CHAPTER 3
ACCOUNTING SOFTWARE APPLICATION
Handout
Reporters:
Juanillo, Cindy B.
Oblino, Marialyn O.
Babon, Marian I..
Velarde, Angeline
3.1 - OVERVIEW OF POPULAR ACCOUNTING SOFTWARE
QuickBooks
is a widely used solution, particularly among small to medium-
sized businesses. Developed by Intuit.
. Xero
known for its modern interface and collaborative features. It
excels in multi-user collaboration, offers unlimited users in all plans, and
boasts strong inventory management and extensive third-party app
integrations.
3. FreshBooks
is tailored for service-based small businesses and freelancers,
with a focus on invoicing and time tracking.
4. Sage 50cloud
Formerly known as Peachtre. Sage 50cloud is a robust accounting
solution geared towards small to medium-sized businesses
5. Wave
is a free accounting software option that caters to small
businesses and entrepreneurs. It offers free accounting, invoicing, and
receipt scanning, a user-friendly interface, and unlimited income and
expense tracking.
3.2 - SETTING UP ACCOUNTS AND LEDGER
What Is a Ledger in Accounting?
A ledger is a book or digital record containing bookkeeping entries.
Ledgers are also known as the second book of entry.
Ledgers contain the necessary information to prepare financial
statements.
What Is a Ledger Account?
A ledger account is a record of all transactions affecting a
particular account within the general ledger. Individual transactions are
identified within the ledger account.
EXAMPLES OF COMMON LEDGER ACCOUNTS INCLUDE:
1. Asset accounts such as cash, prepaid expenses, accounts receivable, furniture
and fixtures
2. Liability accounts including accounts payable, accrued expenses, and notes
payable
3. Equity accounts such as common stock, retained earnings, shareholder
distributions, and paid-in capital
4. Revenue accounts including sales and service fees
5. Expense accounts such as advertising expenses, utilities, rent, salaries and
wages, and supplies
6. Other income and expenses such as interest, investment. income, and gains or
losses from the disposal of an asset
HERE IS HOW TO CREATE YOUR LEDGER AND PUT IT TO USE:
Step 1: Set Up Ledger Accounts
Step 2: Create Columns
Step 3: Record Financial Transactions
Step 4: Create a Trial Balance
WHAT’S THE DIFFERENCE BETWEEN A JOURNAL AND A LEDGER?
Both the accounting journal and ledger play essential roles in the accounting
process. Bookkeepers primarily record transactions in a journal, also known as the
original book of entry.
After that, the bookkeepers can post transactions to the correct subsidiary
ledgers or the proper accounts in the general ledger. While many financial
transactions are posted in both the journal and ledger, there are significant
differences in the purpose and function of each of these accounting books.
LEDGER MEANING VS. JOURNAL MEANING IN ACCOUNTING
In the double-entry bookkeeping method, financial transactions are initially
recorded in the journal. It’s also known as the primary book of accounting or the
book of original entry.
On the other hand, the ledger is the second book of entry because it has
summarized information from the journal in the “T-account” format.
RECORDING TRANSACTIONS
Journalizing
Journal entries
Posting
3.3 - RECORDING TRANSACTIONS AND JOURNAL ENTRIES
Step 1: Identify and Analyze the Transaction
Recognize the event
Define the accounts involved
Determine the monetary value
Step 2: Journalize the Transaction
Use the general journal
Create a journal entry
Each journal entry includes:
Date
Account titles
Debit and credit amounts
Step 3: Post to the General Ledger
Organize accounts
Transfer information
Step 4: Prepare a Trial Balance
List accounts
Verify balance
3.4 - GENERATING AND INTERPRETING FINANCIAL STATEMENT
1. UNDERSTANDING THE TYPES OF FINANCIAL STATEMENTS
(There are three primary types of financial statements)
A. Balance Sheet
B. Income Statement
C. Cash Flow Statement
2. GENERATING FINANCIAL STATEMENTS
(There are two primary methods for generating financial statements)
A. Manual Preparation
B. Using Accounting Software
3. INTERPRETING FINANCIAL STATEMENTS
Interpreting financial statements involves analyzing the data
presented to gain insights into a company's financial health and
performance. Here are some key aspects to consider:
BALANCE SHEET ANALYSIS
A. Liquidity
B. Solvency
C. Capital Structure
INCOME STATEMENT ANALYSIS
A. Profitability
B. Expense Management
C. Revenue Growth
CASH FLOW STATEMENT ANALYSIS
A. Liquidity
B. Investment Opportunities
C. Debt Management
3.5 - PAYROLL AND SOFTWARE CHOICES AND CONSIDERATIONS
I. PAYROLL PROCESSING SOFTWARE:
(Most payroll software follows these general steps)
1. Employee Data Entry
2. Hours Worked Input
3. Net Pay Calculation
4. Payroll Report Generation
II. SOFTWARE CHOICES AND CONSIDERATIONS
(Choosing payroll software depends on your business size and needs)
1. Small Businesses
2. Larger Businesses
3. Features to Consider
4. Cost