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Accounting FOR Management: Dr.N.Ramesh Kumar Associate Professor-MBA Niet

This document discusses computerized accounting systems and accounting software. It defines computerized accounting as accounting software programs stored on a company's computers that help analyze operations and prepare reports according to accounting principles. It describes the features and benefits of computerized systems, including accuracy, efficiency and improved decision making. It also discusses prepackaged and customized accounting software, their advantages and disadvantages.

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70 views27 pages

Accounting FOR Management: Dr.N.Ramesh Kumar Associate Professor-MBA Niet

This document discusses computerized accounting systems and accounting software. It defines computerized accounting as accounting software programs stored on a company's computers that help analyze operations and prepare reports according to accounting principles. It describes the features and benefits of computerized systems, including accuracy, efficiency and improved decision making. It also discusses prepackaged and customized accounting software, their advantages and disadvantages.

Uploaded by

Anonymous 1ClGHbiT0J
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ACCOUNTING

FOR
MANAGEMENT

Dr.N.Ramesh Kumar
Associate Professor- MBA
NIET
Unit-5:
ACCOUNTING IN COMPUTERISED
ENVIRONMENT

Significance of Computerized Accounting


System- Codification and Grouping of
Accounts- Maintaining the hierarchy of ledgers-
Prepackaged Accounting software

.
What is Computerized
Accounting System?
• Computerized accounting systems are software
programs that are stored on a company’s
computer, network server, or remotely
accessed via the Internet.
• 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.
Definition of Computerized
Accounting.

Computer information system environment


exists when one or more computer(s) of any type
or size is (are) involved in the processing of
financial information, including quantitative
data, of significance to the audit, whether those
computers are operated by the entity or by a
third party.
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. Complete Visibility & Scalability
6. For quick decision making & improved
Business Performance
Business Applications of Computers

Inventory control
Market research
Production planning Purchase accounting
Budgeting and Variance Sales accounting
analysis Payroll accounting
Plant capacity utilization Information
Quality control management, etc.
Role / Benefits / Advantages

• Better Quality Work


• Lower Operating Costs
• Improved Efficiency
• Facilitates Better Control
• Greater Accuracy
• Relieve Monotony
• Facilitates Standardization
• Minimizing Mathematical Errors
Limitations / Disadvantages

• Security / Integrity / Virus / Hacking


• May lead to unemployment
• High cost of installation
• Requires special skills for operation
• Frequent repairs
• Frequent power failures
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
Codification and Grouping of
Accounts
Coding Procedure
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
Maintaining the
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
Maintaining Hierarchy of Ledgers

• 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
Prepackaged Accounting
Software
•Maintained by using a spread sheet
package,
•Pre-Packaged Accounting Software
Customized Accounting Software
•ERP
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
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
List of Master Files

Typically, any standard prepackaged s/w will have


the following master file screens:
1. Company master file
2. Accounts master file
3. Sub ledger master file
4. Customer master file
5. Vendor master file
6. Product master file
– Division master file
List of Entry Screens

• The entry screens differ in look and feel between


Entry screens provide add,
packages. However, the basic entry screens
modify are the
or delete options and
also special options like date
following: modification and voucher
– Cash Receipts and Payment Entry number modification in some
s/w
– Bank Receipts and Payment Entry
– Petty Cash Voucher Entry
– Journal Entry
– Purchase Order, GRN, Bill, Purchase return Entry
– Sales Order, Challan, Invoice, Sales Return Entry
– Debit Notes and Credit Notes Entry
– Cash Sales & Purchase Memos
– Production , Consumption and Stock Transfer
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
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.
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
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
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.
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.
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
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

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