COMPUTERISED ACCOUNTING SYSTEM

SALIENT FEATURES OF COMPUTERISED ACCOUNTING SYSTEM

Computer information system environment exists when one or more computer(s) of any type

or size is (are) involved in the processing of any information, whether those computers are

operated by the entity or by a third party. A computerized accounting environment will

therefore have the following salient features:

1. The processing of information will be by one or more computers.

2. The computers may be operated by the entity or by a third party.

3. The processing of financial information by the computer is done with the help of computer

software.

4. Computer software includes any program that performs a desired function or set of functions

and the documentation required to describe and maintain that program.

5. The computer software used for the accounting system may be acquired software or may be

developed specifically for the business.

6. Acquired software may consist of a spread sheet package or may be prepackaged accounting

software.

SIGNIFICANCE OF COMPUTERISED ACCOUNTING SYSTEM

1. The speed with which accounts can be maintained is several fold higher.

2. Automatic Correct Balancing of Ledger Accounts

3. Automatic Tallied Trial balances unless some mistake is made while recording the opening

balance.

4. Automatic Income Statement

5. Automatic Balance Sheet

Threat to Computerized Accounting System

The only concerns that has increased today are concerns for controls, security and integrity of

the computer system as more and more information is stored not in the hard print but as soft

copies inside the computer. Issue like unauthorized access to the data either through the local

area network or through the internet by hacking into the company server are becoming

potential threat to the computer usage.

CLASSIFICATION AND CODIFICATION OF ACCOUNTS

Some computerized accounting softwares support a coded accounting system and some

support even a non-coded accounting system. A coded accounting system is more convenient

where there are numerous account heads and the complexity is high. It also to some extent

reduces the possibility of the same account existing in several names due to spelling mistakes

or abbreviations used.

A proper codification requires a systematic grouping of accounts. The major groups or heads

could be Assets, Liabilities, Revenue Receipts, Capital Receipts, Revenue Expenditure, Capital

Expenditure. The sub-groups or minor heads could be “Cash”or “Receivables”or “Payables” and

so on. The grouping and codification is dependent upon the type of organization and the extent

of sub-division required for reporting on the basis of profitcentersor product lines. There could

a classification based on geographical location as well.

The main unit of classification in accounts should be the major head which should be divided

into minor heads, each of which should have a number of subordinate heads, generally shown

as sub-heads. The sub-heads are further divided into detailed heads. Sometimes major heads

may be divided into ‘sub-major heads’ before their further division into minor heads.

The Major heads, Minor heads, Sub-heads and Detailed heads together may constitute a four

tier arrangement of the classification structure of Accounts.