Computerized Accounts by using Accounting Software

26/12/2020 0 By indiafreenotes

Computerized accounting systems are software programs that are stored on a company’s computer, network server, or remotely accessed via the Internet.  A firm prepares various reports with the help of it.

Hence, it also helps to analyze the company’s operations, efficiency, and profitability. Most importantly, firms prepare its reports as per Generally Accepted Accounting Principles (GAAP) under this system.

Features of Computerised Accounting System

  1. Very neat and accurate work
  2. Need for less clerical work
  3. Cost and time efficient
  4. Less possibility of errors and omissions
  5. Generated real-time comprehensive MIS reports

Requirements of Computerized Accounting System

  1. Operating Framework

It is a well-defined operating procedure made according to the operating environment of the organization.

  1. Accounting Framework

It consists of Principles, grouping and coding structures of accounting.

Advantages of Computerized Accounting System

  1. The accounts prepared with the use of computers are usually uniform, neat, accurate, and more legible than a manual job.
  2. Computers bring speed and accuracy in preparing the records and accounts and thus, increases the efficiency of employees. Hence, time is saved.
  3. Also, greater control is possible and more information may be available with the use of computers in accounting.
  4. Computerized accounting reduces the monotony of doing repetitive accounting jobs, which are tiresome and time-consuming
  5. Using accounting software it becomes much easier for different individuals to access accounting data outside of the office, securely. This is particularly true if an online accounting solution is being used.
  6. The financial statements prepared by computers are highly reliable because the calculations are so accurate.
  7. Using accounting software, the entire process of preparing accounts becomes faster.
  8. Also, the data record is secure under this system.

Disadvantages of Computerized Accounting System

  1. The effectiveness of the data output completely depends on the information input. Hence, if the input is incomplete or incorrect then it will lose effectiveness.
  2. Biased or incompetent employees may affect the data.
  3. Virtually every aspect of a computerized accounting system is costly. Hence, the expenses of the company increase.
  4. Computerized accounting systems are vulnerable to cybersecurity issues. Hence, Cloud-based systems store your company’s information remotely, where it can be hacked.
  5. Excess is anything is dangerous. Similarly, excess use of computers can affect the health of the operator.

Types of Accounting Softwares

  1. Ready-to-use Softwares

Firstly, this kind of software is suitable for small businesses in which there are very less accounting transactions. The cost of the software is very low. Hence, the expenses of the firm will not increase.

The user base too is very less. Such software is prone to risks as it is less secure. There is no need for special training for using the software. It may not comply with other information systems.

  1. Customized Softwares

Sometimes the software is customized to meet the special requirement of the user. It happens when general software is not helpful. It is suitable for medium and large businesses.

Hence, a firm can use it with many Information Systems. Cost of the software is relatively high. It includes modification and addition to the basic software.

Unlike ready-to-use software, it is more secure. Training cost is relatively high. Hence, the expenses of the firm will increase.

  1. Tailored Softwares

This software is suitable for Large organizations having various divisions. It is helpful when the user base is geographically scattered. In contrast, its cost is very high.

Special training is necessary to use this software. Hence, the expenses of the firm will increase. It is highly secure.

Special Features of Computerized Accounting System:

  1. It leads to quick preparation of accounts and makes available the accounting statements and records on time.
  2. It ensures control over accounting work and records.
  3. Errors and mistakes would be at minimum in computerized accounting.
  4. Maintenance of uniform accounting statements and records is possible.
  5. Easy access and reference of accounting information is possible.
  6. Flexibility in maintaining accounts is possible.
  7. It involves less clerical work and is very neat and more accurate.
  8. It adapts to the current and future needs of the business.
  9. It generates real-time comprehensive MIS reports and ensures access to complete and critical information instantly.

Requirements of the Computerized Accounting System:

Accounting Framework:

A good accounting framework in terms of accounting principles, coding and grouping structure is a pre-condition. It is the application environment of the computer­ized accounting system.

Operating Procedure:

A well-conceived and designed operating procedure blended with suitable operating environment is necessary to work with the computerized accounting system. The computer 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 he takes the required reports by suitable transformations of stored data into information. Hence, it includes all the basic requirements of any database-oriented application in computers.

Problems Faced in Computerized Accounting System:

  1. User Training:

The user, for using computer accounting software, needs to understand the concepts of the software. Hence, he should undergo proper training. A computer operator must learn the basics of computer, concepts of software, working with the operating system software [such as Windows/DOS] and the accounting software.

  1. System Dependency:

Using a computer solution makes the user to depend fully on the com­puter system and necessitates the availability of computer at all times. If the system is not available [due to hardware failure or power cut], it would be difficult to verify the accounts.

  1. Hardware Requirements:

A full-fledged computer system with a printer is required to operate the computerized accounting system. Most small organizations may not afford to have such facility with necessary software.

  1. System Failure:

When there is a system crash [hard disk crash], there is high risk of losing the data available on the hard disk drive at any point of time. It would be highly painful, if the problem occurs at end of the financial year, when the financial statements should be ready.

  1. Backups and Prints:

Backups of the data should be done regularly so that, when the data is lost, it can be restored from floppies [backups]. Regular print outs of the system information would be useful as manual records.

  1. Voucher Management:

Accounting software allows easy alteration of data. If a voucher is wrongly placed in a wrong head, it would be very difficult to sort out and bring back the voucher. A good voucher management is very essential.

  1. Security:

Additional security has to be provided because improper handling of the system [hardware/software] could be dangerous. Passwords, locks, etc., have to be set so that no unauthor­ized person can handle the system.