OVERVIEW OF COMPUTERISED ACCOUNTING SYSTEM

1. Learning Objectives

• Understand the necessity of Computerised Accounting Systems (CAS) in modern business.
• Appreciate the role of Information Technology in improving financial accounting systems.
• Describe the major functions of the Accounting Information System (AIS).

2. Introduction

In contemporary business environments, accounting transactions are increasingly processed using computers. CAS integrates hardware and software to facilitate accurate and timely decision-making, thereby enhancing profitability and competitiveness. The fundamental components of CAS include:

• Procedures: A sequence of actions to accomplish tasks.
• Data: Raw facts and figures input into the system.
• People: The users engaging with the software.
• Hardware: The physical devices used for computations.
• Software: Instructions and applications managing the data.

3. Concept of Computerised Accounting System (CAS)

CAS processes accounting transactions using computer systems to generate essential financial reports like day books, ledgers, trial balances, and profit and loss statements. The flow from data (transactions) to information (reports generated) is integral to the effectiveness of CAS.

4. Data and Information Flow

In CAS, various elements of transactions serve as data items. A basic transaction consists of:

• Account name
• Accounting code
• Transaction date
• Amount involved Data processed becomes information useful for decision-makers.

5. Major Components of CAS

Manual accounting systems, though common historically, are now being replaced by CAS, which consists of a more streamlined accounting cycle that includes:

• Analyzing transactions.
• Recording in journals.
• Posting to ledgers.
• Preparing trial balances and financial statements.

6. Salient Features of CAS

6.1 Simplicity and Integration

CAS integrates sales, finance, purchasing, inventory, and manufacturing processes, providing real-time business insights.

6.2 Transparency and Control

Increased accessibility and transparency in operations, leading to enhanced user satisfaction.

6.3 Accuracy and Speed

Faster data entry and report generation through user-defined templates.

6.4 Scalability

Adaptable data processing to accommodate business growth.

6.5 Reliability

Ensures accurate and secure financial information.

7. Grouping of Accounts

As business transactions increase, data classification becomes essential. Understanding the Accounting Equation:

• Assets = Liabilities + Capital
  This equation forms the basis for grouping financial data into:
• Equity and Liabilities: Various categories under shareholder funds and non-current liabilities.
• Assets: Split into non-current and current assets.
• Revenues: Income generated from normal business operations.

8. Codification of Accounts

Coding in CAS enhances the classification of accounts, enabling easier retrieval and reporting. Types of coding include:

• Sequential Codes: Assigning numbers/letters in order for easy identification.
• Block Codes: Partitioning numbers into ranges for different categories.
• Mnemonic Codes: Using abbreviations or letters for quick reference.

9. Using the Software of CAS

Software activities are categorized into one-time (setup) and recurring (data entry and report generation) processes. Security features in CAS software include:

• Password security to restrict access.
• Data audit for tracking changes.
• Data vault for additional protection.

10. Advantages of CAS

• Timely and accurate reporting.
• Efficient data management and record-keeping.
• Improved control and security of financial data.

11. Limitations of CAS

• Rapid technological changes require frequent investment.
• Data risks: loss, corruption due to system failures.
• Increased vulnerability to hacking and security breaches.

12. Accounting Information System (AIS)

AIS consists of multiple sub-systems managing different aspects of accounting like cash, sales, inventory, purchases, payroll, and tax compliance, ensuring streamlined financial reporting and audits.

Conclusion

Computerised Accounting Systems significantly enhance the efficiency, accuracy, and security of financial data handling in organizations. As reliance on technology grows, understanding CAS becomes crucial for future accountants and financial professionals.

1. Components of CAS: Data, Hardware, People, Procedure, Software.
2. Advantages of CAS: Timely reporting, efficiency, accuracy, control, and confidentiality.
3. Grouping of Accounts: Based on the accounting equation Assets = Liabilities + Capital.
4. Codification Importance: Essential for organizing financial data securely and effectively.
5. Salient Features: Simplicity, Transparency, Accuracy, Scalability, and Reliability of CAS.
6. Limitations: Technology obsolescence, data loss, and vulnerability to hacking.
7. Accounting Cycle: Involves transaction analysis, journal recording, ledger posting, and financial statement preparation.
8. Sub-systems of AIS: Cash, Sales, Inventory, Purchase, Payroll, Tax, Costing, and Budgeting.
9. Security Features: Password protection, data audit, and encryption for data safety.