Untrained computer operators can lead to loss of data.
f. Limitations of Software
The software is developed on the basis of the experiences of the team of developers.
As such, it may not be able to deal with a specific problem that may arise.
g. Self-Decision Making
The computer cannot make a decision like human beings. It is to be guided by the
user.
h. Maintenance
Computer requires to be maintained properly to help maintain its efficiency. It requires a neat, clean and controlled temperature to work efficiently.
i. Dangers for HealthExtensive and wrong use of computer may lead to many health problems such as
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muscular pain, eyestrain, and backache, etc. This affects adversely the workingefficiency and increases medical expenditure.
Application activity 1.7
1. Discuss the role of using accounting software in business
2. Even though accounting software has numerous advantages in
business management, it has some weaknesses. Discuss aboutthose strengths and weaknesses of accounting software.