L 16 - computers in accounting Flashcards
What is meant by a Computer?
State the characteristics of a Computer.
i) Speed : It can access and process data millions times faster than humans can. All the computer operations are caused by electrical pulses and travels at the speed of light.
ii) Storage : Computers have huge capacity to store data in a very small physical space. Nowadays, computers are also capable of storing pictures and sound in digital form.
iii) Accuracy : The accuracy of computer is very high and every calculation is performed with the same accuracy. Errors occur because of human beings rather than technological weakness; main sources of errors are wrong program by the user or inaccurate data.
iv) Diligence : A computer is free from tiredness and lack of concentration. Even if it has to do 10 million calculations, it will do even the last one with the same accuracy and speed as the first.
v) Versatility : Computer can perform wide range of jobs with speed, accuracy, and diligence. In any organisation, often it is the same computer that is used for diverse purposes such as accounting, playing games, preparing electric bills, sending e-mails and so on.
vi) Communication : All the computers within an office are connected by cable and it is possible to communicate with others in the office through the network of computers.
vii) Processing Power : computers have become faster, smaller, cheaper, more reliable and user friendly.
Explain the components of computer.
A computer consists of three major components -
1. input unit -
Input unit is controlling the various input devices which are used for entering data into the computer. The input unit is responsible for taking input and converting it into binary system.
Ex - keyboard, mouse and scanner, magnetic tape
- CPU (central processing unit) -
The CPU is the control centre for a computer. It guides, directs and governs its performance.This is used to store program, photos, graphics, and data and obey the instructions in program. It is divided into three sub units:
i) Control Unit : Control Unit controls and co-ordinates the activities of all
the components of the computer.
ii) Memory Unit : This unit stores data before being actually processed.
iii) Arithmetic and Logic Unit : It is responsible for performing all the arithmetical calculations and computations such as addition, subtraction, division and multiplication. It also performs logical functions involving comparisons among variable and data items. - Output Unit
After processing the data, it ensures the convertibility of output into human readable form that is understandable by the user. The commonly used output devices include monitor, plotter, printer, speaker, etc.
Explain the limitations of a computer.
i) High Cost of Installation : Computer hardware and software need to be
updated from time to time with availability of new versions. As a result heavy cost is incurred to purchase a new hardware and software every time there is a change in the existing version.
ii) High Cost of Training : To ensure efficient use of computers in accounting, new versions of hardware and software are introduced. This requires training and cost is incurred to train the personnel.
iii) Self Decision Making Not Possible : The computer cannot make a decision like human beings. It is to be guided by the user, and work only the way it is programmed to function.
iv) Costly Maintenance : Computers require to be maintained properly to help maintain its efficiency. It requires a neat, clean and controlled temperature to work efficiently which results into costly maintenance.
v) Dangers for Health : Extensive use of computer may lead to many health problems such as muscular pain, eyestrain, and backache, etc. This affects adversely the working efficiency and increasing medical expenditure.
Explain the role of computers in accounting.
i) Numerous transactions : The computerized accounting system is capable
of handling large number of transactions with speed and accuracy.
ii) Instant reporting : The computerized accounting system is capable of offering quick and quality reporting because of its speed and accuracy.
iii) Reduction in paper work : A manual accounting system requires large physical storage space to keep accounting records/books and vouchers/ documents. There is a need to reduce the paper work and dispense with large volume of books of accounts. This can
be achieved by introducing computerized accounting system.
v) On-line facility : Computerized accounting system offers online facility to
store and process transaction data so as to retrieve information to generate
and view financial reports.
vi) Scalability : Computerized accounting systems are fully equipped with
handling the growing transactions of a fast growing business enterprise. The requirement of additional manpower in Accounts department is restricted to only the data operators for storing additional vouchers. There is absolutely no additional cost of processing additional transaction data.
vii) Accuracy : The information content of reports generated by the computerized accounting system is accurate and therefore quite reliable for decision making. In a manual accounting system the reports and information are likely to be distorted, inaccurate and therefore cannot be relied upon.
viii) Security : Under manual accounting system it is very difficult to secure such information because it is open to inspection by any one dealing with the books of accounts. However, in computerized accounting system only the authorized users are permitted to have access to accounting data. Security provided by the computerized accounting system is far superior compared to any security offered by the manual accounting system.
Enumerate the basic requirements of any computerized accounting system.
- Accounting framework : It is the application environment of the computerized accounting system. A healthy accounting framework in terms of accounting principles, coding and grouping structure is a pre- condition for any computerized accounting system.
- Operating procedure : A well-conceived and designed operating procedure blended with suitable operating environment of the enterprise is necessary to work with the computerized accounting system. The computerized accounting is one of the database-oriented applications wherein the transaction data is stored in well-organized database. The user operates on such database using the required interface and also takes the required reports by suitable transformations of stored data into information.
Briefly explain the applications of computerized accounting.
- Preparation of accounting documents : Computer helps in preparing accounting documents like Cash memo, Bills, and Invoices etc., and preparing accounting vouchers.
- Recording of transactions : Everyday business transactions are recorded with the help of computer software. Logical scheme is implied for codification of accounts and transaction. Every account and transaction is assigned a unique code which put that account in a particular group. This process simplifies the work of recording the transactions.
- Preparation of Trial Balance and Financial Statements : After recording of transaction, the data is transferred into ledger accounts automatically by the computer. Trial balance is prepared by the computer to check accuracy of the records. With the help of the trial balance the computer can be programmed to prepare Trading and Profit and Loss Account and Balance Sheet.
Describe the stages of transaction processing system.
