Andhra Pradesh BIEAP AP Inter 2nd Year Accountancy Study Material 9th Lesson Computerised Accounting System Textbook Questions and Answers.
AP Inter 2nd Year Accountancy Study Material 9th Lesson Computerised Accounting System
Define a computerised accounting system. Distinguish between a manual and computerised accounting system.
Computerised accounting is a system of accounting in which one can use computers and different accounting software for a digital record of each transaction. The aim of both manual and computerised accounting is to record, classify and summarise accounting transactions. But the following are the differences between manual accounting and computerised accounting.
Differences between manual and computerised accounting systems
|Basis||Manual Accounting||Computerised Accounting|
|1. Definition||Manual accounting system in which we keep a physical register of journals and a ledger for keeping the records of each transaction.||In this system of accounting, we use computers and different accounting software for a digital record of each transaction.|
|2. Calculation||In manual accounting, all calculations of adding and subtracting are done manually. For example, to find the balance of any ledger account, we will calculate the debit and credit sides, and then we will find the difference for showing the balance.||In computerised accounting, our duty is to record the transactions manually in the database. All the calculations are done by computer System we need not calculate each accounts balance. It is calculated automatically by computerised accounting system.|
|3. Ledger Accounts||In manual accounting, we check the journal and then transfer figures to related accounts’ debit or credit side through manual posting.||Computerised accounting system will automatically process the system and will make all the accounts, and ledgers because we have pass voucher entries under its respected ledger account.|
|4. Trail Balance||In this system of accounting, we have to collect information on the balances of all accounts in our ledger. On this basis, we have to prepare a trial balance.||Our computerising accounting system will produce a trial balance automatically.|
|5. Adjustment Entries Record||Both adjustment journal entries and its posting in the ledger accounts will be done manually one by one.||Only adjustment entries will pass in the computerised accounting system, post in the ledger accounts will be done automatically.|
|6. Financial Statements||We have to make the financial statements manually by carefully transferring trial balance figures in the income statement and balance sheet.||We need not prepare financial statements manually. Financial statements will become automatic. It will also change after each voucher entry in the system. This facility is not available in the manual accounting system.|
Discuss the advantages of computerised accounting system over a manual accounting system.
Computerised accounting offers the following advantages.
1. Speed: Accounting data is processed faster by using a computerised accounting system than it is achieved through manual efforts.
2. Accuracy: The possibility of error is eliminated in a computerised accounting system because the primary accounting data is entered for all the subsequent usage and the process is preparing the accounting reports.
3. Reliability: The computer system is well-adapted to performing repetitive operations. They are immune to tiredness, boredom, or fatigue. As a result, computers are highly reliable compared to human beings.
4. Up-to-date information: The accounting records, in a computerised accounting system, is updated automatically as and when accounting data is entered and stored. Therefore, the latest information pertaining to discounts gets reflected when accounting reports are produced and printed.
5. Real-time user interface: Most automated accounting systems are interlinked through a network of computers. This facilitates the availability of information to various users at the same time on a real-time basis (That is spontaneous).
6. Automated Document Production: Most computerised accounting systems have standardised, user-defined formats of accounting reports that are generated automatically. The accounting reports such as cash books, trail balances, and statements of accounts are obtained just by the click of a mouse in a computerised accounting environment.
7. Scalability: In a computerised accounting system, the requirement of additional manpower is confined to data entry operators for strong additional vouchers. The additional cost of processing additional transactions is almost negligible. As a result, computerised accounting systems are highly scalable.
8. Legibility: The data displayed on the computer monitor is legible. This is because the characters (alphabets, numerals, etc.) are typewritten using standard fonts. This helps in avoiding errors caused by untidy written figures in a manual accounting system.
9. Efficiency: The computer-based accounting systems ensure better use of resources and time. This brings about efficiency in generating decisions, useful information, and reports.
10. Quality reports: The inbuilt checks and untouchable features of data handling facilitate hygienic and true accounting reports that are highly objective and can be relied upon.
11. MIS Reports: The computerised accounting system facilitate the real-time production of management information reports, which will help management to monitor and control the business effectively. Debtors analysis would indicate the possibilities of defaults and also the concentration of debt and its impact on the balance sheet.
12. Storage retrieval: The computerised accounting system allows the users to store data in a manner that does not require a large amount of physical space. This is because the accounting data is stored in hard disks, pen drives, CD/DVD-ROMS, and floppies that occupy a fraction of physical space.
13. Motivation and employees’ interest: The computer system requires specialised training of staff, which makes them feel more valued. This motivates them to develop an interest in the job.
Explain the limitations of the computerised accounting system.
The following are the limitations of the computerised accounting system.
1. Cost of training: The sophisticated computerised accounting packages generally require specialised staff personnel. As a result, a huge training cost is incurred to understand the use of hardware and software on a continuous basis because newer types of hardware and software are acquired to ensure efficient and effective use of computerised accounting systems.
2. Staff opposition: Whenever the accounting system is computerised, there is a significant degree of resistance from the existing staff, partly because of the fear that they shall be made redundant and largely because of the perception that they shall be less important to the organisation.
3. Disruption: The accounting processes suffer a significant loss of work time when an organisation switches over to computerised accounting system. This is due to changes in the working environment that requires accounting staff to adapt to new systems and procedures.
4. System failure: The danger of the system crashing due to hardware failures and the subsequent loss of work is a serious limitation of computerised accounting system. However, providing backup arrangements can initially check unanticipated errors. Since the computers lack capability to judge, they cannot defect the unanticipated errors as human being commit. This is because the software defect and check errors are a set of programmes for known and anticipated errors.
5. Breaches of security: Computer-related crimes are difficult to defect as any alteration of data may go unnoticed. The alteration of records in a manual accounting system is easily detected at first sight. Fraud and embezzlement are usually committed on a computerised accounting system by altering the data or programmes. Hacking passwords or user rights may change accounting records. This is achieved by tapping telecommunications lines, wiretapping, or decoding programmes. Also, the people responsible for tampering with data cannot be located.
6. Ill-effects on health: The extensive use of computers system may lead to the development of various health problems: bad backs, eyestrain, muscular pains, etc. This effects adversely the working efficiency of accounting staff on one hand and increased medical expenditure on such staff on the other software damage and failure may occur due to attacks by viruses. This is of particular relevance to accounting systems that extensively use internet facilities for their online operations. No foolproof solutions are available as of now to tackle the menaces of attacks on software by a virus.
Explain the various categories of accounting packages.
Every computerised accounting system is implemented to perform the accounting activity of recording and storing accounting data and generating reports as per the requirements of the user. From this perspective, the accounting packages are classified into the following categories.
1. Ready-to-use: Ready-to-use accounting software is suited to organisations running small conventional businesses where the frequency or volume of accounting transactions is very low. This is because the cost of installation is generally low and the number of users is limited. Ready-to-use software is relatively easier to learn and people (accountant) adaptability is very high. This also implies that the level of secrecy is relatively low and software is prone to data fraud. The training needs are simple and sometimes the supplier of software offers the training of the software for free. However, this software offers little scope for linking to other information systems.
2. Customised: Accounting software may be customized to meet the special requirement of the user. Standardised accounting software available in the market may not suit or fulfill user requirements. For example, standardised accounting software may contain the sales voucher and inventory status as separate options. However, when the user requires that inventory status be updated immediately upon entry of the sales voucher and report to be printed, the software needs to be customised.
Customised software is suitable for large and medium businesses and can be linked to other information systems. The cost of installation and maintenance is relatively high because of the high cost to be paid to the vendor for customisation. The customisation includes modification and addition to the software contents, provision for the specified number of users and their authentication, etc. Secrecy of data and software can be better maintained in customised software. Since the need to train the software use is important, the training costs are therefore high.
3. Tailored: This accounting software is generally tailored in large business organisations with multi-users and geographically scattered locations. This software requires specialised training for the users. The tailored software is designed to meet the specific requirements of the users and form an important part of the organizational MIS. The secrecy and authenticity checks and robust in such softwares and they offer high flexibility in terms of the number of users.
Very Short Answer Questions
What is computerised accounting?
Computerised accounting is a system of accounting in which one can use computers and different accounting software for a digital record of each transaction.
What is MIS?
The computerised accounting system facilitates the real-time production of management information reports, which will help management to monitor and control. The business effectively. Debtors analysis indicates the possibilities of bad debts and also the concentration of debt and its impact on the balance sheet.
Ready to use accounting software.
Ready-to-use accounting software is suited to organisations running small/conventional businesses when the frequency or volume of accounting transactions is very low. This is because the cost of installation is generally low and the number of users is limited.
Customised accounting software.
Accounting software may be customised to meet the special requirement of the user. For example, standardised accounting software may contain the sales voucher and inventory status as separate options. However, when the user requires that inventory status be updated immediately upon entry of sales voucher and report be printed, the software needs to be customised.
Tailored accounting software.
Accounting software is generally tailored to large business organisations with multi-users and geographically scattered locations. This software requires specialised training for the users. The tailored software is designed to meet the specific requirements of the users and forms an important part of the organisational MIS.