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8/8/2019 Computer is Ed Accounting
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A COMPUTER can be defined as an electronic a device which is used for
processing data in accordance with given set of instructions and obtaining results
in any desired form on a prescribed device . It can perform arithmetic and logical
operations .
Computers are automatic electronic machines that can -
Accept(read) data
Store the accepted data in memory.
Manipulate the stored data according to directions given by the user
Produce intelligible reports(results) from manipulated data
Computerized Environment
Today we live in a highly mechanized and dynamic world . Technological
development and ever increasing application of the concepts like mechanization,modernization, globalization, automation and computerization has helped to carry
out the work speedy and accurately. Automation and use of computer in every
phase of business is diving force for evolving speedy methods of management
decisions . New developments in computer data processing continue to appear at a
rapid pace . Technological advances are making computers faster and smaller in
size . In every walk of life , computer has casted its deep impression on the mind
of man . Computers use is not restricted only to accounting and science but it is
now used in every trade and field of business . Hence computer awareness is a
must for every person who intends to relate himself to the business.
Today the computer is used practically in all fields :-Information technology through satellites .Computerized billings (e.g.- telephone bills, electric bills etc)Banks , universities , insurance companies ,corporate sectors, etc use it for
maintaining accounts or records or correspondence.Used by doctors for C.T scanning and sonography.Fashion designers , interior decorators , architects use to view the designs from
various angles.Armies use it for self -guided missiles, planes, tanks etc.
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Selection of Hardware andSoftware for
AccountsToday most of the computers are made from processors equivalent to
Pentium4 with about 60 GB Hard Disc capacity , and loaded with latest version ofWindows as an operating system along with software like MS-Office etc .The
system can also have a secondary storage device for using CD or DVD etc with
USB port . A dot matrix or laser jet / ink jet printer is used to take print outs of the
work done.
Many companies have developed accounting software but Tally and EX
are most popular . Many companies are developing software as per their own
needs . With the development of ERP ( Enterprise Resource Planning ) System
which takes care of operations of entire company in which account is just one part
of it.
Software is also developed / modified considering the local government
taxes and levies so that there is no need to calculate it separately , for example
excise duty sales tax etc are also equally important apart from normal profit and
loss statement being prepared by an accountant .
With the help of window based software learning to use accounting software
is very easy and requires a little knowledge of hardware and software is very easy
and requires a little knowledge of hardware and software part of whole computer .
More over HELP menu built in the software guides to resolve any problem and on-
line help is also available for software like Tally and EX to assist the user. In big
companies where there are lots of vouchers and accounting entries are to be passedmany people are working simultaneously on one system which is also called as
Multi user system. At such places the software also has system administration like
control for editing data /entry , once it is made so as to avoid misuse and fraud
taking place . Generally password based security system is used in all software.
With the development of various management tools for business analysis
todays accounting software not only prepares what is ordinarily called as Balance
Sheet or Profit & Loss A/C but also generates various MIS reports(Management
Information System) . This gives the management very useful information like
debtors position , aging
analysis , movement and inventory of costly raw material, stock position against
production planning,etc. the cost of an ordinary accounting software vary from
Rs.6,000 to more than Rs.20,000depending upon the number of users or location
for its use and ERP systems may cost anything above Rs.3lacs depending upon the
scale of operation of the company.
How to use Computer for Accounting:
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The most of accounting software are very simple to use. The following steps are to
be followed:-
Basic Information: Here basic
information about the company like Name, Address, PAN,VAT/ CST number
, financial year, etc are to be filled.
The Primary Choice:
Accounts Information:
This option enables you to handle all the information relating to financial
accounts . Here you can masters like Groups and sub groups ,Ledgers, Cost
centers, cost categories, etc. For e.g. there can be main groups like assets ,
liabilities , incomes and expenditures etc. These can be further subdivided into
subgroups. Assets can be subdivided into fixed assets, investments, current
assets, etc. further ledgers can be created as per requirements like Conveyance,printing and stationery , postage and other major expenses.
Inventory Information : You can use
this to handle the information relating to the inventory accounts . It enables you
to work on stock items, stock groups , categories units of measurement and
other related information including values.
Voucher Entry : This is
the most frequently used option . This option allows you to make your daily
voucher and invoice entries.
There are further options of Balance Sheet, Profit & loss a/c, stock, summary etc.
The major difference between the manual accounting and computerized accounting
is seen here. In case of manual accounting each entry is posted under suitable
ledger and then totaling is done manually and effect of the same is given in the
balance sheet and profit & loss a/c manually. There is a possibility of human error
at each stage which makes life of accountant miserable . The beauty of accounting
software can be seen here as you have to just enter a voucher and entire work of
totaling and giving its effect in over all system is done automatically by computer.
This saves lots of time and energy of many people working in accounts .
Many softwares have predefined groups as below :
Capital Account
- Capital
- Reserves and Surplus
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Current Assets
-Bank accounts -Cash
in hand
-Deposits (Asset) -
Loans -Advances
-Stock in hand
-Sundry Debtors
Current Liabilities
-Duties and Taxes Payable -Provisions
-Sundry Creditors
Fixed Assets ( each type of asset will have separate head )
Investment
Loans (liability) -Bank
OD accounts -Secured Loans
- Unsecured Loans-Deposits accepted
Suspense account
Miscellaneous expenditures and losses (asset)
Sales account
Purchase account
Other Direct Income Accounts with separate headings
Indirect Income account with separate headings
Direct Expense Account with separate headings
Indirect Expenses accounts with separate headings
Branch / Divisions (Sperate Accounts for each branch and divisions )
Apart from this , software has facility to create a new groups as per the
needs of the organization. Single or multiple ledgers can be created depending
upon the size and needs of the users.
What is better-Manual Accounting or
Computerized Accounting
Every company applies accounting because it is generally accepted that
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companies have to reveal certain financial and management information to the
government and public users and of course because accounting is indispensable
tool in business decision-making process. With the development of information
technologies there were developed many computer products (software) that make
accounting as easy as ABC for those who uses them. From this point accounting
can be divided into two basic categories: those which apply manual accounting and
those which prefer computerized accounting systems.
MANUALACCOUNTING& COMPUTERIZEDACCOUNTING
Manual accounting implies that employees perform the whole accounting cycle
manually on a periodic basis: they calculate trial balances, journalize
transactions, prepare financial statement reports and other routines. Of course it
takes much time, resources and effort in large organizations.
Computerized accounting implies that the only thing that employees do is
recording transactions into the computer which processes the other steps ofaccounting cycle automatically or by a request. But this is a very simplified
view on the computerized accounting because transaction is a complex category
which includes not only sales or acquisitions, but depreciation, premiums and
wages calculation, dividends etc.
So computers provide accurate calculations and smart reports but it takes much
time, resources and effort too and it's difficult to assess which accounting type
is more fast and economic.
If manual accounting requires qualified accountants to keep a record of business
transactions, computerized requires accountants which can use specific software
and thus they cost more.Computer software calculates faster but it does not know what you need until you
can clearly explain what exactly you need.
In addition good computerized accounting system can cost thousands and even
millions dollars, depending on the complexity and the size of organization
Computerized accounting provides better internal control report system for anygiven period of time (computer can control thousands indicators simultaneously
and create notifications to the appropriate departments or workers if some
indicators do not correspond to the normal state), while manual control takes
more time.
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The Advantages of Manual Accounting there are:comparatively cheap workforce and resourcesReliability
independence from machinesskilled workers availability
The Disadvantages of Manual Accounting are:reduced speedincreased effort of accountantsrelatively slower internal control reporting
routine work and some others.
The Advantages of Computerized Accounting are :high speed and mobility of reportingReliabilityno routine work
increased accuracyinternal control system of increased productivity
easy back uprestoration of record
The Disadvantages of Computerized Accounting are:extremely high costs on developingintroducing and using the system,
special trainings for personnelincreased personnel costs
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dependence on machines etc.
Obviously both computerized and manual accounting have advantages and
disadvantages but they perform the same task, and the final result is the same. The
main differences between them are the costs Health Fitness Articles, speed and
mobility.
Thus small and medium businesses usually prefer manual accountingwithout detriment to quality while large corporations apply complexaccounting systems which cost millions dollars but the effect from theirapplication exceeds all the expectations.