Accounting in ComputerizedEnvironment UNIT 5
AU-Chennai Syllabus – UNIT 5• Significance of computerized  accounting system• Codification and grouping of  accounts• Mai...
Significance of ComputerizedAccounting System
Business Applications of Computers•   Inventory control•   Production planning•   Budgeting and Variance analysis•   Plant...
Features• Processing by one or more computers• Operated by the entity or by a third party• Processing with the help of one...
Role / Benefits / Advantages• Speeding up the process• Automation of ledger posting, Trial  balance and subsidiary ledger•...
Role / Benefits / Advantages… contd.• Flexibility• Better quality of work, clean and neat• Scalable• Lower operating cost•...
Limitations / Disadvantages• Security / Integrity / Virus / Hacking• May lead to unemployment• High cost of installation• ...
Features of A/cg Software• On-screen input and print outs• Automatic updating• Automatic stock adjustments• Integration of...
Manual and Computerized a/cg - Distinction  Function          Manual Accounting          Computerized AccountingRecording ...
AU-Chennai Syllabus – UNIT 5• Significance of computerized  accounting system• Codification and grouping of  accounts• Mai...
Codification and Grouping ofAccounts
Coding System• Codification refers to allotting code numbers to  accounts in a hierarchical structure• Accounts are first ...
Coding Procedure
Coding System… contd.• The major heads, sub-heads and detailed heads  together constitute a 4-tier structure• The detailed...
AU-Chennai Syllabus – UNIT 5• Significance of computerized  accounting system• Codification and grouping of  accounts• Mai...
Maintaining the Hierarchy of Ledgers
Maintaining Hierarchy of Ledgers• Accounting master files are created with  codes and description of accounts• In a hierar...
AU-Chennai Syllabus – UNIT 5• Significance of computerized  accounting system• Codification and grouping of  accounts• Mai...
Prepackaged Accounting Software
Prepackaged Software• Prepackaged software are generic accounting  systems purchased from the market rather  than develope...
Configuring / Customizing / Installing   Prepackaged S/w• Creation of Company, name, address, contact details,  PAN, CST/T...
List of Master Files• Typically, any standard prepackaged s/w will have the  following master file screens:   – Company ma...
List of Entry Screens• The entry screens differ in look and feel between  packages. However, the basic entry screens are t...
List of Reports     Following reports are common to most s/w:•   Cash Book                  •   General Ledger•   Cash Sal...
Reports…. Contd.• Document printing options such as trial balance, POs,  challans, declaration forms and invoices printing...
Advantages of Prepackaged s/w•   Easy to install•   Relatively inexpensive•   Easy to use•   Backup procedure is simple•  ...
Disadvantages of Prepackaged s/w• Does not cover peculiarities of specific business• Does not cover all functional areas• ...
Considerations Involved in Selection• Some of the criteria for selection of prepackaged  s/w could be the following:  –   ...
Customized Accounting Software• Customized accounting software is one where the  software is developed on the basis of req...
Advantages of Customized s/w• Uncommon functions can also be computerized• The input screens and input documents can be  m...
Disadvantages of Customized s/w• Ambiguous specifications resulting in a defective  or incomplete system• Presence of bugs...
AU-Chennai Syllabus – UNIT 5• Significance of computerized  accounting system• Codification and grouping of  accounts• Mai...
Best Wishes for Success in your       Examinations !                     R D Vasudevan
U5 c49 c60 - accounting in computerized environment ver 7.0
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U5 c49 c60 - accounting in computerized environment ver 7.0

  1. 1. Accounting in ComputerizedEnvironment UNIT 5
  2. 2. AU-Chennai Syllabus – UNIT 5• Significance of computerized accounting system• Codification and grouping of accounts• Maintaining the hierarchy of ledgers• Prepackaged accounting software
  3. 3. Significance of ComputerizedAccounting System
  4. 4. Business Applications of Computers• Inventory control• Production planning• Budgeting and Variance analysis• Plant capacity utilization• Quality control• Market research• Purchase accounting• Sales accounting• Payroll accounting• Information management, etc.
  5. 5. Features• Processing by one or more computers• Operated by the entity or by a third party• Processing with the help of one or more computer software e.g. Tally• Software used may be a generic software purchased from the market (package software) or• May be developed specifically for the business (custom software)
  6. 6. Role / Benefits / Advantages• Speeding up the process• Automation of ledger posting, Trial balance and subsidiary ledger• Accuracy• Reduced error• Eliminating duplication of work• Immediate availability of information• Easy access
  7. 7. Role / Benefits / Advantages… contd.• Flexibility• Better quality of work, clean and neat• Scalable• Lower operating cost• Improved efficiency• Relieves employee monotony• Facilitates standardization• Minimization of frauds
  8. 8. Limitations / Disadvantages• Security / Integrity / Virus / Hacking• May lead to unemployment• High cost of installation• Requires special skills for operation• Frequent repairs• Frequent power failures
  9. 9. Features of A/cg Software• On-screen input and print outs• Automatic updating• Automatic stock adjustments• Integration of database with the accounting programme• Automatic calculation of payroll
  10. 10. Manual and Computerized a/cg - Distinction Function Manual Accounting Computerized AccountingRecording Through books of original Transactions are stored in well entry designed databaseClassification By posting them into ledger Automatically classified and accounts presented in the form of a reportSummarizing Ledger account balances to Trial balance generated be ascertained and automatically summarized to produce trial balanceAdjusting To be made in order to follow No adjusting entries for errorsEntries the matching principle and rectifications are madeFinancial Depends on the availability of Independent of theStatements trial balance preparation of trial balance
  11. 11. AU-Chennai Syllabus – UNIT 5• Significance of computerized accounting system• Codification and grouping of accounts• Maintaining the hierarchy of ledgers• Prepackaged accounting software
  12. 12. Codification and Grouping ofAccounts
  13. 13. Coding System• Codification refers to allotting code numbers to accounts in a hierarchical structure• Accounts are first systematically grouped into Major Heads such as: – Assets – Liabilities – Revenue Receipts – Capital Receipts – Revenue Expenditure – Capital Expenditure, etc.• The sub-groups or Minor Heads could be ‘Cash’ or ‘Receivables’ or ‘Payables and so on.
  14. 14. Coding Procedure
  15. 15. Coding System… contd.• The major heads, sub-heads and detailed heads together constitute a 4-tier structure• The detailed head is often termed as an object classification for control purposes. Ex: – Salaries – Office Expenses – Salesman Expenses – Workshop Overhead, etc.• The classification system should be approved by the top management and auditor before coding and computerization
  16. 16. AU-Chennai Syllabus – UNIT 5• Significance of computerized accounting system• Codification and grouping of accounts• Maintaining the hierarchy of ledgers• Prepackaged accounting software
  17. 17. Maintaining the Hierarchy of Ledgers
  18. 18. Maintaining Hierarchy of Ledgers• Accounting master files are created with codes and description of accounts• In a hierarchical coded system reports can be generated based on codes• General ledger, Debtors ledger and Creditors ledger are automatically created by any standard software• At the time of creation, some of the account heads are indicated to the system as cash, bank, debtors and creditors• The system then automatically posts sales to debtors a/c and purchases to creditors a/c
  19. 19. AU-Chennai Syllabus – UNIT 5• Significance of computerized accounting system• Codification and grouping of accounts• Maintaining the hierarchy of ledgers• Prepackaged accounting software
  20. 20. Prepackaged Accounting Software
  21. 21. Prepackaged Software• Prepackaged software are generic accounting systems purchased from the market rather than developed in-house (ex: Tally accounting s/w)• These s/w are easy to use, relatively inexpensive and readily available• The installation of these s/w are very simple• A network version is generally available which works on client-server architecture• User manuals guide the user on how to use the s/w• Vendor provides regular updates
  22. 22. Configuring / Customizing / Installing Prepackaged S/w• Creation of Company, name, address, contact details, PAN, CST/TNGST, etc• Defining accounting period• Creation of chart of accounts in master file with codes• Each a/c to be classified according to type• Opening balances need to be entered• Creating master files for customer, supplier, product, etc.• Defining system of valuation such as LIFO, FIFO, Weighted average, etc
  23. 23. List of Master Files• Typically, any standard prepackaged s/w will have the following master file screens: – Company master file – Accounts master file – Sub ledger master file – Customer master file – Vendor master file – Product master file – Division master file
  24. 24. List of Entry Screens• The entry screens differ in look and feel between packages. However, the basic entry screens are the following: – Cash Receipts and Payment Entry – Bank Receipts and Payment Entry Entry screens provide add, modify or delete options and – Petty Cash Voucher Entry also special options like date – Journal Entry modification and voucher number modification in some – Purchase Order, GRN, Bill, Purchase return Entry s/w – Sales Order, Challan, Invoice, Sales Return Entry – Debit Notes and Credit Notes Entry – Cash Sales & Purchase Memos – Production , Consumption and Stock Transfer
  25. 25. List of Reports Following reports are common to most s/w:• Cash Book • General Ledger• Cash Sales Book • Stock Ledger• Sales Return register • Purchase Book• Credit Note Register • Creditors Ledger• Bank Book • Subsidiary Ledger• Cash Purchase Book • Production register• Purchase Return register • Sales Book• Stock movement register • Debit Note Register• Journal Book • Debtors Ledger• Petty Cash Book • Consumption Register
  26. 26. Reports…. Contd.• Document printing options such as trial balance, POs, challans, declaration forms and invoices printing• Bank reconciliation reports• MIS reports like aging of debtors, slow moving and non-moving stock, etc.• House keeping section provides: – System maintenance features – Taking back-up and system restore – Clean-up, fine tuning and re-indexing of s/w, etc.
  27. 27. Advantages of Prepackaged s/w• Easy to install• Relatively inexpensive• Easy to use• Backup procedure is simple• Flexibility• Very effective for small and medium size businesses
  28. 28. Disadvantages of Prepackaged s/w• Does not cover peculiarities of specific business• Does not cover all functional areas• Customization may not be possible in most such software• Reports generated are not sufficient or serve the purpose• Lack of security• Bugs in the software
  29. 29. Considerations Involved in Selection• Some of the criteria for selection of prepackaged s/w could be the following: – Fulfillment of business requirements – Completeness of reports – Ease of use – Cost – Reputation of the vendor – Regular updates.
  30. 30. Customized Accounting Software• Customized accounting software is one where the software is developed on the basis of requirement specifications provided by the user organization• The need for customized accounting software could be: – Unique nature of the business or – The functionality desired may not available in pre- packaged software.
  31. 31. Advantages of Customized s/w• Uncommon functions can also be computerized• The input screens and input documents can be matched for ease of data entry• Reports can be designed as desired• Additional MIS reports can be included• Bar-code scanners can be used as input devices• The system can align with the organizational structure of the company
  32. 32. Disadvantages of Customized s/w• Ambiguous specifications resulting in a defective or incomplete system• Presence of bugs in the software• Incomplete documentation• Inadequate change management procedure resulting in system compromise• Poor vendor support and lack of access to source code• Delay in completion of the software
  33. 33. AU-Chennai Syllabus – UNIT 5• Significance of computerized accounting system• Codification and grouping of accounts• Maintaining the hierarchy of ledgers• Prepackaged accounting software
  34. 34. Best Wishes for Success in your Examinations ! R D Vasudevan
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