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Computerised Accounting System

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  • Last Updated : 18 Aug, 2022
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A computerised accounting system is an accounting information system that records and analyses financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. An accounting system either manual or computerised has two aspects. It should work under well-defined accounting principles and there should be a user-defined framework for the maintenance of records and preparation of reports. In a computerised accounting system, the structure of storage and processing of data is called an operating environment which includes hardware as well as software in which the accounting system works. 

A computer system is made up of different elements, which include Hardware, Software, People, Procedure, Data, and Connectivity. 

Elements of a Computer System:

A computer system is composed of six major components. They all work together to complete the task at hand. Let’s examine each one of them.

1. Hardware:  

A computer’s hardware is made up of its physical parts. A computer system is made up of input devices and output devices, which together make up the hardware. The keyboard, optical scanner, mouse, joystick, touch screen, and stylus are a few examples of input devices that are used to enter data into computers. The computer’s output can be received on media like a display and printer. 

2. Software: 

A collection of programmes that serve as an interface for a computer system’s user and hardware are referred to as software. System software is a group of programmes that regulate internal processes, including reading data from input devices, sending results to output devices, and ensuring that components are working properly. The following is a list of the system software:

A. System Software: System Software is that software that is used to control the hardware, reading of the data and other internal functions. It is further divided into two parts:

(i) Operating System: An operating system is a collection of applications and tools used to control how a computer as a whole function utilising a certain set of physical components. It serves as the user’s interface to the computer system. Example: Mac, UBUNTU, Windows, DOS, etc.

(ii) Programming Software: It is specialised software that accepts data and interprets it into machine/assembly language that a computer can understand. C, PASCAL, COBOL, and others are some examples.

B. Application software: Application software is a programme created to carry out a specific task or a bunch of tasks for a user. It  is further divided into two parts:

(i) Utility Software: These are programmes created especially for controlling a computer system’s resources. Examples includes a file manager and antivirus software.

(ii) Connectivity Software: Computer systems and Servers are connected with the help of a special type of software called connectivity software. This information is shared and communicated between different systems.

3. People: 

Users are the most crucial for a computer system. They are also known as computer system live-ware. The people listed below interact with computer systems.

A. System Analysts: System analysts are those who plan how a system will function and process.

B. System Programmers: System programmers are those who create the codes and programmes that make a system function.

C. End Users: The operators of the system who manage and use it for various tasks are referred to as end users.

4. Procedure: 

A procedure is a step-by-step set of instructions which carries out a certain task and produces the intended results. There are three different sorts of procedures in a computer system.

A. Hardware-oriented Procedure: It describes how a hardware component operates.

B. Software-oriented Procedure: This is a guide that provides specific instructions on how to use a particular software.

C. Internal Procedure: It controls the information flow to ensure that every component of a computer system continues to function as a whole.

5. Data: 

Data are the raw facts and figures that are entered into a computer for further processing. Data are raw input until they are interpreted by the computer system using machine language, stored in memory, categorised for processing, and then produced as information in accordance with the instructions supplied to it. Information can then be used to make decisions.

6. Connectivity: 

When computers are connected to a network, they are able to exchange information and resources, including files (data/music, etc.). Wires, cables, satellites, infrared, Bluetooth, WiFi, etc., can all be used for this sharing. The Internet is one of the most prominent examples of this.

Benefits of Computerised Accounting System:

1. Speed: The computer system operates at a remarkable speed. As a result, carrying out various challenging operations takes less time. Accounting data is processed by electronic systems more quickly than by manual means.

2. Accuracy: In the computerised accounting system, primary accounting data is only entered once for the preparation of various accounting reports, as well as for later uses and processes. The potential of errors is decreased or eliminated in computerised accounting systems, which makes it very accurate. 

3. Reliability: The computerised accounting system is comparatively more reliable than the manual system because it is capable of executing repetitive tasks. 

4. Up-to-Date Information: In a computerised accounting system, the existing accounting records are immediately updated as soon as new accounting data is available. For instance, the cash balance and the machinery balance on the Assets side of the Balance Sheet are updated instantly, as soon as a transaction involving the purchase of machinery is entered into the computerised accounting systems. This makes sure that at any given time, the accounting reports represent the most recent information.

5. Efficiency: The computerised accounting system is used to save time and resources. This improves the efficiency of the management in decision-making and is useful in providing information and reports.

Disadvantages of Computerised Accounting System:

1. Huge Cost:  Incurring huge costs in training the specialised personnel to make them understand the use of accounting software is one of the major disadvantages of the computerised accounting system. There are significant costs associated with setting up a computerised accounting system and periodically updating different hardware and software.

2. Requires Proper Control: A computerised accounting system stores a significant amount of critical data. As a result, proper control must be maintained to prevent data loss.

3. Resistance: Introduction of a computerised accounting system may lead to protest or resistance from its current employees. It might be because of their lack of confidence or worry that the implementation of such a system might decrease their importance in the organisation.

4. Interruption: Converting from a manual accounting system to a computerised accounting system takes a lot of time. The workforce may need more time to become used to the new working environment, which could result in low productivity.

5. Breach of Security: In a computerised accounting system, all the accounting data is stored on a computer system. Any data can be altered easily or fraud and embezzlement can be done easily in a computerised accounting system. Hacking passwords or user rights may change the accounting records.

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