Can anyone find the FASB codification that lays out requirements for an accounting software?
I see numerous articles stating that QuickBooks is not GAAP compliant - and they are usually sales pitches for their software. I am unable to locate within the FASB codification of GAAP where software requirements are laid out. All I see in the codification is the accounting principles that anyone with a bachelor degree in accounting is well-familiar with. Intuit makes a claim that GAAP compliant financial statements can be produced with the QSW tool.
I have never seen any FASB recommendation on accounting software. It is the knowledge of the accountant knowledge and skill that will prepare GAAP conpliant Financial Statements.
Sometime, if not often, this will require changing or writing new financial reports statements. The required accountant letter usually is a word document.
Overall, many (most) clients will not need "GAAP compliant statements." They can be adjusted, as needed. The idea is to get statements that are accurate and are useful to clients. Banks or funders might be a little more fussy about specifics but cross that bridge when you get there.
To my knowledge no such FASB standard exists. Don't get hoodwinked by sales pitches from software companies, would be my advice.
I've worked for two public companies performing routine accounting work, as well as preparing the financials for one of those companies. Neither company had such GAAP compliant software. It was our knowledge of the standards that made the accounting be in agreement with GAAP and the FASB standards, not a piece of software.
I've worked extensively with QB Premier for a retail/wholesale western boot business. The accounting complied with all FASB standards in every material respect because of my knowledge, training, and education, not because of the software I was using. I see nothing wrong with using QB to maintain an accounting system that is in compliance with GAAP standards. It isn't hard to do if you know what you're doing. But you have to understand what those standards are and how to apply them. I know of no software that has yet replaced the human element in that judgment and decision making process.
Btw, if you don't understand bookkeeping and the accounting standards any accounting software can get messed up pretty bad. When I was hired by the boot company that I mentioned above the office manager had been performing the bookkeeping function. What I found after working for them for several months, using QB Premier, was that our Cost of Goods Sold was greater than our Sales Revenue. It took me several months to figure out what was going on and why.
The Office Manager had no background in bookkeeping or accounting. She was booking inventory purchases in QB to Cost of Goods Sold. Then, as each pair of boots was sold QB was recording the cost of the boots to Cost of Goods Sold. So, for each pair of boots we sold, Cost of Goods Sold was getting charged twice for the cost of the boots. There were a lot more problems I found, as well.
It just goes to show if you don't know what you're doing you can mess up any accounting system badly.
QB can be GAAP compliant as long as the person performing the accounting function knows what is required to be GAAP compliant and understands the workings of QB thoroughly.
IMO, most small businesses are going to want their books kept in such a way to keep the bookkeeping costs to a minimum. That is probably going to be a cash basis or modified cash basis system in many cases. In those situations who cares about FASB compliant software? Many, if not most small business owners are just going to care about you keeping their books so they can file their tax returns at the end of the year, not keep their books in conformity with FASB standards. There are valid reasons for keeping the books on an accrual basis, such as if IRS regulations requires accrual accounting (for inventory for example), or for getting a better idea of actual profit earned in an accounting period. But one needs to be sensitive to the client and the client's needs and keep bookkeeping costs to a minimum, IMO.
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