u5 c49 c60 - accounting in computerized environment ver 7.0
TRANSCRIPT
Accounting in Computerized Environment
Accounting in Computerized Environment
UNIT 5UNIT 5
AU-Chennai Syllabus – UNIT 5• Significance of computerized
accounting system
• Codification and grouping of accounts
• Maintaining the hierarchy of ledgers
• Prepackaged accounting software
Significance of Computerized Accounting SystemSignificance of Computerized Accounting System
Business Applications of Computers• Inventory control• Production planning• Budgeting and Variance analysis• Plant capacity utilization• Quality control• Market research• Purchase accounting• Sales accounting• Payroll accounting• Information management, etc.
Features• Processing by one or more
computers
• Operated by the entity or by a third party
• Processing with the help of one or more computer software e.g. Tally
• Software used may be a generic software purchased from the market (package software) or
• May be developed specifically for the business (custom software)
Role / Benefits / Advantages• Speeding up the process
• Automation of ledger posting, Trial balance and subsidiary ledger
• Accuracy
• Reduced error
• Eliminating duplication of work
• Immediate availability of information
• Easy access
Role / Benefits / Advantages… contd.• Flexibility
• Better quality of work, clean and neat
• Scalable
• Lower operating cost
• Improved efficiency
• Relieves employee monotony
• Facilitates standardization
• Minimization of frauds
Limitations / Disadvantages• Security / Integrity / Virus /
Hacking
• May lead to unemployment
• High cost of installation
• Requires special skills for operation
• Frequent repairs
• Frequent power failures
Features of A/cg Software• On-screen input and print outs
• Automatic updating
• Automatic stock adjustments
• Integration of database with the accounting programme
• Automatic calculation of payroll
Manual and Computerized a/cg - Distinction
Function Manual AccountingComputerized
AccountingRecording Through books of original
entryTransactions are stored in well designed database
Classification
By posting them into ledger accounts
Automatically classified and presented in the form of a report
Summarizing
Ledger account balances to be ascertained and summarized to produce trial balance
Trial balance generated automatically
Adjusting Entries
To be made in order to follow the matching principle
No adjusting entries for errors and rectifications are made
Financial Statements
Depends on the availability of trial balance
Independent of the preparation of trial balance
AU-Chennai Syllabus – UNIT 5• Significance of computerized
accounting system
• Codification and grouping of accounts
• Maintaining the hierarchy of ledgers
• Prepackaged accounting software
Codification and Grouping of AccountsCodification and Grouping of Accounts
Coding System• Codification refers to allotting code
numbers to accounts in a hierarchical structure
• Accounts are first systematically grouped into Major Heads such as:– Assets– Liabilities– Revenue Receipts– Capital Receipts– Revenue Expenditure– Capital Expenditure, etc.
• The sub-groups or Minor Heads could be ‘Cash’ or ‘Receivables’ or ‘Payables and so on.
Coding Procedure
Coding System… contd.• The major heads, sub-heads and detailed
heads together constitute a 4-tier structure
• The detailed head is often termed as an object classification for control purposes. Ex:– Salaries– Office Expenses– Salesman Expenses– Workshop Overhead, etc.
• The classification system should be approved by the top management and auditor before coding and computerization
AU-Chennai Syllabus – UNIT 5• Significance of computerized
accounting system
• Codification and grouping of accounts
• Maintaining the hierarchy of ledgers
• Prepackaged accounting software
Maintaining the Hierarchy of LedgersMaintaining the Hierarchy of Ledgers
Maintaining Hierarchy of Ledgers • Accounting master files are created with
codes and description of accounts
• In a hierarchical coded system reports can be generated based on codes
• General ledger, Debtors ledger and Creditors ledger are automatically created by any standard software
• At the time of creation, some of the account heads are indicated to the system as cash, bank, debtors and creditors
• The system then automatically posts sales to debtors a/c and purchases to creditors a/c
AU-Chennai Syllabus – UNIT 5• Significance of computerized
accounting system
• Codification and grouping of accounts
• Maintaining the hierarchy of ledgers
• Prepackaged accounting software
Prepackaged Accounting SoftwarePrepackaged Accounting Software
Prepackaged Software• Prepackaged software are generic
accounting systems purchased from the market rather than developed in-house (ex: Tally accounting s/w)
• These s/w are easy to use, relatively inexpensive and readily available
• The installation of these s/w are very simple
• A network version is generally available which works on client-server architecture
• User manuals guide the user on how to use the s/w
• Vendor provides regular updates
Configuring / Customizing / Installing Prepackaged S/w
• Creation of Company, name, address, contact details, PAN, CST/TNGST, etc
• Defining accounting period• Creation of chart of accounts in master file with
codes• Each a/c to be classified according to type• Opening balances need to be entered• Creating master files for customer, supplier,
product, etc.• Defining system of valuation such as LIFO,
FIFO, Weighted average, etc
List of Master Files• Typically, any standard prepackaged s/w will
have the following master file screens:– Company master file – Accounts master file– Sub ledger master file – Customer master file – Vendor master file – Product master file– Division master file
List of Entry Screens• The entry screens differ in look and feel
between packages. However, the basic entry screens are the following:– Cash Receipts and Payment Entry
– Bank Receipts and Payment Entry
– Petty Cash Voucher Entry
– Journal Entry
– Purchase Order, GRN, Bill, Purchase return Entry
– Sales Order, Challan, Invoice, Sales Return Entry
– Debit Notes and Credit Notes Entry
– Cash Sales & Purchase Memos
– Production , Consumption and Stock Transfer
Entry screens provide add, modify or delete options and also special options like date modification and voucher number modification in some s/w
List of ReportsFollowing reports are common to most s/w:
• Cash Book• Cash Sales Book• Sales Return register• Credit Note Register• Bank Book• Cash Purchase Book• Purchase Return
register• Stock movement
register• Journal Book• Petty Cash Book
• General Ledger• Stock Ledger• Purchase Book• Creditors Ledger• Subsidiary Ledger• Production register• Sales Book• Debit Note Register• Debtors Ledger• Consumption Register
Reports…. Contd.• Document printing options such as trial
balance, POs, challans, declaration forms and invoices printing
• Bank reconciliation reports• MIS reports like aging of debtors, slow moving
and non-moving stock, etc.• House keeping section provides:
– System maintenance features– Taking back-up and system restore– Clean-up, fine tuning and re-indexing of s/w, etc.
Advantages of Prepackaged s/w
• Easy to install• Relatively inexpensive • Easy to use • Backup procedure is simple• Flexibility • Very effective for small and medium size
businesses
Disadvantages of Prepackaged s/w
• Does not cover peculiarities of specific business
• Does not cover all functional areas • Customization may not be possible in most
such software • Reports generated are not sufficient or
serve the purpose• Lack of security • Bugs in the software
Considerations Involved in Selection
• Some of the criteria for selection of prepackaged s/w could be the following: – Fulfillment of business requirements – Completeness of reports – Ease of use – Cost – Reputation of the vendor – Regular updates.
Customized Accounting Software
• Customized accounting software is one where the software is developed on the basis of requirement specifications provided by the user organization
• The need for customized accounting software could be:– Unique nature of the business or– The functionality desired may not available in
pre-packaged software.
Advantages of Customized s/w
• Uncommon functions can also be computerized
• The input screens and input documents can be matched for ease of data entry
• Reports can be designed as desired• Additional MIS reports can be included• Bar-code scanners can be used as input
devices• The system can align with the
organizational structure of the company
Disadvantages of Customized s/w
• Ambiguous specifications resulting in a defective or incomplete system
• Presence of bugs in the software• Incomplete documentation• Inadequate change management procedure
resulting in system compromise• Poor vendor support and lack of access to
source code • Delay in completion of the software
AU-Chennai Syllabus – UNIT 5• Significance of computerized
accounting system
• Codification and grouping of accounts
• Maintaining the hierarchy of ledgers
• Prepackaged accounting software
END OF UNIT 5END OF AFM SYLLABUS
Best Wishes for Success in your Examinations !
R D Vasudevan