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Chapter: 11th Accountancy : Computerised Accounting

Computerised Accounting System (CAS)

Computerised accounting system refers to the system of maintaining accounts using computers.

Computerised Accounting System (CAS)

Computerised accounting system refers to the system of maintaining accounts using computers. It involves the processing of accounting transactions through the use of hardware and software in order to keep and produce accounting records and reports. Computerised accounting system takes accounting transactions as inputs that are processed through accounting software to generate the following reports:

·           Day books /Journals


·           Ledger


·           Trial balance


·           Trading account


·           Profit and loss account


·           Balance sheet, etc.


In accounting, computer is commonly used in the following areas:

a.        Recording of business transactions


b.        Payroll accounting


c.         Stores accounting and


d.        Generation of accounting reports

It is to be noted that the fundamentals of accounting do not change whether books of accounts are maintained manually or computerised. The same principles of debit and credit are equally applicable in a computerised environment.

1. Features of computerised accounting system

Computerised Accounting System (CAS) facilitates the management and other users to maintain accounts and prepare financial statements using computers. The reports generated through CAS are used to analyse financial status of a business and take necessary decisions to strengthen the financial soundness of the business. The CAS possesses the following features:

i)  Simple and integrated

CAS is designed to automate and integrate all the business operations such as purchase, sales, finance, inventory and manufacturing. The CAS may be integrated with enhanced Management Information System (MIS), multi-lingual and data organisation capabilities to simplify all the business processes of the organisation easily and cost-effectively.

ii)  Speed

It can perform functions at much higher speed than doing the same manually.

iii)  Accuracy

Computers perform functions with high degree of accuracy. If hardware, software and input by people are proper, the computerised accounting system can assure of accurate outcome.

iv)  Reliability

Computers are used to process large volumes of data and hence, data provided by it are reliable.

v)  Versatility

Computer and accounting software have the ability to perform diverse tasks. For example, by simply recording accounting entries through accounting software, one can get trial balance, trading account, profit and loss account, balance sheet and diverse reports.

vi)  Transparency

With computerised accounting, the organisation will have greater transparency of day-to-day business operations and access to the vital information.

vii)  Scalability

CAS enables processing of any volume of data in tune with the change in the size of the business.

viii)  On-line facility

CAS offers online facility to store and process transaction and data so as to retrieve information to generate and view financial reports in any part of the world.

ix)  Security

In CAS, only the authorised users are permitted to have access to accounting data. Under manual accounting system, it is very difficult to secure such information as it is open to inspection by any person dealing with the books of accounts.


2. Components of Computerised Accounting System

Components of CAS can be classified into six categories, namely, i) Hardware ii) Software iii) People iv) Procedure v) Data and vi) Connectivity.

i)  Hardware

The physical components of a computer constitute its hardware. Hardware consists of input devices and output devices that make a complete computer system. Examples of input devices are keyboard, optical scanner, mouse, joystick, touch screen and slylus which are used to feed data into the computer. Output devices such as monitor and printer are media to get the output from the computer.

ii)  Software

A set of programs that form an interface between the hardware and the user of a computer system are referred to as software. The following are the various types of software:

a. System software: A set of programs to control the internal operations such as reading data from input devices, giving results to output devices and ensuring proper functioning of components is called system software. The system software includes the following:

·           Operating system: A set of tools and programs to manage the overall working of a computer using a defined set of hardware components is called an operating system. It is the interface between the user and the computer system. Example: DOS, Windows, UBUNTU, imac, etc.

·           Programming software: Special software to accept data and interpret them in the form of machine/assembly language understandable by a computer. Example: C, PASCAL, COBOL, etc.

·           Utility software: These are designed specifically for managing the computer device and its resources. Example: File manager, Anti-virus software, etc.

b. Application software: Programs designed to perform a specific function for a user. An application software can be classified as follows:

·           General purpose software: This type of application can be used for a variety of tasks and not limited to one particular function. Example: MS-Office.

·           Specific purpose software: This software is created to execute one specific task and they are customised to the needs of user. Example: Accounting software, payroll software, etc.

iii)  People

The most important element of a computer system is its users. They are also called live-ware of the computer system. The following types of people interact with a computer system.

·           System analysts: People who design the operation and processing of the system.

·           System programmers: People who write codes and programs to implement the working of the system.

·           System operators: People who operate the system and use it for different purposes. They are also called as end users.

iv)   Procedure

Procedure is a step by step series of instructions to perform a specific function and achieve desired output. In a computer system there are three types of procedures.

·           Hardware oriented procedure: It defines the working of a hardware component.

·           Software oriented procedure: It is a set of detailed instructions for using the software.

·           Internal procedure: It maintains the overall working of each part of a computer system by directing the flow of information.

v)  Data

The facts and figures that are fed into a computer for further processing are called data. Data are raw input until the computer system interprets them using machine language, stores them in memory, classifies them for processing and produces results in conformance with the instructions given to it. Processed and useful data are called information which is used for decision making.

vi) Connectivity

When two or more computers are connected to each other, they can share information and resources such as sharing of files (data/music, etc), sharing of printer, sharing of facilities like the internet. This sharing is possible using wires, cables, satellite, infra-red, bluetooth, microwave transmission, etc.

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