Chapter 13 Computerised Accounting System

1) Front- end interface : It is the link between the user and the database oriented software, through which the user communicates to the back-end database.
2) Back-end Database : It stores data which can be retrieved by the user only to the extent he is authorised to access.
3) Data Processing : It is the process of transforming the data into information useful for making decisions.
4) Reporting System : It is the system which helps in composing all the information in some integrated form known as a report.

Thus, the computerised accounting system is a system wherein the difference data is collected, processed and interpreted using suitable software to render useful reports.

1) Ready to use Software : A variety of readymade softwares is available in the market. These softwares are for users at large and are not developed according to the requirements of any specific user. Most popular readymade softwares available in the market are Tally, Ex. Busy etc.

2) Customised Software : The term ‘Customised Software’ means making changes in the ready to use Software so as to suit the specific requirements of the user. Any readymade software can be changed according to the needs and specifications of the user. However, the cost of installation of Customised softwares are high because the cost of change is to be paid by the user.

3) Tailor-made Software : The term ‘tailor-made software’ means developing a software according to the needs and specifications of the user. These softwares are not available off-the-shelf.

1) Unix Operating System : Unix was initially written in assembly language. Later on, it was replaced by C, and Unix, rewritten in C and was developed into a large, complex family of inter-related operating systems. The major categories include BSD, and Linux.

2) Linux : Linux is a Unix-like operating system and was developed without any Unix code. Linux is an open license model and code is available for study and modification. It has superseded Unix on many platforms. Linux is commonly used in smartphones and smartwatches.

1) High Speed
2) High Reliability
3) Accuracy
4) Updating of Information
5) Efficiency
6) Legibility
7) Lower Cost
8) Timely Reporting
9) Flexible Reporting
10) Storage and Retrieval
11) Security of Data
12) Queries

Ready to use accounting packages is best suitable for small and conventional businesses.

(i) Customised accounting packages are best suitable for large and medium businesses.
(ii) Tailored accounting packages are best suitable for large and typical businesses.

A Computerised Accounting System is that accounting information system that helps in processing the financial transactions and events as per the Generally Accepted Accounting Principles (GAAP) and leads to the generation of reports as per the requirements of the users.

An accounting system whether manual or computerised has two parameters, namely,
1) It has to follow the well defined concepts known as the accounting principles
2) It has to maintain the user-defined structure for maintained of records and generation of reports.

Advantages are:

• Faster and efficient in processing of information.
• Automatic generation of accounting documents like invoices, cheques and statement of account.
• With the larger reductions in the cost of hardware and software and availability of user-friendly accounting software package, it is relatively cheaper like maintaining a manual accounting system.
• More timely information can be produced.
• No more manual processing of the data- all automatically posted to the various ledgers/accounts.
• Many types of useful reports can be generated for management to make decisions.

1) Ready to Use Software: A variety of readymade softwares is available in the market. These softwares are for users at large and are not developed according to the requirements of any specific user. Most popular readymade softwares available in the market is Tally, Ex. Busy etc.

2) Customised Software: The term 'Customised Software' means making changes in the ready to use Software so as to suit thespecific requirements of the user. Any readymade software can be changed according to the needs and specifications of the user. However, the cost of installation of Customised softwares are high because the cost of change is to be paid by the user.

3) Tailor-made Software: The term 'tailor-made software' means developing a software according to the needs and specifications of the user. These softwares are not available off-the-shelf.

The following factors are usually taken in considerations before sourcing accounting software.

(i) Flexibility: Flexibility is the first and most important thing while selecting the accounting software. The flexibility must be there in data entry and the availability and design of various reports expected from it.

(ii) Cost of Installation and Maintenance: The choice of the software obviously requires consideration of organisation ability to afford the hardware and software. A simple guideline to take such a decision is the cost benefit analysis of the available options and the financing opportunities available to the firm.

(iii) Size of Organisation: The size of organisation and the volume of business transactions do affect the software choices. Small organisations, e.g., in non-profit organisations, where the number of accounting transactions is not so large, may opt for a simple, single user operated software. While, a large organisation may require sophisticated software to meet the multi-user requirements, geographically scattered and connected through complex networks.

(iv) Ease of Adaptation and Training Needs: Some accounting software is user friendly requiring a simple training to the users. However, some other complex software packages linked to other information systems require intensive training on a continuous basis. The software must be capable of attracting users and if it requires simple training, should be able to motivate its potential users.

(v) Utilities/MIS Reports: The MIS reports and the degree to which they are used in the organisation also determine the acquisition of software. e.g., software that requires simply producing the final accounts for cash flow/ratio analysis may be ready-to-use software. However, the software, which is expected to produce cost records, needs to be customized as per user requirements.

I do agree with the statement that computerised accounting systems are the best form of accounting system. A computerised accounting system is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements.

As we know that every accounting system, manual or computerised, has two aspects. First, it has to work under a set of well-defined concepts called accounting principles.

Another, that there is a user-defined framework for maintenance of records and generation of reports. Here, it is worth mentioning that the modern computerised accounting systems are based on the concept of database. A database is implemented using a database management system, which is defined by a set of computer programmes(or software) that manage and organise data effectively and provide access to the stored data by the application programmes.

The accounting database is well-organised with an active interface that uses accounting application programs and a reporting system. Computerised accounting is also one of the database-oriented applications wherein the transaction data is stored in a well-organised database.

The user operates on such a database using the required and desired interface and also takes the desired reports by suitable transformations of stored data into information. Therefore, the fundamentals of computerised accounting embrace all the basic requirements of any database-oriented application in computers.

A computerised accounting system provides us speed, accuracy, reliability and helps us in recording, summarising and analysing the accounting transactions with the best suitable method and moreover make the reporting so easy to the top level management. Hence, it can be said that the computerised accounting systems are the best accounting system.

The framework of storage and processing of data is called as Operating environment .

Database is implemented using DBMS .

A sequence of actions taken to transform the data into decision useful information is called Data Processing .

An appropriate accounting software for a small business organisation having only one user and single office location would be Ready to use .