ICT Flashcards
5 benefits of computerised accounting systems
Efficiency Accuracy Timely information Storage Faster communication of information
Greater Efficiency
Once the system is established, there are a number of accounting processes that can be carried out automatically. This can range from the automatic updating of records once source documents are created, to the generation of reports (including the BAS).
Greater accuracy
Using a computer ensures mathematical accuracy and (as long as all data is entered correctly) will produce reports that are accurate and include all relevant information.
Timely information for decision making
Because financial reports can be generated almost instantaneously, computerised systems are able to provide information on demand regarding the level of stock on hand, the balance owed by an individual debtor, or when payments are due to creditors. In this way, the software aids accounting in its role of providing information to aid decision-making.
Improved storage
Since source documents are generated electronically, they can also be stored electronically. Some packages allow for data to be backed up online. (Obviously documents can be printed if required, and would be provided as hard copies for customers and suppliers.)
Faster communication of information
Many software packages can use the internet to communicate information between various parties. For example, software updates and changes in small business regulations can be communicated directly to the owner as they occur. Information can be exchanged electronically between the business and its customers, suppliers, and accountant, and even the ATO (for the electronic submission of their BAS). In some sophisticated stock management systems, orders can be sent to suppliers automatically (by email) once stock levels reach a certain minimum.
4 costs to a computerised accounting system
Hardware
Software
Training
Time
Software
Basic accounting packages start at around $100, but can increase to around $1 000 for complex multi-user packages. If the business requires software written speci cally for the business, the cost could be thousands of dollars.
Hardware
Even though the costs of computers are falling, at the time of writing, a basic computer would still cost around $1 000. If other hardware, like bar code scanners or a dedicated phone line for an internet connection, is required, then this cost must also be considered.
Training
Many of the more prominent accounting packages offer tutorials and online assistance, and some also run specialist courses to train staff, or the owner, in the operation of the system, but not all of these are free.
Time
Although using a computerised accounting system should ultimately save time, the establishment of the system can take time away from the rm’s core activity of making sales. Like all business decisions, it is a matter for the owner/manager to determine what would be most bene cial for the business. However, considering the decreasing costs and the increasing legal requirements it is unsurprising that more and more businesses are choosing to use computerised accounting systems.
Computerised Accounting System
A computerised accounting system involves the use of computer hardware and software to perform the recording and reporting functions that would otherwise have been done manually. This has allowed small business owners to streamline their accounting processes, thus leaving them more time to work on their core business.
Distinguish between a service and a trading business
A service business provides time, service, expertise and labour in exchange for fees/charges whereas a trading business purchases stock (goods) and sells at a mark-up for profit.
Explain the effect of the following transaction on the accounting reports.
Cash sales of $730 plus GST
STOCK IS MARKED UP BY 100%
Income Statement:
Sales increase by $730, Cost of Sales increase by $365, which leads to a $365 increase in Gross Profit and Net Profit (2 marks)
Cash Flow Statement:
An increase in Operating Inflows—Cash Sales of $730 and GST Received $73, leading to an increase in Cash Balance at end (1 mark)
Balance Sheet:
Overall Assets increase by $438 (Bank increases by $803, Stock decreases by $365 (1 mark)
Liabilities increase by $73 (GST payable) (1 mark)
Owner’s Equity increases by $365 (Net Profit increases)
Benefits of using trade credit to purchase stock
- improved cash flow
- immediate access to goods (don’t need to pay up-front)
- interest-free/cheap source of finance
- discounts offered
