SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                 ---------------

                                   FORM 10-K/A

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended June 30, 1997
                         Commission file number 0-23306

                                PROPHET 21, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified In Its Charter)


           Delaware                                    23-2746447
--------------------------------          --------------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
 Incorporation or Organization)


19 West College Avenue, Yardley, Pennsylvania                              19067
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                              (Zip Code)


                                 (215) 493-8900
--------------------------------------------------------------------------------
                    (Registrant's Telephone Number, Including
                                   Area Code)

           Securities registered pursuant to Section 12(b) of the Act:


                                                     Name of each exchange
Title of each class                                  on which registered
-------------------                                  ---------------------


-------------------------                        -------------------------------

-------------------------                        -------------------------------


           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
--------------------------------------------------------------------------------


<PAGE>

     Indicate by check mark  whether the  Registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.


               Yes:     X                     No:
                   ------------                   ------------


     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]


     State the aggregate market value of the voting stock held by non-affiliates
of the  Registrant:  $8,029,425 at August 15, 1997 based on the last sales price
on that date.


     Indicate  the  number of  shares  outstanding  of each of the  Registrant's
classes of common stock, as of August 15, 1997:


Class                                   Number of Shares
-----                                   ----------------

Common Stock, $.01 par value               3,559,600


     The  following  documents  are  incorporated  by reference  into the Annual
Report on Form 10-K: Portions of the Registrant's definitive Proxy Statement for
its 1997 Annual Meeting of Stockholders  are incorporated by reference into Part
III of this Report.


<PAGE>

                                EXPLANATORY NOTE


     Prophet 21, Inc., a Delaware  corporation  (the  "Company"),  hereby amends
Items 5 and 7 of Part II of its Annual Report on Form 10-K, which was filed with
the Securities and Exchange  Commission on September 5, 1997.  Item 5 of Part II
is being amended to change the number of beneficial  holders of the Common Stock
from  1,000 to 632.  Item 7 of Part II is being  amended to change the cash flow
from operations for fiscal 1997 from $5,710,000 to $5,773,000.


Item 5.  Market for the Company's Common Equity and Related Stockholder Matters.

     Prior to March  1994,  there was no  established  market for the  Company's
Common  Stock.  Since March 11, 1994,  the Common Stock has traded on the Nasdaq
National Market ("NNM") under the symbol "PXXI."

     The following table sets forth the high and low sales prices for the Common
Stock for each of the quarters  since the quarter  ended  September  30, 1995 as
reported on NNM. Such quotations  reflect  inter-dealer  prices,  without retail
mark-up, mark-down or commission and may not represent actual transactions.

   Quarter Ended                 High               Low
-------------------           ----------         ----------

September 30, 1995              $  5.25           $  4.375
December 31, 1995               $  5.25           $  4.125
March 31, 1996                  $  5.50           $  4.375
June 30, 1996                   $  6.50           $  4.125
September 30, 1996              $  6.25           $  4.75
December 31, 1996               $  6.50           $  5.00
March 31, 1997                  $  6.50           $  5.625
June 30, 1997                   $  6.00           $  4.50

     As of August 15, 1997, the  approximate  number of holders of record of the
Common Stock was 180 and the  approximate  number of  beneficial  holders of the
Common Stock was 632.

     The Company has never declared or paid  dividends on its Common Stock.  The
Company currently intends to retain any future earnings to finance the growth of
the business and,  therefore,  does not anticipate  paying any cash dividends in
the foreseeable future.


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.


General

     The Company was founded in 1967 to provide custom programming services and,
in 1974,  it began to design,  develop,  market and support  automated  business
management  systems for  distributors,  wholesalers  and dealers.  The Company's
revenue is derived primarily from the


<PAGE>

sale of Prophet 21 Systems,  maintenance  contracts  which  provide for software
support and equipment  maintenance,  and the sale of optional software products.
Each  Prophet  21 system  includes  the  Prophet  21  Software,  an IBM  RS/6000
computer,   various  optional   third-party   software   products  and  hardware
components,  training,  support and installation.  The Company's cost of revenue
consists  principally  of the costs of hardware  components,  customer  support,
installation and training and, to a lesser extent, third-party software.

     The Company implemented a strategic decision early in 1992 to move from its
internally  developed  proprietary  hardware system to an open system  platform,
based on the UNIX/AIX  operating system running on an IBM RS/6000 computer.  The
Company's  adoption  of an open  system  solution  broadened  the market for the
Prophet  21  systems,  facilitated  greater  customer  acceptance,  and  allowed
successful integration of industry standard third-party software and hardware.

     In fiscal 1996, the Company introduced its next generation product, Prophet
21  Acclaim,   a  complete   business   management   system  that  combines  the
functionality  of the  traditional  Prophet  21 system  with the  technology  of
Progress Software  Corporation's  DBMS. Prophet 21 Acclaim is targeted for sales
to new and current customers. It has been designed so that current customers can
move  to  this  new  product  while   preserving   their   existing   technology
infrastructure.  The  general  release of  Prophet 21 Acclaim  began late in the
second quarter of fiscal 1997.

     The statements  contained in this Annual Report on Form 10-K/A that are not
historical facts are forward-looking  statements (as such term is defined in the
Private  Securities  Litigation  Reform  Act of 1995)  that  involve  risks  and
uncertainties. Such forward-looking statements may be identified by, among other
things,  the use of forward-looking  terminology such as "believes,"  "expects,"
"may,"  "will,"  "should"  or  "anticipates"  or the  negative  thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve  risks  and  uncertainties.  From  time  to  time,  the  Company  or its
representatives have made or may make forward-looking  statements,  orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Securities and Exchange Commission, or press releases or
oral statements made by or with the approval of an authorized  executive officer
of the Company. These forward-looking  statements,  such as statements regarding
anticipated  future  revenues,   capital  expenditures,   and  other  statements
regarding  matters  that are not  historical  facts,  involve  predictions.  The
Company's actual results,  performance or achievements  could differ  materially
from the results expressed in, or implied by, these forward-looking  statements.
Potential  risks and  uncertainties  that  could  affect  the  Company's  future
operating  results  include,  but are not limited to: (i)  economic  conditions,
including  economic  conditions  related  to the  computer  industry;  (ii)  the
availability  of  components  and parts  from the  Company's  vendors at current
prices  and  levels;  (iii)  the  intense  competition  in the  markets  for the
Company's  products  and  services;  (iv) the  Company's  ability to protect its
intellectual property; (v) potential infringement claims against the Company for
its software development products; (vi) the Company's ability to obtain customer
maintenance  contracts at current  levels;  and (vii) the  Company's  ability to
develop, market, provide, and achieve market acceptance of new service offerings
to new and existing clients.


<PAGE>
Results of Operations

     The following table sets forth for the periods  indicated certain financial
data as a percentage of revenue and the  percentage  change in the dollar amount
of such data compared to the prior comparable period:

<TABLE>
<CAPTION>

                                     Percentage of Revenue      Percentage Increase (Decrease)
                                    -----------------------    ------------------------------

                                                                  Fiscal           Fiscal
                                      Fiscal Year Ended           1996 over        1997 over
                                          June 30,                Fiscal           Fiscal
                                    -----------------------    -------------      -----------
                                    1995     1996      1997        1995              1996

Revenue:
<S>                                 <C>       <C>      <C>          <C>              <C> 
  System sales ...............      68.2%     63.3%    61.9%        (1.8)%           7.8%
  Service and support ........      31.8      36.7     38.1         22.1            14.2
                                   -----     -----    -----
                                   100.0     100.0    100.0          5.8            10.1
                                   -----     -----    -----

Cost of revenue:
  System sales ...............      40.4      35.3     34.7         (7.4)            8.3
  Service and support ........      18.3      20.0     19.6         15.7             7.9
                                   -----     -----    -----
                                    58.7      55.3     54.3         (0.2)            8.1
                                   -----     -----    -----
      Gross profit ...........      41.3      44.7     45.7         14.3            12.6
                                   -----     -----    -----

Operating expenses:
  Sales and marketing ........      26.1      25.3     22.8          2.5            (0.5)
  General and administrative .       7.2       6.9      6.7          2.0             6.0
  Research and development ...       9.3       6.8      7.4        (22.7)           19.8
  Severance expense ..........       1.2       --       --        (100.0)            --
                                   -----     -----    -----
      Total operating expenses      43.8      39.0     36.9         (5.8)            4.2
                                   -----     -----    -----
      Operating (loss) income       (2.5)      5.7      8.8        341.5            70.9
Interest income ..............       1.2       1.2      1.0          9.1            (7.8)
      (Loss) income before
       income taxes ..........      (1.3)      6.9      9.8        670.9            56.8
(Benefit) provision for income
 taxes .......................      (0.5)      2.8      3.5        639.2            38.3
                                   -----     -----    -----
      Net (loss) income ......      (0.8)%     4.1%     6.3%       694.7            69.4
                                   =====     =====    =====
</TABLE>


<PAGE>

   Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30, 1996

     Revenue.  Revenue  increased by 10.1%, or $3,353,000,  from  $33,050,000 in
fiscal 1996 to  $36,403,000  in fiscal 1997.  System sales revenue  increased by
7.8%, or  $1,632,000,  from  $20,905,000 in fiscal 1996 to $22,537,000 in fiscal
1997.  This  increase was  attributable  primarily to sales of the Company's new
Prophet  21 Acclaim  product  which  began late in the second  quarter of fiscal
1997.  Such increase was offset,  in part, by a decrease in programming  revenue
and by lower sales  volume of Prophet 21 XL Software  upgrades as many  existing
customers,  during the first quarter of fiscal 1997, were evaluating  whether to
upgrade to XL9, the latest version of the Company's XL Software, or purchase the
new Prophet 21 Acclaim product.  Service and support revenue increased by 14.2%,
or  $1,721,000,  from  $12,145,000 in fiscal 1996 to $13,866,000 in fiscal 1997.
This  increase  was  attributable  primarily to an increase in the number of new
users who have entered into maintenance  contracts and, to a lesser extent, to a
price increase  implemented by the Company on such maintenance  contracts during
the second  quarter of fiscal 1997 and to an increase in services  performed  by
the Company in connection with the general release of the new Prophet 21 Acclaim
product.

     Gross profit. The Company's gross profit increased by 12.6%, or $1,865,000,
from  $14,754,000  in fiscal 1996 to  $16,619,000  in fiscal 1997.  Gross profit
margin  increased  from 44.7% of  revenue in fiscal  1996 to 45.7% of revenue in
fiscal 1997. Gross profit from system sales increased by 7.2%, or $664,000, from
$9,233,000  in fiscal 1996 to  $9,897,000  in fiscal 1997.  Gross profit  margin
attributable  to system sales  decreased  from 44.2% of system sales  revenue in
fiscal 1996 to 43.9% in fiscal  1997.  The  increase in gross profit from system
sales was  attributable  primarily  to sales of the  Company's  new  Prophet  21
Acclaim  product  which  began late in the second  quarter of fiscal  1997.  The
decrease in gross profit margin from system sales was attributable  primarily to
decreased  sales  volume of  optional  Prophet 21  software  which,  in general,
carries higher margins.  Gross profit from service and support revenue increased
by 21.8%, or $1,201,000,  from $5,521,000 in fiscal 1996 to $6,722,000 in fiscal
1997. Gross profit margin  attributable to service and support revenue increased
from  45.5% of service  and  support  revenue in fiscal  1996 to 48.5% in fiscal
1997.  The  increases  in  such  gross  profit  and  gross  profit  margin  were
attributable  primarily  to an  increase  in the  number  of new  users who have
entered into maintenance  contracts and, to a lesser extent, to a price increase
implemented  by the  Company  on such  maintenance  contracts  during the second
quarter of fiscal 1997 and to an increase in services  performed  by the Company
in connection with the general release of the new Prophet 21 Acclaim product.

     Sales and  marketing  expenses.  Sales  and  marketing  expenses  decreased
slightly by 0.5%,  or $40,000,  from  $8,346,000 in fiscal 1996 to $8,306,000 in
fiscal  1997,  and  decreased  as a  percentage  of revenue from 25.3% to 22.8%,
respectively.  Sales and marketing expenses decreased in absolute dollars and as
a percentage of revenue due primarily to the fact that the User's Conference was
scheduled  only once in fiscal 1997 and, to a lesser extent,  reduced  marketing
costs related to a decrease in staffing. Such decreases were offset, in part, by
increased  salesperson  compensation and to increased marketing costs associated
with the new Prophet 21 Acclaim product.

     General and administrative  expenses.  General and administrative  expenses
increased by 6.0%, or $138,000,  from $2,296,000 in fiscal 1996 to $2,434,000 in
fiscal  1997,  but  decreased  as a  percentage  of  revenue  from 6.9% to 6.7%,
respectively. The increase in absolute dollars in


<PAGE>

general and  administrative  expenses  was due to an  increase  in  compensation
expenses.  General and  administrative  expenses  decreased as a  percentage  of
revenue as a result of increased sales volume.

     Research  and  development  expenses.  Research  and  development  expenses
increased by 19.8%, or $445,000, from $2,248,000 in fiscal 1996 to $2,693,000 in
fiscal  1997,  and  increased  as a  percentage  of  revenue  from 6.8% to 7.4%,
respectively.  Such  increases  were due  primarily  to an  increase  in  salary
expenses and  staffing.  The Company  also  capitalized  $1,813,000  in software
development expenditures during fiscal 1997.

     Income  taxes.  The  Company's  effective  tax rate was  40.6% and 35.8% in
fiscal 1996 and 1997, respectively.


   Fiscal Year Ended June 30, 1996 Compared to Fiscal Year Ended June 30, 1995

     Revenue.  Revenue  increased by 5.8%, or  $1,807,000,  from  $31,243,000 in
fiscal 1995 to  $33,050,000  in fiscal 1996.  System sales revenue  decreased by
1.8%,  from  $21,295,000  in fiscal 1995 to  $20,905,000  in fiscal  1996.  This
decrease was  attributable  primarily to the  Company's  focus on larger  system
sales which  resulted in increased  average price of systems sold but a decrease
in the number of units sold. In addition,  the Company continued to experience a
longer sales cycle during  fiscal 1996 as a result of its focus on larger system
sales. The decrease in system sales was offset, in part, by an increase in sales
of optional software products.  Service and support revenue increased 22.1% from
$9,948,000  in fiscal 1995 to  $12,145,000  in fiscal  1996.  This  increase was
attributable  primarily  to an increase in the number of users who entered  into
maintenance  contracts and, to a lesser  extent,  to the  implementation  by the
Company of a new maintenance  program which offers multiple levels of service at
different prices.

     Gross Profit. The Company's gross profit increased by 14.3%, or $1,844,000,
from  $12,910,000  in fiscal 1995 to  $14,754,000  in fiscal 1996.  Gross profit
margin  increased  from 41.3% of  revenue in fiscal  1995 to 44.7% of revenue in
fiscal 1996. Gross profit from system sales increased by 6.3%, or $548,000, from
$8,685,000  in fiscal 1995 to  $9,233,000  in fiscal 1996.  Gross profit  margin
attributable  to system sales  increased  from 40.8% of systems sales revenue in
fiscal 1995 to 44.2% in fiscal  1996.  The  increases  in such gross  profit and
gross profit  margin were  attributable  primarily to increased  sales volume of
optional Prophet 21 software which, in general,  carries higher margins and to a
lesser extent, to the Company's sales focus on larger system sales. Gross profit
from  service  and support  revenue  increased  by 30.7%,  or  $1,296,000,  from
$4,225,000  in fiscal 1995 to  $5,521,000  in fiscal 1996.  Gross profit  margin
attributable to service and support revenue  increased from 42.5% of service and
support  revenue in fiscal 1995 to 45.5% in fiscal 1996.  The  increases in such
gross profit and gross profit margin were attributable  primarily to an increase
in the number of new users who have entered into the maintenance program and, to
a lesser extent, the implementation by the Company of a new maintenance  program
which offers multiple levels of service at different prices, offset in part by a
severance payment of $190,000.

     Sales and marketing  expenses.  Sales and marketing  expenses  increased by
2.5%, or $200,000,  from $8,146,000 in fiscal 1995 to $8,346,000 in fiscal 1996,
but decreased as a percentage of revenue from 26.1% to 25.3% respectively. Sales
and  marketing  expenses  


<PAGE>

increased due to the Company's  increased  marketing  efforts in direct mail and
software   catalogue  sales  and  to  a  lesser  extent,   higher   salespersons
compensation associated with higher sales.

     General and administrative  expenses.  General and administrative  expenses
increased by 2.0%, or $45,000,  from  $2,251,000 in fiscal 1995 to $2,296,000 in
fiscal  1996,  but  decreased  as a  percentage  of  revenue  from 7.2% to 6.9%,
respectively.  The  increase in general and  administrative  expenses was due to
increases in compensation expense.

     Research  and  development  expenses.  Research  and  development  expenses
decreased by 22.7%, or $659,000, from $2,907,000 in fiscal 1995 to $2,248,000 in
fiscal  1996,  and  decreased  as a  percentage  of  revenue  from 9.3% to 6.8%,
respectively.  The  decrease  in  research  and  development  expenses  was  due
primarily to a reduction in related  salary  expenses and staffing  requirements
resulting from the Company's  creation of new, more efficient  programming tools
for use by the Company's  programmers and the capitalization of certain software
development costs.

     Income  taxes.  The  Company's  effective  tax rate was  43.0% and 40.6% in
fiscal 1995 and fiscal 1996, respectively.


Liquidity and Capital Resources

     Since its inception,  the Company has funded its operations  primarily from
cash generated by operations and available  cash,  including funds raised in the
Company's  initial public  offering  completed in March 1994. The Company's cash
flow from  operations was  $1,184,000,  $1,263,000 and $5,773,000 for the fiscal
years ended June 30, 1995, 1996 and 1997, respectively.

     The Company's  working  capital was $14,797,000 and $11,720,000 at June 30,
1996 and 1997, respectively.

     The  Company  invested  $876,000,  $1,069,000  and  $1,440,000  in  capital
equipment  and   leasehold   improvements   in  fiscal  1995,   1996  and  1997,
respectively.  There are no other material  commitments for capital expenditures
currently  outstanding.  The Company also  invested  $458,000 and  $1,813,000 in
software  development costs which were capitalized during the fiscal years ended
June 30, 1996 and 1997.

     The Company does not have a significant  concentration  of credit risk with
respect to accounts  receivable due to the large number of customers  comprising
the Company's  customer base and their dispersion  across  different  geographic
regions. The Company performs on-going credit evaluations and generally does not
require collateral.  The Company maintains reserves for potential credit losses,
and, to date, such losses have been within the Company's expectations.

     In fiscal 1997, the Company's  Board of Directors  approved  resolutions to
repurchase  up to 600,000  shares of the  Company's  Common Stock in open market
purchases.  As of June 30, 1997, the Company had repurchased 442,900 shares at a
cost of $2,518,000.

     The Company  believes that available funds and the cash flow expected to be
generated  from  operations  will be adequate to satisfy its current and planned
operations for at least the next 24 months.


<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by the  undersigned,  thereunto  duly  authorized  this 29th day of
September, 1997.


                                           PROPHET 21, INC.



                                           By: /s/Charles L. Boyle, III
                                               ------------------------
                                               Charles L. Boyle, III, President
                                               and Chief Executive Officer


<PAGE>

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

       Signature                       Title                       Date
       ---------                       -----                       ----


/s/Charles L. Boyle, III      President, Chief Executive      September 29, 1997
--------------------------    Officer and Director
Charles L. Boyle, III         (Principal Executive Officer)


/s/Thomas M. Giuliani         Chief Financial Officer         September 29, 1997
--------------------------    and Treasurer
Thomas M. Giuliani            (Principal Financial and
                              Accounting Officer)


/s/John E. Meggitt, Ph. D.    Chairman of the Board           September 29, 1997
--------------------------    and Director
John E. Meggitt, Ph.D.


/s/Dorothy M. Meggitt         Secretary and Director          September 29, 1997
--------------------------
Dorothy M. Meggitt


/s/Louis J. Cissone           Director                        September 29, 1997
--------------------------
Louis J. Cissone


/s/Mark A. Timmerman          Director                        September 29, 1997
--------------------------
Mark A. Timmerman