Lesson 2:Special aspects of computerised Accounting

Development of Computerized Accounting Systems

Manual accounting was the most popular method of accounting until recent times. Businesses had to hire a full-time or part-time accountant or book-keeper for this purpose. They would manually record transactions, generate books and ledgers, and prepare financial statements. They had to do all accounting work manually on paper.

Accounting process later moved to computerized systems like billing machines. As we read above, these machines resembled typewriters and calculators and people used them in stores. They performed tasks like calculating net totals, deducting discounts, recording billing information, etc.

With the advent of newer technology, modern computerized systems made accounting easier. They enabled users to enter accounting data real-time. Apart from basic outcomes, these technological innovations helped record sophisticated transactions as well.

The most important innovation in this regard was the Transaction Processing System. Let’s take a look at it in detail.

Transaction Processing System (TPS)

The Transaction Processing System plays a huge role in recording and processing diverse business transactions. It basically records, corrects, validates, processes, stores and displays information. The business employing it can later retrieve this information and use it for various purposes.

The TPS performs its tasks using many steps and procedures. Some of these steps are as follows:

• Entry of data:Firstly, the user enters data into the system using input devices like keyboard, mouse, barcode scanner or interactive screen.
• Validation of data:Next, the system uses a set of programmes that compute and validate the data users enter in it.
• Processing of data:Once the system validates the data and checks its accuracy, it then processes it on the basis of the user’s commands.
• Storage of data: After processing data, the system stores it either in its short-term memoryor the long-term one. This depends on the user’s command.
• Reporting of information:Finally, processed data is now called information, which is displayed to the user in pre-determined formats.

The Transaction Processing System also performs real-time accounting operations. Users can edit and use this data digitally using the internet. The reports generated by the system are stored and displayed in a language called Structured Query Language.

Components /Aspects of Computerized Accounting System:

Following components form the Computerized Accounting System:

(a) Hardware

(b) Software

(c) Company personnel

Each component is critical to the system’s success.

Hardware:

Hardware is the electronic equipment that includes computers, disk drives, monitors, printers and the network that connects them. Most modern accounting systems require a network, the system of electronic linkages that allow different computers to share the same information.

In a networked system many computers can be connected to the main computer, or server, which stores the programme and the data. With the right communication of hardware and software, an auditor in London can access the data of a client located in Sydney, Australia. The result is a speedier audit for the client, often at lower cost than if the auditor had to perform all the work on site in Sydney.

Software:

Software is the set of programmes that cause the computer to perform the work desired. Accounting software accepts, edits (alters), and stores transaction data and generates the reports managers use to run the business. Many accounting software packages operate independently from the other computing activities of the system.

Personnel:

Personnel are critical to the success of any Endeavour because people operate the system. Modern accounting system gives non-accounting personnel access to parts of the system.

Management of a computerized accounting system requires careful planning of data security and screening of the people in the organization who will have access to the data. Security is sought by using passwords, codes that permit access to computerized records.

Input represents data from source documents, such as sales receipts, bank deposit slips, Purchase orders etc. Computerized accounting systems require that data inputs be arranged in specific formats. Transactions with missing dates, account numbers or other critical information are not accepted by the system. Outputs are the reports generated for decision making. These may be like statements of debtors, creditors, inventory, trial balance, income statement, balance sheet and so on.