A computerised accounting system is an information system that processes the financial transactions as per IAS to produce reports required by users. Computerised accounting systems are software programs that are stored on a company's computer, network server, or remotely accessed via the Internet. Some of the possible uses of computer in the accounting field are:
- maintain books of original entry
- maintain ledger accounts
- prepare financial statements
- maintain records of inventory
- maintain non-current assets’ registers
- draft and issue purchase order
- draft and issue sales invoices
- prepare statement of accounts for individual customers
- prepare budgets & forecasts including cash budgets
- calculate accounting ratios
- instant production of different reports
In a computerised accounting system, the framework of storage and processing of data is called operating environment that consists of hardware and software.
Computer hardware refers to the machines used to run the whole computer system. It comprises of Computer processing unit, processor, monitor, keyboard, printers, scanners, external disks, networking cables etc.
Software represents the set of instructions given to computers to carry out their tasks. This not only comprises of the package of instruction used to run the operating system but may also include some other software packages as MS Office and Quickbook accounting software.
Advantages of computerised accounting
- Accounting data is processed faster by using a computerised accounting system since it requires less time in performing a task.
- Accounting data is entered once for all the subsequent usage and processes in preparing the accounting reports making it more accurate.
- The computer system is well-adapted to performing repetitive operations. They are immune to tiredness, boredom or fatigue
- The accounting records, in a computerised accounting system are updated automatically as and when accounting data is entered and stored.
- The use of computers makes the generation of different documents like invoices, cheques, purchase orders, debit or credit notes, statement of accounts etc very easy.
- Accounts and reports are constantly updated and instantly available as and when required by different users at different places at the same time.
- Accounting data is stored on the hard drive of a computer is password protected and therefore offers more safety and security.
- Accounting software can easily be tailored to automatically calculate VAT returns.
Disadvantages of computerised accounting
- The sophisticated computerised accounting packages generally require specialised staff personnel resulting in huge training costs.
- The possibility of system crash may result in loss of work
- Computer related crimes are difficult to detect as any alteration of data may go unnoticed.
- The extensive use of computers systems may lead to development of various health problems
- If the data originally entered was incorrect then the output would also be inaccurate. This concept is called GIGO (Garbage In Garbage Out).
- Accounting software with necessary licenses is expensive.
Users of computerised accounting
Accountants
- Easy and simplified recording and posting
- Quick retrieval of transactions and information
- Easy and quick generation of accounting reports
- Overall improved operational efficiency
- More useful for budgeting purposes
Auditors
- Quick retrieval of transactions and information
- Availability of different reports in timely and effective manner
- Reduces time needed to complete the audit process
Owners
- Availability of more accurate and reliable information
- Low staff requirements
- Better and improved business image
- More useful for budgeting purposes
Customers
- Speedy processing of information
- Updated and accurate records of customers
- Computerised inventory records help the customers to quickly determine the availability of his required items.
The transition from manual to computerised accounting system involves a process with few simple steps given as follows:
- Determine purpose of computerised accounting
- Purchase of equipment
- High speed internet connection
- Selection of accounting software (Trial version then full version)
- Installation of software
- Data entry into computer system
- Backup of information
