Pierce supports businesses preparing for digital VAT after HMRC U-turn

Pierce is warning all VAT registered businesses to be ready for Making Tax Digital following HMRC’s U-turn decision.

Initially, plans were laid out for landlord and other self-assessment businesses to start using the process from April 2019, but now all businesses with a taxable turnover above the VAT registration threshold (currently £85,000) will be required to keep their records digitally.

Businesses will have to send their VAT returns using Making Tax Digital compatible software, replacing the old method of submitting their figures on HMRC’s website, making the process more effective and efficient going forward.

Pierce is helping businesses move over to the new digital platform, ahead of the introduction in April 2019, by offering a free consultation to look at the most suitable software options for the company.

Ahead of the deadline, there are many challenges that businesses will have to factor in, including:

  • Converting manual records into a digital version
  • Converting spreadsheets to a recognised book-keeping software that will link directly to HMRC
  • Adapting bespoke software to work in line with the new processes.
  • Upgrading old software that may no longer be compatible

Pierce can help clients prepare efficiently for Making Tax Digital by:

  • Assisting businesses to select the most appropriate software for their requirements
  • Implementing the software
  • Providing thorough training during the initial set-up and when required
  • Taking the headache away by providing a full package

For more information on getting your business ready for the introduction of Making Tax Digital, contact Pierce on 01254 688 100 or email m.scott@pierce.co.uk.

Margaret Scott is the Online Services Manager at Pierce.

Finding clarity in the cloud

There’s little doubt that the digital revolution has provided businesses with more opportunities than ever before.

However, technology has also placed a bewildering array of apps, tools and processes at our fingertips.

That can be off-putting for those businesses still to take advantage of “the cloud” – the virtual network of computer services accessed through the internet and providing infinite possibilities.

Thankfully, it is possible to find clarity in the cloud.

At Pierce, we work with businesses varying in size and sector so we understand that every business is different.

Having been previously offered a one-size-fits-all package, many local businesses I have spoken to have been reluctant to adopt the online approach.

Unlike some accountancy specialists, who only supply one option when it comes to cloud-based bookkeeping packages, we find the best fit for our clients from one of five suppliers: Xero, QBO (Quickbooks Online), FreeAgent, Kashfolw and SageOne.

Choosing the right package enables us to select a service that is tailored more specifically to businesses’ individual requirements.

Cloud accounting is already providing benefits for hundreds of Lancashire businesses that previously relied on office-based systems, including:

  • Streamlined processes: cloud accounting software can extract key information from bills, receipts and invoices and publish the data to your accountancy software.
  • Increased accuracy: eliminating the need for manual data entry reduces the risk of human error.
  • Convenience: systems can be accessed anywhere and anytime if you have an internet connection. This provides both businesses and employees with flexibility as you are no longer tied to an office.
  • Up-to-date: through cloud accountancy, you no longer have to update your computer or network. The system automatically updates in line with the latest regulations, so businesses can be rest assured that they are fully compliant.
  • Secure: cloud accountancy services have been designed to be highly secure, preventing the risk of data being breached.
  • Communication: the system allows continual communication between the business and their accountant. This means that any financial problems can be detected and prevented before they arise.

Technology is constantly evolving and my advice is to speak to an expert who will help you demystify cloud accounting, providing a clearer view of the difference it could make to your business.

Cloud Accounting Software

It seems such a short while since December 2014 when I last wrote an article about Cloud accounting software and now the question now is more likely to be when are you moving to the Cloud rather than if.



Over the last fifteen months Cloud Accounting Software has gained momentum and quite a number of our clients have taken the decision to move from the desktop accounting applications. Indeed here at Pierce we have also moved to the Cloud, both for our accounting software and all our Microsoft needs

There are obvious issues to take into account not least you need a good internet connection. Security, as always, is only as good as your password, but the Cloud is not really a mystery as you are probably already using the Cloud for banking, emails, social media etc.

Pierce online

Pierce have taken an independent approach to Cloud accounting software. Through a range of Cloud partners which cover a wide cross section of the market we can help you choose, setup and configure the best choice of software for your business. We are not tied in with one supplier.

All the Cloud accounting systems are capable of giving you up-to-date information at low cost.Bank feed, rules, and live reconciliation speed up the processing and give timely information.

Our online services team have been using the different software packages here at Pierce and so have a very good working knowledge of all of them.

We can help implement, train and give on-going support on what we feel are the five market leaders of Cloud accounting software:

Additional Package – Receiptbank

We also help train our clients to use ReceiptBank which allows you to scan in all your purchase invoices and it learns which VAT rate is applicable and the correct nominal code to which it should be allocated. There is no duplication as these purchases are then posted into the appropriate accounting package. One of the greatest benefits of this is being able to drill down in the software and view the scan of the original invoice rather than searching in paper files.

When to make the move?

Maybe the time is right for you now or shortly before you current software is due for renewal it may well be worth thinking, is it time for a change? Anyone with a laptop and access to the internet can take advantage of the Cloud and we are here ready to help you make that change.

For more information contact Margaret Scott on 01254 688100.

Make your business grow

We help you achieve your goals and make your business grow

By: Margaret Scott

Cloud Lady Success shutterstock_152011988

You want to grow your business and we want to help you.

The most successful business owners focus on doing what they do best – running their business – which is where we come in by effectively becoming your Online Services support team assisting you with your Online accounting systems while you take care of your business.

Use one of our online solutions and you retain full control and full access to your figures, at anytime and anywhere, so that when you need to make an important business decision, you have the facts at your fingertips. You also benefit from Support from our on-line accounts team.

Pierce combines all the convenience of 21st century technology with all the reassurance of a personalised working relationship.

Personal relationships matter

We spend time with you, getting to know you and your business so that we can truly have your business’s best interests at heart. We may not be sitting in your office but we’re on your team.

We can do the following:-

  • Provision of one of our cloud-based packages
  • Initial set-up of the package to meet your needs
  • The processing of your scanned purchase invoices and on-line bank statements proficiently and thoroughly, and management reports provided each month or quarter as required.
  • VAT returns reviewed by us before they are completed and filed

Data is secure, you can have restricted access or unlimited users. In the event of disaster you have peace of mind knowing that your data is safe and easy to recover because we arrange for the hosting of all of your accounts, real-time data and reports online so that you can access them at any time, 24/7 from anywhere in the world and because they’re hosted online, in the event of disaster you can rest assured that your figures and accounts are safe.

Contact Us shutterstock_212925412

Get in touch…

Call us                   01254 688124

Email us                m.scott@pierce.co.uk



1st April VAT rules change – not a joke

By: Margaret Scott

1st April VAT rules change – not a joke. The changes to the VAT rules relating to Prompt Payment Discounts may cause some problems, please do not hesitate to contact us for clarification and assistance.

The following information relates to a Sage Bulletin.


PDP – Prompt Payment Discount – what to do when you raise or receive a VAT invoice offering a PPD from the 1 April 2015 when the change takes effect.

Summary of Changes

Currently where businesses offer PPD terms to customers they calculate the VAT due on the discounted price. If the discount is not taken up HMRC does not require businesses to alter the amount of VAT invoiced and accounted for.

For example:

“.A discount of X% of the full price applies if payment is made within Y days of the invoice date. No credit note will be issued. Following payment you must ensure you have only recovered the VAT actually paid.”How can Sage ERP X3 customers meet these requirements?


  1. Correctly calculate VAT on Invoices.

Currently VAT may be calculated on the full value or the discounted value of an invoice, this is controlled the parameter BRIDISC.

From the 1st April 2015 to be in line with the new legislation, VAT must be calculated on the full value of an invoice:

  • In Sage ERP X3 V6 the parameter BRIDISC should be set to NO
  • In Sage ERP X3 V7 the parameter DEPMGTMOD (Discount management mode) should be set to 2 (Breakdown by VAT).
  • The payment attribute used for Early Settlement Discount should be set to Tax Recovery

From the 1st April 2015, businesses must account for VAT on the full consideration received for supplies of goods and services. Therefore invoices must calculate VAT with no reduction for PPD.

Where a discount is subsequently taken, it is therefore necessary to ensure VAT records are amended to reflect the lower VAT amount. Businesses may comply with this change in two ways;

  • Credit Notes must be issued for the difference.
  • Each party must make appropriate internal accounting adjustments.

When choosing the latter option businesses must add suitable wording to the terms of any discount.

  1. Provide details of Customer VAT responsibilities on Sales Invoices

We would recommend that our customers add suitable wording to their settlement discount terms rather than issue credit notes for each discount taken.

(Note: In the HMRC guidance there is an optional requirement for the invoice to show Total Gross, Total VAT and Total Net amounts with and without the discount appliedSage ERPX3 only shows totals without the discount applied).

  1. Make appropriate internal accounting adjustments

Sage ERP X3 has functionality to “claw back” VAT. VAT is calculated on the full invoice value, and when any PPD is taken in Cash Entry, the VAT element of the discount is calculated and posted to specified GL account(s), thereby recording the VAT clawed back.

If a part payment has taken place, at the time of the payment, the Settlement Discount line will have the full amount of the discount. This will also post the full amount of the VAT claw back which is not correct under the new legislation. It is recommended that customers change the ESD line on the payment to correctly account for the ESD on the part payment. This will result in the posting of the part of the VAT claw back that is relevant on the payment.

In the instance of a credit note being raised after the invoice has been paid, manual adjustments will need to be done.

What does this mean

a) If the customer pays the full price they record it in their records and no VAT adjustment is necessary.

b) If the customer pays the discounted price in accordance with the PPD terms on receipt of the invoice they may record the discounted price and VAT on this in their accounts and no subsequent VAT adjustment is necessary.

c) If the customer does not pay when the invoice is first issued, they must record the full price and VAT in their records as shown on the invoice. If they subsequently decide to take-up the PPD then:

  • If the supplier’s invoice states that a credit note will be issued, the customer must adjust the VAT they claim as input tax when the credit note is received. They must retain the credit note as proof of the reduction in consideration.
  • If they have received an invoice setting out the PPD terms which states no credit note will be issued, they must adjust the VAT in their records when payment is made. They should retain a document that shows the date and amount of payment (e.g. a bank statement) in addition to the invoice to evidence the reduction in consideration.

The invoice must contain the following information (in addition to the normal invoicing requirements):

  • The terms of the PPD (PPD terms must include, but need not be limited to, the time by which the discounted price must be made).

A statement that the customer can only recover as input tax the VAT paid to the supplier.

Worked Example

Example for a Sales Invoice, with Settlement discount 10%, VAT rate 20%, using Claw back:

Before 1st April

Invoice net value is £100.00, Settlement Discount is £10.00 (10% of 100), VAT is £18.00 (20% of £90.00). Cash paid is £108.00

GL Postings:

From GL Account Credit Debit
Invoice Control £118.00
Invoice Goods £100.00
Invoice VAT £18.00
Cash Control £118.00
Cash Bank £108.00
Cash Discount £10.00


After 1st April

Invoice net value is £100.00, VAT is £20.00 (20% of £100.00),  Settlement Discount is £12.00 (10% of £120). Cash paid is £108.00

GL Postings :

From GL Account Credit Debit
Invoice Control £120.00
Invoice Goods £100.00
Invoice VAT £20.00
Cash Control £120.00
Cash Bank £108.00
Cash Discount £10.00
Cash Claw back VAT £2.00


Example for a Sales Invoice, with Settlement discount 10%, VAT rate 20%, NOT using Claw back:.

GL Postings:

From GL Account Credit Debit
Invoice Control £120.00
Invoice Goods £100.00
Invoice VAT £20.00
Cash Control £120.00
Cash Bank £108.00
Cash Discount £12.00


GOV.Uk image 2727733_orig

Source: Gov.UK

A PPD is an offer by a supplier to their customer of a reduction in the price of goods and/or services supplied if the customer pays promptly; that is, after an invoice has been issued and before full payment is due. For example a business may offer a discount of 5% of the full price if payment is made within 14 days of the date of the invoice.

  • at present, suppliers making PPD offers are permitted to put on their invoice, and account for, the VAT due on the discounted price, even if the full price (i.e. the undiscounted amount) is subsequently paid. Customers receiving PPD offers may only recover as input tax the VAT stated on the invoice.
  • after the change, suppliers must account for VAT on the amount they actually receive and customers may recover the amount of VAT that is actually paid to the Suppliers.


a) on issuing a VAT invoice, suppliers will enter the invoice into their accounts, and record the VAT on the full price. If offering a PPD suppliers must show the rate of the discount offered on their invoice (Regulation 14 of the VAT Regulations 1995 (SI 1995/2518)).

b) the supplier will not know if the discount has been taken-up until they are paid in accordance with the terms of the PPD offer, or the time limit for the PPD expires.

c) the supplier will need to decide, before they issue an invoice, which of the processes below they will adopt to adjust their accounts in order to record a reduction in consideration if a discount is taken-up.

d) when adjustments take place in a VAT accounting period subsequent to the period in which the supply took place the method of adjustment needs to comply with Regulation 38 of the VAT Regulations 1995 (SI 1995/2518).

e) suppliers may issue a credit note to evidence the reduction in consideration. In which case, a copy of the credit note must be retained as proof of that reduction.

f) alternatively, if they do not wish to issue a credit note, the invoice must contain the following information (in addition to the normal invoicing requirements):

  • the terms of the PPD (PPD terms must include, but need not be limited to, the time by which the discounted price must be made).
  • a statement that the customer can only recover as input tax the VAT paid to the supplier.

Additionally, it might be helpful for invoices to show:

  • the discounted price
  • the VAT on the discounted price
  • the total amount due if the PPD is taken up.

g) if a business has adopted the option at (f), the VAT invoice, containing appropriate wording as described above, together with proof of receipt of the discounted price in accordance with the terms of the PPD offer (e.g. a bank statement) will be required to evidence the reduction in consideration, and the reduction to the supplier’s output tax (in accordance with Regulation 38 of the VAT Regulations 1995).

h) we recommend businesses use the following wording on the invoice:

“A discount of X% of the full price applies if payment is made within Y days of the invoice date. No credit note will be issued. Following payment you must ensure you have only recovered the VAT actually paid.”

i) if the discounted price is paid in accordance with the PPD terms, then the supplier must adjust their records to record the output tax on the amount actually received.

If the full amount is received no adjustment will be necessary.


On receiving an invoice offering a PPD a VAT registered customer may recover the VAT charged, in accordance with VAT Regulation 29 of the VAT Regulations 1995.

As adjustments may take place in a VAT accounting period subsequent to the period in which the supply took place the method of adjustment needs to comply with Regulation 38 of the VAT Regulations 1995 (SI 1995/2518).

In practice this will mean:

a) if the customer pays the full price they record it in their records and no VAT adjustment is necessary.

b) if the customer pays the discounted price in accordance with the PPD terms on receipt of the invoice they may record the discounted price and VAT on this in their accounts and no subsequent VAT adjustment is necessary.

c) if the customer does not pay when the invoice is first issued, they must record the full price and VAT in their records as shown on the invoice. If they subsequently decide to take-up the PPD then:

  • if they have received an invoice setting out the PPD terms which states no credit note will be issued they must adjust the VAT in their records when payment is made. They should retain a document that shows the date and amount of payment (e.g. a bank statement) in addition to the invoice to evidence the reduction in consideration.
  • if the supplier’s invoice does not state that a credit note will not be issued, the customer must adjust the VAT they claim as input tax when the credit note is received. They must retain the credit note as proof of the reduction in consideration.


Cloud Accounting our help and support

Cloud Accounting our help and support:

cloud keyboard shutterstock_239186986

By Margaret Scott

Reimagining with Cloud.

Successful digital businesses are holistically applying the concepts of mobile, social and big data to reimagine their business. Cloud creates the connections.

We realised over 2 years ago that online accounting, cloud systems were starting to become more popular and to this end we started to explore the market and began to use an online accounting product called Kashflow for some of our clients.


A lot has changed over this time and we have noted 5 cloud products that are making their mark :-

We know all five products and undertake training so that all our team are able to help clients by phone and on-line with whichever system they are using.

Going Forward

Accounts automated by scanner – this really is the 21st Century

Receiptbank allows us to scan in all the purchase invoices and it learns which nominal code to which it should be allocated. The invoices are then imported into the product eg Kashflow and the postings are automated.

Fast and effortless receipt submission

From paper to the cloud in a single snap

Instantly submit expenses via:

  • Phone app: using your camera
  • Paypal: automatic submission
  • Dropbox: direct importing
  • Email: simply email us
  • Post: single or batch send

OCrex allows us to scan in bank statements where we don’t have a live bank feed for the client.

Exploring the Future of Cloud Computing:


Riding the Next Wave of Technology-Driven Transformation

Exploring the Future of Cloud Computing: Riding the Next Wave of Technology-Driven Transformation

Cloud computing is seen by many as the next wave of information technology for individuals, companies and governments. The abundant supply of information technology capabilities at a low cost offers many enticing opportunities. In addition to reducing operational costs, cloud technologies have become the basis for radical business innovation and new business models, and for significant improvements in the effectiveness of anyone using information technology – which, these days, increasingly means most of the world.

Shellshock: New Computer Virus

From Margaret Scott

Shellshock: ‘Deadly serious’ new vulnerability found

Shellshock virus

A “deadly serious” bug potentially affecting hundreds of millions of computers, servers and devices has been discovered.

The flaw has been found in a software component known as Bash, which is a part of many Linux systems as well as Apple’s Mac operating system.

The bug, dubbed Shellshock, can be used to remotely take control of almost any system using Bash, researchers said.

Some experts said it was more serious than Heartbleed, discovered in April.

“Whereas something like Heartbleed was all about sniffing what was going on, this was about giving you direct access to the system,” Prof Alan Woodward, a security researcher from the University of Surrey, told the BBC.

“The door’s wide open.”

Some 500,000 machines worldwide were thought to have been vulnerable to Heartbleed. But early estimates, which experts said were conservative, suggest that Shellshock could hit at least 500 million machines.

The problem is particularly serious given that many web servers are run using the Apache system, software which includes the Bash component.

Patch immediately

Bash – which stands for Bourne-Again SHell – is a command prompt on many Unix computers. Unix is an operating system on which many others are built, such as Linux and Mac OS.

The US Computer Emergency Readiness Team (US-Cert) issued a warning about the bug, urging system administrators to apply patches.

However, other security researchers warned that the patches were “incomplete” and would not fully secure systems.

Of particular concern to security experts is the simplicity of carrying out attacks that make use of the bug.


Analysis – Mark Ward, technology correspondent

security image security image

Shellshock rates a 10 on the scale of vulnerabilities. As bugs go, it’s about as bad as it gets.

Except that the last big bad bug, Heartbleed, rated an 11, according to one expert.

That should mean Shellshock isn’t as bad. Right?

Maybe. It’s too early to tell.

With Heartbleed, more work had been done by the folks that found it so it was easier to estimate who was at risk. There were lots of big targets, many of which had large user populations.

With Shellshock, the sheer number of potential victims is higher. And we do know that an exploit has been produced and some folks are scanning sites to see which are vulnerable to attacks based around that code.

So far, what’s keeping servers safe is the fact that cyber thieves are lazy and tend to copy what has already worked. Finding exploits is specialised, hard work so they only tend to pile in once that appears. With that code already in circulation, the early news about Shellshock may just be the first tremor of a much bigger quake.


Cybersecurity specialists Rapid7 rated the Bash bug as 10 out of 10 for severity, but “low” on complexity – a relatively easy vulnerability for hackers to capitalise on.

“Using this vulnerability, attackers can potentially take over the operating system, access confidential information, make changes, et cetera,” said Tod Beardsley, a Rapid7 engineer.

“Anybody with systems using Bash needs to deploy the patch immediately.”

Security firms have suggested that there is evidence Shellshock is being used by hackers.

“The vulnerability has already been used for malicious intentions – infecting vulnerable web servers with malware, and also in hacker attacks,” said Kaspersky Labs.

“Our researchers are constantly gathering new samples and indications of infections based on this vulnerability.”

For general home users worried about security, Prof Woodward suggested simply keeping an eye on manufacturer websites for updates – particularly for hardware such as broadband routers.

Free questions

The new bug has turned the spotlight, once again, onto the reliance the technology industry has on products built and maintained by small teams often made up of volunteers.

Heartbleed was a bug related to open source cryptographic software OpenSSL. After the bug became public, major tech firms moved to donate large sums of money to the team responsible for maintaining the software.

Similarly, the responsibility for Bash lies with just one person – Chet Ramey, a developer based at Case Western Reserve University in Ohio.

That such key parts of everyday technology are maintained in this way is a cause for concern, said Tony Dyhouse from the UK’s Trustworthy Software Initiative.

“To achieve a more stable and secure technology environment in which businesses and individuals can feel truly safe, we have to peel back the layers, start at the bottom and work up,” he said.

“This is utterly symptomatic of the historic neglect we have seen for the development of a dependable and trustworthy baseline upon which to develop a software infrastructure for the UK.

“Ultimately, this is a lifecycle problem. It’s here because people are making mistakes whilst writing code and making further mistakes when patching the original problems.”

Follow Dave Lee on Twitter @DaveLeeBBC

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IT Warning! Microsoft XP – end of life

IT warning!    Microsoft XP – end of life

By: Margaret Scott

XP – end of life

Windows XP and Office 2003  will go out of support on April 8, 2014.

Microsoft have a support policy giving a minimum of 10 years. XP first appeared in 2001 so it is already 12 years old.

It doesn’t mean XP will suddenly stop working. You can keep using it if you want, but Microsoft won’t be releasing any more security updates so your computer will be at risk.

XP hasn’t got some of the security features in newer Windows versions and can’t support the latest version of Internet Explorer. Web developers struggle writing for XP Internet Explorer versions 6 ,7, 8  and it is difficult for all software providers to make sure their products work on all Windows versions.

For many it may mean purchasing a new computer as well as upgrading software.

My advice would be to start planning now as April is only  6months away.

Here at Pierce we are commencing a rolling program so that all our pc’s and laptops are upgraded prior to April 2014. We are also Microsoft Partners and are installing Office 365 2013 version. Windows 8 isn’t compatible with some of our specialist accountancy software and Windows 8 is certainly a steep learning curve if used directly after XP so most of our staff may retain Windows 7 rather than Windows 8 as their operating system.

Some other end of life dates:-

Windows Vista – April 11 2017

Windows 7 – January 14 2020

Windows 8 – January 10 2023

The History of Windows – quotes from Microsoft

Highlights from the first 25 years  

1975–1981: Microsoft boots up

Getting started: Microsoft co-founders Paul Allen (left) and Bill Gates

It’s the 1970s. At work, we rely on typewriters. If we need to copy a document, we likely use a mimeograph or carbon paper. Few have heard of microcomputers, but two young computer enthusiasts, Bill Gates and Paul Allen, see that personal computing is a path to the future.

In 1975, Gates and Allen form a partnership called Microsoft. Like most start-ups, Microsoft begins small, but has a huge vision—a computer on every desktop and in every home. During the next years, Microsoft begins to change the ways we work.

The dawn of MS‑DOS

In June 1980, Gates and Allen hire Gates’ former Harvard classmate Steve Ballmer to help run the company. The next month, IBM approaches Microsoft about a project code-named “Chess.” In response, Microsoft focuses on a new operating system—the software that manages, or runs, the computer hardware and also serves to bridge the gap between the computer hardware and programs, such as a word processor. It’s the foundation on which computer programs can run. They name their new operating system “MS‑DOS.”

When the IBM PC running MS‑DOS ships in 1981, it introduces a whole new language to the general public. Typing “C:” and various cryptic commands gradually becomes part of daily work. People discover the backslash (\) key.

MS‑DOS is effective, but also proves difficult to understand for many people. There has to be a better way to build an operating system.

Geek trivia: MS‑DOS stands for Microsoft Disk Operating System.

1982–1985: Introducing Windows 1.0

Microsoft works on the first version of a new operating system. Interface Manager is the code name and is considered as the final name, but Windows prevails because it best describes the boxes or computing “windows” that are fundamental to the new system. Windows is announced in 1983, but it takes a while to develop. Skeptics call it “vaporware.”

On November 20, 1985, two years after the initial announcement, Microsoft ships Windows 1.0. Now, rather than typing MS‑DOS commands, you just move a mouse to point and click your way through screens, or “windows.”  Bill Gates says, “It is unique software designed for the serious PC user…”

There are drop-down menus, scroll bars, icons, and dialog boxes that make programs easier to learn and use. You’re able to switch among several programs without having to quit and restart each one. Windows 1.0 ships with several programs, including MS‑DOS file management, Paint, Windows Writer, Notepad, Calculator, and a calendar, card file, and clock to help you manage day-to-day activities. There’s even a game—Reversi.

Geek trivia: Remember floppy disks and kilobytes? Windows 1.0 requires a minimum of 256 kilobytes (KB), two double-sided floppy disk drives, and a graphics adapter card. A hard disk and 512 KB memory is recommended for running multiple programs or when using DOS 3.0 or higher.

1987–1992: Windows 2.0–2.11—More windows, more speed

On December 9, 1987 Microsoft releases Windows 2.0 with desktop icons and expanded memory. With improved graphics support, you can now overlap windows, control the screen layout, and use keyboard shortcuts to speed up your work. Some software developers write their first Windows–based programs for this release.

Windows 2.0 is designed for the Intel 286 processor. When the Intel 386 processor is released, Windows/386 soon follows to take advantage of its extended memory capabilities. Subsequent Windows releases continue to improve the speed, reliability, and usability of the PC.

In 1988, Microsoft becomes the world’s largest PC software company based on sales. Computers are starting to become a part of daily life for some office workers.

Geek trivia: Control Panel makes its first appearance in Windows 2.0.

1990–1994: Windows 3.0–Windows NT—Getting the graphics

On May 22, 1990, Microsoft announces Windows 3.0, followed shortly by Windows 3.1 in 1992. Taken together, they sell 10 million copies in their first 2 years, making this the most widely used Windows operating system yet. The scale of this success causes Microsoft to revise earlier plans. Virtual Memory improves visual graphics. In 1990 Windows starts to look like the versions to come.

Windows now has significantly better performance, advanced graphics with 16 colors, and improved icons. A new wave of 386 PCs helps drive the popularity of Windows 3.0. With full support for the Intel 386 processor, programs run noticeably faster. Program Manager, File Manager, and Print Manager arrive in Windows 3.0.

Windows software is installed with floppy discs bought in large boxes with heavy instruction manuals.

The popularity of Windows 3.0 grows with the release of a new Windows software development kit (SDK), which helps software developers focus more on writing programs and less on writing device drivers.

Windows is increasingly used at work and home and now includes games like Solitaire, Hearts, and Minesweeper. An advertisement: “Now you can use the incredible power of Windows 3.0 to goof off.”

Windows for Workgroups 3.11 adds peer-to-peer workgroup and domain networking support and, for the first time, PCs become an integral part of the emerging client/server computing evolution.

Windows NT

 When Windows NT releases on July 27, 1993, Microsoft meets an important milestone: the completion of a project begun in the late 1980s to build an advanced new operating system from scratch. “Windows NT represents nothing less than a fundamental change in the way that companies can address their business computing requirements,” Bill Gates says at its release.

Unlike Windows 3.1, however, Windows NT 3.1 is a 32-bit operating system, which makes it a strategic business platform that supports high-end engineering and scientific programs.

Geek trivia: The group that develops Windows NT was originally called the “Portable  Systems” team.

1995–2001: Windows 95—the PC comes of age (and don’t forget the Internet)

On August 24, 1995, Microsoft releases Windows 95, selling a record-setting 7 million copies in the first five weeks. It’s the most publicized launch Microsoft has ever taken on. Television commercials feature the Rolling Stones singing “Start Me Up” over images of the new Start button. The press release simply begins: “It’s here.”

This is the era of fax/modems, e‑mail, the new online world, and dazzling multimedia games and educational software. Windows 95 has built-in Internet support, dial-up networking, and new Plug and Play capabilities that make it easy to install hardware and software. The 32-bit operating system also offers enhanced multimedia capabilities, more powerful features for mobile computing, and integrated networking.

At the time of the Windows 95 release, the previous Windows and MS‑DOS operating systems are running on about 80 percent of the world’s PCs. Windows 95 is the upgrade to these operating systems. To run Windows 95, you need a PC with a 386DX or higher processor (486 recommended) and at least 4 MB of RAM (8 MB of RAM recommended). Upgrade versions are available for both floppy disk and CD-ROM formats. It’s available in 12 languages.

Windows 95 features the first appearance of the Start menu, taskbar, and minimize, maximize, and close buttons on each window.

Catching the Internet wave

In the early 1990s, tech insiders are talking about the Internet—a network of networks that has the power to connect computers all over the world. In 1995, Bill Gates delivers a memo titled “The Internet Tidal Wave,” and declares the Internet as “the most important development since the advent of the PC.”

In the summer of 1995,  the first version of Internet Explorer is released. The browser joins those already vying for space on  the World Wide Web.

Geek trivia: In 1996, Microsoft releases Flight Simulator for Windows 95—the first time in its 14-year history that it’s available for Windows.

1998–2000: Windows 98, Windows 2000, Windows Me

Released on June 25, 1998, Windows 98 is the first version of Windows designed specifically for consumers. PCs are common at work and home, and Internet cafes where you can get online are popping up. Windows 98 is described as an operating system that “Works Better, Plays Better.”

With Windows 98, you can find information more easily on your PC as well as the Internet. Other improvements include the ability to open and close programs more quickly, and support for reading DVD discs and universal serial bus (USB) devices. Another first appearance is the Quick Launch bar, which lets you run programs without having to browse the Start menu or look for them on the desktop.

Geek trivia: Windows 98 is the last version based on MS‑DOS.

Windows Me: Designed for home computer use, Windows Me offers numerous music, video, and home networking enhancements and reliability improvements compared to previous versions.

First appearances: System Restore, a feature that can roll back your PC software configuration to a date or time before a problem occurred. Movie Maker provides users with the tools to digitally edit, save, and share home videos. And with Microsoft Windows Media Player 7 technologies, you can find, organize, and play digital media.

Geek trivia: Technically speaking, Windows Me was the last Microsoft operating system to be based on the Windows 95 code base. Microsoft announced that all future operating system products would be based on the Windows NT and Windows 2000 kernel.

Windows 2000 Professional

More than just the upgrade to Windows NT Workstation 4.0, Windows 2000 Professional is designed to replace Windows 95, Windows 98, and Windows NT Workstation 4.0 on all business desktops and laptops. Built on top of the proven Windows NT Workstation 4.0 code base, Windows 2000 adds major improvements in reliability, ease of use, Internet compatibility, and support for mobile computing.

Among other improvements, Windows 2000 Professional simplifies hardware installation by adding support for a wide variety of new Plug and Play hardware, including advanced networking and wireless products, USB devices, IEEE 1394 devices, and infrared devices.

Geek trivia: The nightly stress test performed on Windows 2000 during development is the equivalent of three months of run time on up to 1,500 computers.

2001–2005: Windows XP—Stable, usable, and fast

On October 25, 2001, Windows XP is released with a redesigned look and feel that’s centered on usability and a unified Help and Support services center. It’s available in 25 languages. From the mid-1970s until the release of Windows XP, about 1 billion PCs have been shipped worldwide.

For Microsoft, Windows XP will become one of its best-selling products in the coming years. It’s both fast and stable. Navigating the Start menu, taskbar, and Control Panel are more intuitive. Awareness of computer viruses and hackers increases, but fears are to a certain extent calmed by the online delivery of security updates. Consumers begin to understand warnings about suspicious attachments and viruses. There’s more emphasis on Help and Support.

Windows XP Home Edition offers a clean, simplified visual design that makes frequently used features more accessible. Designed for home use, Windows XP offers such enhancements as the Network Setup Wizard, Windows Media Player, Windows Movie Maker, and enhanced digital photo capabilities.

Windows XP Professional brings the solid foundation of Windows 2000 to the PC desktop, enhancing reliability, security, and performance. With a fresh visual design, Windows XP Professional includes features for business and advanced home computing, including remote desktop support, an encrypting file system, and system restore and advanced networking features. Key enhancements for mobile users include wireless 802.1x networking support, Windows Messenger, and Remote Assistance.

Windows XP has several editions during these years:

  • Windows XP 64-bit Edition (2001) is the first Microsoft operating system for 64-bit processors designed for working with large amounts of memory and projects such as movie special effects, 3D animations, engineering, and scientific programs.
  • Windows XP Media Center Edition (2002) is made for home computing and entertainment. You can browse the Internet, watch live television, enjoy digital music and video collections, and watch DVDs.
  • Windows XP Tablet PC Edition (2002) realizes the vision of pen-based computing. Tablet PCs include a digital pen for handwriting recognition and you can use the mouse or keyboard, too.

Geek trivia: Windows XP is compiled from 45 million lines of code.

2006 Windows Vista is released in 2006 with the strongest security system yet.

User Account Control helps prevent potentially harmful software from making changes to your computer. In Windows Vista Ultimate, BitLocker Drive Encryption provides better data protection for your computer, as laptop sales and security needs increase. Windows Vista also features enhancements to Windows Media Player as more and more people come to see their PCs as central locations for digital media. Here you can watch television, view and send photographs, and edit videos.–2008:

Windows Vista—Smart on security

Design plays a big role in Windows Vista, and features such as the taskbar and the borders around windows get a brand new look. Search gets new emphasis and helps people find files on their PCs faster. Windows Vista introduces new editions that each have a different mix of features. It’s available in 35 languages. The redesigned Start button makes its first appearance in Windows Vista.

Geek trivia: More than 1.5 million devices are compatible with Windows Vista at launch.

2009: Windows 7

Windows 7 was built for the wireless world that arose in the late 2000s. By the time it was released, laptops were outselling desktops, and it had become common to connect to public wireless hotspots in coffee shops and private networks in the home.

Windows 7 included new ways to work with windows—like Snap, Peek, and Shake—which both improved functionality and made the interface more fun to use. It also marked the debut of Windows Touch, which let touchscreen users browse the web, flip through photos, and open files and folders.

Geek trivia: Windows 7 was evaluated by 8 million beta testers worldwide before it was released.

2012: Windows 8

Windows 8 is Windows reimagined from the chipset to the user experience. It functions as both a tablet for entertainment and a full-featured PC for getting things done. It introduces a totally new interface that works smoothly for both touch and mouse and keyboard. Windows 8 also includes enhancements of the familiar Windows desktop, with a new taskbar and streamlined file management.

Windows 8 features a Start screen with tiles that connect to people, files, apps, and websites. Apps are front and center, with access to a new place to get apps—the Windows Store—built right in to the Start screen.

Along with Windows 8, Microsoft also launched Windows RT, which runs on some tablets and PCs. Windows RT is designed for sleek devices and long battery life, and exclusively runs apps from the Windows Store. It also comes with a built-in version of Office that’s optimized for touchscreens.

Geek trivia: Power users will notice that Windows 8 has made the detection and correction of file system errors both more transparent and less intrusive.


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