A computerised accounting system is an accounting information system that records, processes, and analyses financial transactions and events according to Generally Accepted Accounting Principles (GAAP) to generate reports based on user requirements. Like a manual accounting system, it operates within a well-defined framework of accounting principles and procedures for maintaining records and preparing reports. In a computerised environment, the storage and processing of accounting data take place within an operating environment that consists of both hardware and software components. A computer system is made up of several essential elements, including hardware, software, people, procedures, data, and connectivity, all of which work together to ensure efficient and accurate accounting operations.
Elements of a Computer System:
A computer system is composed of six major components. They all work together to complete the task at hand. Let's examine each one of them.
1. Hardware:
It refers to the physical components of a computer system that can be seen and touched. It includes both input and output devices that enable users to interact with the computer. Input devices are used to enter data and instructions into the system, such as a keyboard, mouse, optical scanner, joystick, touch screen, and stylus. Output devices are used to display or produce the processed information, including monitors, printers, and speakers. Together, these hardware components support the functioning of a computerised accounting system by facilitating data entry, processing, storage, and report generation.
2. Software:
Software is a collection of programs that acts as an interface between the user and the computer hardware. It enables the computer system to perform various tasks by controlling hardware operations and processing data. Software is broadly classified into System Software and Application Software.
A. System Software: System software is used to manage and control the computer hardware, perform internal operations, read input data, and provide output. It is further divided into:
(i) Operating System: An operating system is a set of programs that manages the overall functioning of a computer system and serves as an interface between the user and the hardware. It controls system resources and coordinates all activities of the computer. Examples include Windows, macOS, Ubuntu, and DOS.
(ii) Programming Software: Programming software consists of tools and programs used to create, translate, and execute computer programs. It converts source code into machine language that the computer can understand. Examples include C, COBOL, Pascal, and other programming languages
B. Application software: Application software is a programme created to carry out a specific task or a bunch of tasks for a user. It is further divided into two parts:
(i) Utility Software: Utility software helps manage, maintain, and optimize computer resources and performance. Examples include antivirus programs, file management tools, backup software, and disk clean-up utilities.
(ii) Connectivity Software: Connectivity software enables communication and data sharing between computers, servers, and networks. It facilitates the exchange of information across different systems and supports network connectivity and communication.
3.People:
People are one of the most important components of a computer system and are often referred to as liveware. They are responsible for designing, operating, managing, and using the system. Different types of people interact with a computer system to ensure its effective functioning
A. System Analysts: System analysts are professionals who study user requirements, design system processes, and plan how a computer system will function. They act as a link between users and programmers to develop efficient systems.
B. System Programmers: System programmers are responsible for writing, testing, and maintaining the programs and codes that enable a computer system to operate effectively. They develop software according to the system requirements.
C. End Users: End users are the individuals who operate and use the computer system to perform various tasks. They interact directly with the software and hardware to carry out their day-to-day activities and utilize the system's services
4. Procedure:
A procedure is a set of step-by-step instructions designed to perform a specific task and achieve the desired results. Procedures ensure that computer system operations are carried out efficiently, accurately, and consistently. In a computer system, procedures are generally classified into three types.
A. Hardware-oriented Procedure: A hardware-oriented procedure explains the methods and steps involved in operating, maintaining, and handling hardware components of a computer system. It provides instructions for the proper use of physical devices.
B. Software-oriented Procedure: A software-oriented procedure provides detailed instructions on how to use a specific software application. It guides users in performing tasks, entering data, and utilizing software features effectively.
C. Internal Procedure: An internal procedure governs the flow of information and coordination among different components of a computer system. It ensures that all parts of the system work together smoothly and efficiently to achieve overall system objectives.
5. Data:
Data refers to raw facts and figures that are entered into a computer system for processing. These facts and figures remain unorganized and meaningless until they are processed by the computer. The computer interprets the data using machine language, stores it in memory, classifies it for processing, and converts it into meaningful information according to the instructions provided. The resulting information can then be used for analysis, decision-making, and various business activities. In a computerised accounting system, data serves as the foundation for generating accurate financial information and reports.
6. Connectivity:
Connectivity refers to the ability of computers and other devices to connect and communicate with each other through a network. It enables the sharing of information, data, files, software, and other resources between different systems. Connectivity can be established using various communication mediums such as wires, cables, satellites, infrared technology, Bluetooth, and Wi-Fi. Through connectivity, users can access and exchange information efficiently regardless of their location. One of the most common and widely used examples of connectivity is the Internet, which connects millions of computers and devices worldwide
Benefits of Computerised Accounting System
1. Higher Accuracy: Computerised systems reduce human errors in calculations, posting, and balancing. Once data is entered correctly, the system automatically handles computations like totals, GST, and depreciation.
2. Faster Processing: Transactions are recorded and processed instantly. Tasks like generating invoices, trial balances, or profit & loss statements take seconds instead of hours or days.
3. Real-Time Financial Information: You can view up-to-date financial reports at any time, helping managers make quick and informed decisions.
4. Better Data Security: Accounting software allows password protection, user roles, and backups, which makes financial data safer than physical books.
5. Easy Reporting and Analysis: Reports such as balance sheets, cash flow statements, and sales summaries can be generated automatically and customized easily.
6. Cost and Time Efficiency: Although initial setup may cost money, CAS reduces long-term costs by saving labour, paper work, and audit time.
7. Scalability: As a business grows, the system can handle more transactions without major changes in process.
8. Simplified Tax Compliance: Modern systems automatically calculate taxes (like GST) and help in filing returns more efficiently.
