Question

Describe the various types of accounting software along with their advantages and limitations.

Answer 1

The various types of accounting software are:

1. Ready-to-use
2. Customised
3. Tailored

Ready-to-use Software- This type of software is readily available in the market with prescribed and standard features. This accounting software is basically used by the small-size business enterprises, where the number of transactions is not so large. The cost of its installation and maintenance is also low. It has limited number of users. Its adaptability is very high as it is relatively easier to learn and operate. It does not have a wide scope to link it with other information systems.

Customised Software- Customised software is the software that has standardised features to meet the special requirements of the users. It provides the scope of changing the features of accounting software. The functions of this software can be programmed as per the needs and requirements of the users. This type of software best suits the needs of medium and large businesses. Its cost of installation and maintenance is comparatively higher. It can be easily linked to the other information systems.

Tailored Software- Tailored or Tailor-made accounting software is the software that is developed as per the specifications and requirements of the users. This accounting software is generally used in the large business organisations with multi-users and geographically scattered locations. It is designed to meet the specific needs of the users and form an integral part of the organisational MIS. It has infinite number of users.

Advantages of Ready-made Accounting Software

The advantages of Ready-made Accounting Software are enlisted below.

1. This software is easily available in the market.
2. It is less expensive, as it comes with basic and standard features.
3. It involves a lesser need for training.
4. It is less sophisticated.
5. Its adaptability is very high as it is relatively easier to learn and operate.
6. It is suitable for small-size business enterprises.

Disadvantages of Ready-made Accounting Software

The disadvantages of Ready-made Accounting Software are enlisted below.

1. It has limited number of users.
2. It is not suitable for medium and large business organisation, where the number of transactions is very large.
3. It fails to cater the specific needs of the users.
4. It suffers from the low level of data secrecy.
5. It does not have a wide scope to link it with other information systems.

Advantages of Customised and Tailor-made Accounting Software

The following are the advantages of Customised and Tailor-made AccountingSoftware.

1. This software is suitable for medium and large business organisation.
2. It caters the specific requirements and needs of the users.
3. It can be modified as per the needs of the organisation.
4. It has high level of security and minimises the loss and unauthorised access of data.
5. It cannot be easily imitated or duplicated in the market due to difference in the needs and requirements of different users.
6. It does not involve high cost of training as the training can be imparted within the organisation by the experienced personnel.
7. It can be easily linked to the other information systems.
8. It forms an integral part of the organisational MIS.

Disadvantages of Customised and Tailor-made Accounting Software

The following are the disadvantages of Customised and Tailor-made Accounting Software.

1. It involves high cost of installation and maintenance.

2. Developing customised software is a time-consuming process and involves high cost of development.

3. Maintenance of this software is difficult as there exists limited availability of knowledge to the developers.

4. It lacks standard training module.