Now a day’s computer is everywhere and it playing important role in our daily
life. Over the past two decades the way accounting data is entered, stored and
processed has changed considerably. This is due to the introduction of
computerized accounting software. Due to use of Computerized accounting system
it is no longer necessary for large business unit to have large store room full
of ledgers and records. Since all information can be stored in computer hard
discs. Computerized Accounting System software gives many advantages over
manual systems for example. Ledger entries are not recorded in multiple ledgers
separately. A single entry is made and the software will update all the
appropriate accounts automatically.
Concept of computerized account
system:
A computerized accounting system is an accounting information system that
processes the financial transaction and events as per Generally Accepted
Accounting Principles to produce report as per user's requirements.
Every account system, manual or
computerized, has two aspects are as follows:
A) It has to work under a set
of Well-defined concepts called accounting principles.
B) There is a user-defined Framework
for maintenance of record and generation of records.
Definition:
It can be defined as "A computerized account system is a system used by
businesses for recording their financial information."
Accounting is a financial method used by Business to collect, organize, process
and summarize data for reports and statements. Accounting is used to keep track
of business Trends and to keep report a relevant fact within the business.
Computer and business software allow more efficient processing and organization
of data.
Elements of computerized account
system:
Following are the elements of
Computerized Accounting System:
1. Preparation of Accounting
Documents:
Computer helps in preparing accounting documents like Cash Memo, Bills and
invoices etc., and preparing accounting vouchers.
2) Recording of transactions:
Everyday business transaction is
recorded with the help of computer software. Logical scheme is implied for
codification of account and transaction. Every account and transaction is
assigned a unique code. The grouping of accounts is done for from the first
stage. This process simplifies the work of recording transactions.
3) Preparation of trial balance and
financial statements:
After recording of transaction, the data is transferred to ledger account automatically by the computer. Vouchers are prepared by the help of accounting vouchers, the computer can be programmed to prepare trading, profit and loss account and balance sheet. For example. Contra, payment, receipt etc.
After recording of transaction, the data is transferred to ledger account automatically by the computer. Vouchers are prepared by the help of accounting vouchers, the computer can be programmed to prepare trading, profit and loss account and balance sheet. For example. Contra, payment, receipt etc.
Features of Computerized accounting
system:
1) Accuracy, Speed:
Computerized Accounting System has user-definable templates. Which provides,
fast and accurate data entry of the transactions. All documents and
reports can be generated automatically, at the press of button.
2) Simple, fast and powerful and
integrated data:
Computerized account system is this is designed to automate and integrate all
the business operations, such as Purchase, Sales, finance, inventory and
manufacturing. With computerized accounting, accurate, up-to-date business
information is literally at the fingertips.
3) Enhanced User
experience:
Computerized account system allows the company to enter data in various ways in
which makes work a pleasure by adapting to the specific business/organization.
4) Complete visibility:
Computerized Accounting System gives the company sufficient time to
plan, increase the customer base, and enhance customer satisfaction.
With computerized accounting system the company will have greater transparency
to the day-to-day business operations and access to vital information.
5) Grouping of accounts:
Groups are collection of ledgers of the same nature. Account groups are
maintained to determine the hierarchy of ledger accounts which is helpful in
determining and presenting meaningful and compliant reports.
Limitations of Computerized
Accounting System:
1) Human errors:
Human errors can occur at all levels within a
system, from programming to user errors. A system could be set up incorrectly,
with an account reporting in the wrong report. A user could also enter enormous
numbers or employ wrong accounts. Because of human errors, a new system
implementation should undergo a rigorous testing before it goes live. And
comprehensive training should be provided to users to minimize errors.
2) Security:
System Security concern can pose limitations on accounting software. Besides
worrying about viruses and worms, small-business owner also should be concerned
with unauthorized access of Computerized Accounting data. User ID and
Passwords are common minimum security measures business can use to protect the
accounting software against intrusion, but they may not be enough. Hacking is
very common with small business however, only one in five small firms antivirus
software and over half don’t use wireless connections.
3) Cost:
According to system costs have decreased substantially, but they still can be
costly, not only to purchase, but to maintain them as well. Extra costs
for training new employees in the system should be considered along with
ongoing customer service. Charges for customizing reports and other processes
can pose limitations on small and medium-sized business that cannot afford
these services. Other program costs to be considered include new version
upgrades and even hardware that may be required as Technology progresses. If business
can't afford these costs they will be left behind.
4) Other considerations:
When dealing with accounting programs, you should consider
Electrical power as a major limitation of the system. Without electricity, most
small-business accounting systems are useless.... because no data can be
inserted or reports generated. Any electrical fluctuations can have a negative
impact on accounting data, deleting information and creating confusion.
Another consideration that limits the usage of accounting system is a network
where the program may reside...if the computer network is not properly set up
the software cannot be accessed and cannot be utilized.
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