Mada za sehemu hiiComputerized AccountingMada 3
- Some basic computer concepts
- The development of computerized accounting
- The design of computerized accounting system
Accounting is as old as money. In the 13th century, Europe moved toward a money economy, thus traders relied on bookkeeping to oversee the multiple simultaneous transactions. As industry moved forward, it was clear that accounting procedures should be refined for higher accuracy and efficiency. During this time, simple machines were used to record business transactions being carried out. However, these simple machines did not have memory like a computer, hence, a person could not go back to an older financial transaction
A computerised accounting system like other systems has its own characteristics that differentiate it from others. Impliedly, some of these features serve as the strength or benefits of computerised accounting system over manual system These features include:
- Simple, accuracy and speed: Computerised accounting system is always user-friendly with features which enable quick processing of information. This involves providing user-definable templates which facilitate accurate data entry of the business transactions.
- Integration: A good computerised accounting system is the one that integrate all the business operations, such as sales, finance, purchase, inventory and manufacturing or the systems used by such departments. Other departments of the organisation may draw information from the computerised accounting system and conversely, the accountants may benefit from other software products.
- Customisation: A computerised accounting system allows users to customise anumber of features and documents such as statements, forms, reports, screens, help systems and other program surfaces to match the organisation's needs.
- Security and control: Computerised accounting system have strong security features to allow only authorised personnel to have access to the information recorded in the system. This shall control any kind of hacking or fraud activities by other users.
- Scalability: Computerised accounting system can accommodate a change in the size of the business. More importantly, this should be able to accommodate increase in number of users and increase in amount of financial data and transactions.
- Accuracy: Computerised accounting system involves the use of systems which reduce human errors by large and prevent the duplication of data, hence facilitate the production of more reliable and accurate reports compared to manual accounting. Though this depends much on the accuracy of correct data entry. If a wrong data is entered, the system will pick and process it as it is. That is called Garbage in, Garbage out (GiGo).
- Speed: Computerised accounting system enables the processing of huge volume of transactions within a short period of time. At the same time, the reports are generated automatically while data entry is in progress.
- Security: Information processed and stored in the computerised accounting system are well protected against other third parties and can be stored for a long period of time. Users are required to have password in order to access the information.
- Cost efficient: Computerised accounting system is considered to be economical and efficient than manual accounting. It requires less number of people to do the work compared to manual accounting. Additionally, computerised accounting system can be offered on monthly subscriptions at lower charges.
The following are the disadvantages of computerised accounting system to an organisation:
- High cost of installation: Using computerised accounting requires a company to purchase computers and its accessories which are very expensive, thus small and medium enterprises can hardly afford.
- Training and maintenance cost: Companies usually incur costs to train its new employees to be conversant with the computerised accounting system used by the organisation. Also, the company is required to pay for updates when its new version comes into the market and pay for training costs.
- Loss of data: The computerised accounting systems require users to create backups on their information more frequently. If backups are not created the company may fail to retrieve the data from the system on the events that the whole computer or saver collapses.
- Incorrect information: Using computerised accounting system requires accountant to possess adequate computer accounting skills because, any mistake that will be made by the accountant while establishing account categories or entering data in the system may results to production of inaccurate reports by the system.
- Lesser flexible: Computerised accounting systems are usually not very flexible as they may require the user to modify organisation's procedure to be able to effectively use the system.
A computerised accounting system consist of five (5) major components: hardware, software, personnel, procedure and data. These are briefly explained as follows:
- Hardware: A computerised accounting system is made up of hardware which consists of input devices (such as keyboard, scanner, mouse, touch screen) and output devices (such as monitor and printer) that make a complete computer system.
- Software: Any computerised accounting system must include a software as it forms a very fundamental part of a computerised accounting system. Software is a set of electronic instructions that tells the computer how to do certain tasks. There are many software that can be used to process financial information in an organisation. These consist of spreadsheets and other accounting applications known as accounting packages.
- Personnel: A computerised accounting systems requires supervision. Personnel such as operators are required to feed financial data into the system and programmers are needed to write codes and programs to implement the working of the system, and provide troubleshooting capabilities when the need arises. Other personnel are system analysts who design the operation and processes of the system.
- Procedure: Any computerised accounting system must have series of instructions necessary to perform a specific function in the system and achieve desired output. These instructions are called procedures. In a computer accounting system, procedures may define the working of a hardware component and provide explanation for using the software.
- Data: Data represent financial information that are extracted from the accounting source documents and recorded in the computer software. These information relate to the business transactions of an organisations such as purchase of goods, sell of goods, payment of expenses, etc. The data represent information compiled to produce financial statements of the business.
The following table presents a comparison between manual and computerised accounting system:
| Basis | Computerized Accounting | Manual Accounting |
|---|---|---|
| Speed | It is quick and hence less time is consumed to prepare financial statements. | It is slow and time-consuming because humans have a limited capacity to accomplish a task. |
| Data Storage | Data are stored in the software and can be stored for a long period of time. | Data are stored in papers and files, which are kept available for a short period of time. |
| Data Entry | Made by the personnel dedicated to operating the software inputs the data. | The accountant enters manually in the books of accounts. |
| Skills Requirement | In-depth knowledge is required. | Requires basic knowledge for correctly recording financial transactions needed. |
| Reports Production | Reports are generated automatically from the system. | Reports are prepared manually by the accountants. |
| Backup Retrieval | User can create backup and recover information if lost. | Lost data cannot be recovered. |
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