1. Computerised Accounting Systems

Question 1

What is an accounting system?

Answer 1

An accounting system is the system in place within a business to allow it to record, process and store financial information.

An accounting system enables a business to satisfy the requirement for businesses to maintain records of their financial transactions and allows it to produce relevant and reliable information for stakeholders.

Question 2

What are the inputs, processes and outputs of computerised accounting systems?

Answer 2

Inputs:
1. Source documents
2. Standing data

Processes:
1. Ledgers
2. Journals
3. Calculations
4. Record keeping

Outputs:
1. Reports
2. Trial balance
3. Financial statements

Question 3

In the context of computerised accounting systems, what is standing data?

Answer 3

Standing data is reference data that does not regularly change, such as the name and registered address of the business, payment terms for goods sold on credit, the VAT registration number and relevant VAT rates, wage rates for payroll purposes etc.

It is important that access to, and maintenance of standing data is tightly controlled as many different transactions rely on the accuracy of this underlying data.

Question 4

In the context of computerised accounting systems, what are account codes?

Answer 4

Each of the modules in the software package of a computerised accounting system is sub-divided into accounts and each account will have a unique code which makes it easier to input and process accounting information.

Question 5

In the context of computerised accounting systems, what is meant by processing?

What is the difference between real-time and batch processing?

Answer 5

Processing - transactions that are undertaken by the business need to be entered into the system. The recording may be real-time or batch processing:

• Real-time processing - real-time processing means that transactions are entered into the system and relevant modules and accounts are updated at the point at which the transaction takes place.
• Batch processing involves processing a number of transactions together in a group, or batch, usually at the end of each day or each week.

Question 6

In the context of computerised accounting systems, what is meant by controls?

Answer 6

Controls include that the system is operated by trained and qualified staff, that access to the system is restricted to authorised users and that there are adequate levels of approval and review of transactions that are input into the system.

Question 7

Define cloud computing.

Answer 7

Cloud computing is a services that provides a business with access to software and data storage via the internet. Instead of being held locally on the user’s computer, the software and data are held in ‘the cloud’, which means they are held remotely on the computer servers of the software service provider. Examples of cloud computing include Amazon Web Services (AWS), which offers storage, computer power and networking services or Dropbox, which offers storage services.

Question 8

What is cloud accounting?

Answer 8

Cloud accounting is an application of cloud computing. Accounting software is provided in the cloud by a service provider.
The user accesses this software to process their accounting transactions and run reports as they would if the software was installed on their own computer.
The use of cloud accounting does not change the requirement for source documents to be input into the system, which depending on the type of accounting software package used, may be done by a bookkeeper or may be automated.
The processing of transactions takes place in the software within the cloud and outputs in the form of reports, or financial statements are extracted from the cloud.

Question 9

What are the advantages and drawbacks of cloud accounting?

Answer 9

Advantages:
1. A business can access its accounting records from any computer, tablet or phone with internet connection.
2. As most of the processing and data storage is done on the service provider’s servers, the business does not need to purchase expensive, sophisticated IT equipment/
3. As the software is maintained by the service provider, the business may be able to reduce IT support costs within its own business.

Drawbacks:
1. If a business has unreliable internet connection, it may be unable to access its accounting records.
2. There may be server outages on the cloud.
3. There may be increased risk of data being hacked and loss or damage to data.
4. The business does not retain back-up copies of its data on its local computer, and therefore is reliant on the service provider to provide adequate secturity.