Readymade Software: These Software’s are ready to use, easy to handle or easy to operate. These software’s save time and cost. The best example of accounting software is “Tally”.

Advantages of Readymade Software’s:

 i. Suitable for small business firms.

 ii. Easily available.

 iii. Affordable (less expensive)

User friendly (No special training required)

Limitations of Readymade Software’s:

 i. Knowledge of computer is required (as well knowledge of accounting is also required)

 ii. Costly and installation problems.

 iii. Not safe.

Customised Software: Readymade software’s are modified as per the requirement. It is known as customised Software’s. The cost of customised software is higher than the readymade software cost and this cost is paid by the user.

Advantages of Customised Software’s:

 i. Suitable for large and medium houses.

 ii. All transactions are recorded in a systematic manner.

 iii. Software is customised according to the requirement.

 iv. Reliable.

Limitations of Customised Software’s:

 i. Special training is required to handle these types of software’s.

 ii. Costly

 iii. Outdated Software’s may cause problems.

(i) maintaining systematic records :- Accounting records the financial transaction in the Systematic manner.

(ii) Communication the financial result :- Accounting is used to communicate financial information like net profit.

(iii) Meeting legal needs :- Accounting helps for meeting legal needs for various legal purposes like annual accounts, income tax return, sales tax return

(iv) protecting business assets :-  Accounting maintains proper rewards various assets and helps to management to protects business assets by providing relevant information.

(v) Accounting assists the management in decision making :- Accounting assists the management in decision making planning, controlling and coordination of business Activities.

(vi) Ascertaining the business profit and losses :- Accounting helps in determining the coredt net profit and loss of enterprises.

(vii) Ascertaining the financial position :- Accounting helps in determining the financial position of an enterprises with helps of balance sheets.

Financial statements are those statements which are prepared for reporting to decision-maker on the basis of trial balance containing balances of ledger accounts. These are prepared to throw light on the financial results of operation of business during the period under consideration and the financial position at the end of the period. 

In financial accounting through financial statement profit is measured in two stages, i.e. Gross profit and Net profit.
To ascertain the gross profit, trading account is prepared and to ascertain the net profit, P&L account is prepared. To report on financial position of business enterprise, its assets, liabilities and owner equity balance sheet is prepared. Financial statements are the statements, which present periodic reports on the process of business enterprises and the results achieved during a given period.
Financial statements include Trading and Profit and Loss account, balance sheet and other statements and explanatory notes, which form part thereof. Information provided by financial statements is useful to management to plan and control the business operations. Financial statements are also useful to creditors, shareholders and employees of the enterprise.
Information Provided by Financial Statements
Trading and Profit and Loss account present a true and fair view of the financial performance of the business in the form of profit or loss during the year.
Balance sheet presents a true and fair view of the financial position of the business.

At times it might be necessary to return a few goods back to a supplier when an order is received. This situation may arise due to the poor quality of products, inaccurate quantity, untimely delivery or other such reasons.

Purchase returns are also called returns outward and an appropriate purchase returns or returns outward book is maintained for recording entries related to such books. All returns are primarily recorded in the purchase returns book unless the returns are not that frequent, in which case they are recorded in the journal. The journal entry to be passed in the case of purchase returns is

Creditor A/c – Dr.                    XX

To Purchase return A/c                       XX

Accrual Basis of Accounting: Under this system of accounting, revenue and expenses are recorded when they are recognized i.e., Income is recorded as Income when it is accrued (when transaction takes place) irrespective of fact whether cash is received or not. Similarly, expenses are recorded when they are incurred or become due and not when the cash is paid for them.

Under this system, expenses such as outstanding expenses, prepaid expenses, accrued income and received in advance are identified and taken into account.

Under the companies’ amendments Act 2013, all companies are required to maintain their accounts according to accrual basis of accounting.

Drawings a/c Dr 5000

____To purchase a/c 5000

(being goods taken for personal use)

The goods taken by the proprietor for personal use, reduces the inventory of the business. Hence,it is placed on a temporary drawings account. It reduces the Owner's equity account. It is not an expense of the business.

B A N K    R EC  ON C I  L IA  T I O N   S T A T E M E N T

Bank Reconciliation Statement is prepared to reconcile the difference between the bank Balance shown by the Cash Book and Bank Pass Book.

A schedule showing the items of difference between the bank statement and the bank column of Cash Book is known as Bank Reconciliation Statement (BRS).