Computerised accounts Flashcards
what is a digital link?
it is how businesses are required to notify HMRC of their tax records, it is a digital connection created between the digital records and VAT return (VAT 100), and the VAT and HMRC
which businesses is a digital link required for?
for most VAT registered businesses from April 2019 and mandatory for all VAT registered business from April 2022
from April 2024 which businesses are required to submit their income tax to HMRC quarterly through digital link?
business that make an annual income of more than £10,000
what do computerised account systems allow you to do?
- set up income and expense accounts
- manage the bank account
- pay bills
- handle payroll
- prepare tax documents
what is a bespoke system for computerised accounts?
a complex system specifically built for a business, usually for larger businesses, these systems can cost from £5,000 - £10,000 as well as an additional maintenance charge
what computerised systems can small businesses use?
a free software which creates a digital link between HMRC and businesses
what are some advantages of computerised accounts?
- saves times; single entries are sometimes enough to complete the double entry, balance the accounts and add the transactions to the trial balance, this will also automatically update receivables and payables ledgers along with the control accounts.
- allow businesses to link their bank account, information about the business’s bank transactions is linked to the system by a secure link, also meaning that the cash book will be updated instantly so the cash book will always show the current situation rather than having to wait till the end of the month for the statement.
- links for third party software can be set up meaning that the business data can be linked directly to the accountant
- computerised systems also have the ability to remember and post recurring transactions, regular payments include rent , business rents, or insurance premiums, in a computerised system the recurring entry can be set up to post these payments automatically
- Some systems link to mobile phones that issue invoices to customers and even take payments. This reduces the need for someone in the office to deal with the accounts, taking orders and paying bills
- reduce errors , a single entry will be processed and of posted to the required accounts instantly. The cash book and general ledger will be balanced automatically and correctly, the payables and receivables control account will be updated just by entering the invoice or payments only once into the system
how are links different to have complete access?
links only give the requester the certain information they have requested in a readable format through a programme called (supplication programming interface, API)
what is CSV
comma-separated values flies, this files contain numbers and text, they are distinguished by each data field being separated by a comma and each piece of data being given in rows, this type of file may contain information like a persons personal details the advantage is that this file is capable for storing large amounts of data that can be used in a spreadsheet or other apps
what are some disadvantages of computerised accounts?
- the input can be entered wrong but it is always assumed that computerised systems are correct
- risk of duplication, e.g. system may be set to post recurring entries automatically and the operator may want to input the entries manually
- automated recurring entries may be problematic when the amount or frequency changes if forgotten to be updated
- systems can crash or subject to corrupt hard drives or a power outage results in loss of data
- backup is needed so data wouldn’t be lost as easily and reloaded when needed, cloud accounting is when the system is entirely on the internet, there is no programme on the office computer and all data is sent to and can be retrieved from the internet the ‘cloud’ cannot remove the problems caused by power outages, it can reduce the problems of corrupt hard drives and data loss. This can also reduce the possibility of malicious hacks
- easy to forget about manual checks to which errors can continue to build if unnoticed
how are computerised accounting systems used?
commercial accounting software have basic common features and a feature that allows a simple change from a manual system to a computerised system to a computerised system, this involves manual entering of information and the system can automatically update the ledgers
next the opening general ledger balances will be put in including the cash book
then the figures will be posted to the selected accounts in the general and subsidiary ledger automatically
how can we differentiate the different accounts?
accounts are given a unique code which the programme uses to organise into the SPL or the SFP, divided into assets, liability, equity, income, and expenses the way it is organised is called the chart of accounts, see pg.3 for an example
is it possible to add accounts to the chart of accounts?
yes but the user must be aware of the accounts and choose the correct ones when inputting transactions,
is it possible to change the chart of accounts?
yes, if needed but should only be done by someone who understands how the SPL and the SFP works as if it is wrong then the system will show the wrong profits, assets and liabilities,
some accounts cannot be changed, like the payables and receivables control account or the code number, by deleting accounts could cause the systems to crash so most systems prevent from accidentally deleting or changing accounts
how to computerised systems help with making reports?
most systems will print reports in a set style which will include documents like the SPL or SFP, a trial balance can also be printed when needed with the most up to date transactions, a SDB and PDB is usually included as well as the rec and pay ledgers
how can recurring entries be set up?
- bank code and general ledger code
- date of next posting
- frequency
- total required postings
- final payment dates
- VAT rate
what do the different VAT codes mean?
T0 - 0%
T1 - 20% (regular)
T2 - exempt
what does it mean when a credit note is raised?
when raised it can be linked to a particular invoice ensures when payment is made it is correctly allocated to both the invoice and credit note
it needs to be allocated correctly or it could be allocated to the opening balance It’s possible to make a part payment to an invoice (where certain goods are still under query), some customers have an agreement where they will pay a certain amount each month. The invoice to which this belongs is then unknown and it will be known as a payment on account. In the accounting system it will mean recording the amount paid, but not allocating the payment to any invoice or credit note.
what is the different to the process in a manual system than a computerised system?
the automation of posting and the time efficiency, computerised systems don’t eliminate errors completely, but they do reduce the chances of mis-posting. The figures in the computerised system should be checked regularly, just as they are in a manual system. The longer the error is left in the system, the more difficult it will be to correct it
