NCERT Class 11 Accountancy Computerised Accounting System

Computerised Accounting System

In chapter 12, you have learnt about the need for use of computers in accounting the nature anduse of accounting information system. In this chapter, we shall discuss the nature of computrised accounting system, its advantages, limitations and sourcing.

13.1 Concept of Computerised

Accounting System

A computerised accounting system is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Every accounting system, manual or computerised, has two aspects. First, ithas to work under a set of well-defined concepts called accounting principles. Another, that there is a user-defined framework for maintenance of records and generation of reports.

In a computerised accounting system, the framework of storage and processing of data is called operating environment that consists of hardware as well as software in which the accounting system, works. The type of the accounting system used determines the operating environment. Both hardware and software are interdependent. The type of software determines the structure of the hardware. Further, the selection of hardware is dependent upon various factors such as the number of users, level of secrecy and the nature of various activities of functional departments in an organisation.

Take the case of a club, for example, where the number of transactions and their variety is relatively small, a Personal Computer with standardised software may be sufficient. However, for a large business organisation with a number of geographically scattered factories and offices, more powerful computer systems supported by sophisticated networks are required to handle the voluminous data and the complex reporting requirements. In order to handle such requirements, multi-user operating systems such as UNIX, Linux, etc. are used.

Modern computerised accounting systems are based on the concept of  database. A database is implemented using a database management system,which is define by a set of computer programmes (or software) that manage and organise data effectively and provide access to the stored data by the application programmes. The accounting database is well-organised with active interface that uses accounting application programs and reporting system.

Every computerised accounting system has two basic requirements;

• Accounting Framework : It consists a set of principles, coding and grouping structure of accounting.

• Operating Procedure : It is a well-defined operating procedure blended suitably with the operating environment of the organisation.

The use of computers in any database oriented application has four basic requirements as mentioned below ; 

• Front-end Interface : It is an interactive link or a dialog between the user  and database-oriented software through which the user communicates tothe back-end database. For example, a transaction relating to purchase of goods may be dealt with the accounting system through a purchasevoucher, which appears on the computer’s monitor of data entry operator and when entered into the system is stored in the database. The same data may be queried through reporting system say purchase analysis software programme.

• Back-end Database : It is the data storage system that is hidden from the user and responds to the requirement of the user to the extent the user is authorised to access.

• Data Processing : It is a sequence of actions that are taken to transform the data into decision useful information. 

• Reporting System: It is an integrated set of objects that constitute the report. The computerised accounting is also one of the database-oriented applications wherein the transaction data is stored in well-organised database.The user operates on such database using the required and desired interface and also takes the desired reports by suitable transformations of stored data into information.

Summary with Reference to Learning Objectives

1 Computerised Accounting System : A computerised accounting system is an accounting information system that processes the financial transactions and events to produce reports as per user requirements. It is based on the concept of database and has two basic requirements:

(a) Accounting framework and

(b) Operating Procedure.

2 Advantages of Computerised Accounting System :

   • Speed

   • Accuracy

   • Reliability

   • Up-to-date

   • Scalability

   • Legibility

   • Efficiency

   • Quality Report

   • MIS Reports

   • Real time user interface

   • Storage and Retrieval

   • Motivation and Employees interest

   • Automated document production

3 Limitations of Computerised Accounting System :

   • Cost of training  

   • Staff Opposition

   • Disruption

   • System failure

   • Breaches of security

   • Ill-effects on health

   • Inability to check

4 Categories of Accounting Packages :

   • Ready-to-Use

   • Customised

   • Tailored

Questions for Practice

Short Answers

1. State the four basic requirements of a database applications.

2. Name the various categories of accounting package.

3. Give examples of two types of operating systems.

4. List the various advantages of computerised accounting systems.

5. Give two examples each of the organisations where ‘ready-to-use’, ‘customised’, and ‘tailored’ accounting packages respectively suitable to perform the accounting activity.

6. Distinguish between a ‘ready-to-use’ and ‘tailored’ accounting software.

Long Answers

1. Define a computerised accounting system. Distinguish between a manual and computerised accounting system.

2. Discuss the advantages of computerised accounting system over the manual accounting system.

3. Describe the various types of accounting software along with their advantages and limitations.

4. ‘Accounting software is an integral part of the computerised accounting system’

Explain. Briefly list the generic considerations before sourcing an accounting software.

Please refer to attached file for NCERT Class 11 Accountancy - Computerised Accounting System