Computerised Accounting System (A Project Report)

In this report we will discuss about the Computerised Accounting System:- 1. Features of Computerised Accounting System 2. Codification and Grouping of Accounts 3. Spread-sheet Software 4. Pre-packaged Accounting Software 5. Customised Accounting Software 6. Enterprise Resource Planning (ERP) Software 7. Outsourcing of Accounting Function 8. Choice of an Alternative.

Project Report Contents:

  1. Features of Computerised Accounting System
  2. Codification and Grouping of Accounts
  3. Spread-sheet Software
  4. Pre-packaged Accounting Software
  5. Customised Accounting Software
  6. Enterprise Resource Planning (ERP) Software
  7. Outsourcing of Accounting Function
  8. Choice of an Alternative

1. Features of Computerised Accounting System:

The following are the features of computerised accounting system:-

(i) A number of computers are used which are used by the members of the office staff who know how to operate them.

(ii) Usually, a number of computer software’s are used. A computer software includes any programme or routine that performs a desired function or set of functions quickly and the documentation required to describe and maintain that programme or routine. The computer software may be developed by the firm’s staff specifically for the business or it may be software acquired from the market.

(iii) Acquired software may consist of a spread-sheet package or may be pre-packaged accounting software. Larger organisations may use an Enterprise Resource Planning (ERP) package for developing a customised accounting package.

(iv) Work is done with great speed and a very high level of accuracy.

(v) Sometimes, the whole function of accounting is outsourced where the firm gets its financial accounting processed by an outside agency which also uses computers to perform the function.

(vi) The system poses the problems of controls, security and integrity as information is stored in soft copies inside the computers. There may be unauthorised access to the data.


2. Codification and Grouping of Accounts:

In manual accounting system, account codes are rarely used. In computerised accounting also, there are many accounting software’s available which support non-coded accounting system. But mostly a computerised accounting system uses a well-defined coding system.

Proper codification requires a systematic classification of accounts. The main unit of classification is the major heads which are divided into minor heads. Each of the minor head is further divided into subordinate heads generally known as sub-heads. The sub-heads are further divided into detailed heads. Thus, there may be a four tier arrangement of the classification structure of accounts.

To give you an idea, the following may be a part of codification of accounts in a manufacturing concern:-

Revenues (1000-1499)

1100 Domestic

1200 Export Expenses (1500-7999)

Manufacturing Expenses (1500-1999)

1500 Raw Materials Consumed

1600 Direct Labour

1601 Wages 1700 Power

1700 Fuel

1800 Carriage Inwards

Selling Expenses (2000-2999)

2000 Advertising

2100 Commission

2200 Discount

Administrative Expenses (3000-3999)

3010 Postage

3011 Telegrams

3013 Telephone

3100 Salary

3205 Repairs to Furniture

3306 Travelling Expenses

3388 Insurance

3389 Rent

3392 Rates

3396 Audit Fee

3397 Depreciation on Furniture

There is always some logic behind the classification. For example, two major heads of a company may be car-manufacture and servicing of cars. Car manufacture may be divided into manufacture of chasis, the door, the front panel etc. The servicing of cars may be divided into servicing under the guarantee period and servicing outside the guarantee period.

The detailed classification of account heads and the order in which the major and minor heads are to appear in account-records must be got approved by the top management and reviewed by the auditor before being introduced in the enterprise.


3. Spread-sheet Software:

Spread sheet package may be used to maintain accounts. In doing so, the user will have to keep a control of the figures also. Special spread sheet controls including physical spread sheet controls like spread sheets locked on a protected shared drive with restricted access and read / write access controls and password protected-cells and formulas with passwords may be used.

Advantages:

The following are its advantages:

1. It is simple to use and easy to understand. Accounts can be easily regulated.

2. Most of the common functions like doing calculations, setting formulas etc. can be easily done.

3. Presentation can be made in various forms including graphical presentations like bar diagrams, histograms, pie-charts etc.

Disadvantages:

The following are the disadvantages:-

1. It can accept data only up to a specified limit.

2. Simultaneous access on a network may not be possible.

3. Double entry is not automatically completed. Also, reports are not automatically generated.


4. Pre-packaged Accounting Software:

There are several pre-packaged accounting software’s which are available in the market. These software’s are easy to use and relatively inexpensive. The installation of a pre-packaged software it very simple. An installation diskette or CD is provided with the software to install the software on a personal computer.

A network version of the software is also available which has to be installed in the server and then work can be performed from the various workstations or nodes connected to the server. User manual is also provided to guide the user of software. The vendor to the software normally provides regular updates to take care of the changes of law as well as to provide additional features.

Advantages:

The following are the advantages of pre-packaged accounting software;

(i) It is easy to install.

(ii) It is relatively inexpensive.

(ii) It is easy to use.

(iv) Backup procedure is simple.

(v) It is specially effective for medium sized business houses.

Disadvantages:

The following are the disadvantages of pre-packaged accounting software:-

(i) A standard package may not be able to take care of the complexities of the modem business house. There may be certain peculiarities of the particular business which may not be taken care of by the standard package. Many reports which are required may not be possible.

(ii) It may not cover all the functional areas. For example, production process may not be covered.

(iii) Customization may not be possible in most such software’s.

(iv) There is lack of security because any person can view data of all concerns with common access password. Customized accounting software does not suffer from this drawback.

(v) Usually in the initial years, there are bugs which take long to be rectified by the vendor.

Consideration While Selecting Pre-packaged Software:

To select appropriate pre-packaged software from a number of them available in the market, the following points need to be considered:

(i) An attempt should be made to match the requirements of the particular business with the available solutions. The one which fulfils the maximum requirements should be picked up.

(ii) Costs of the different packages have also to be taken into account.

(iii) It should not be very detailed or cumbersome to use.

(iv) Reputation and track record of the vendor will also be considered. A vendor who is prepared to give updates has to be preferred.


5. Customised Accounting Software:

A customised accounting software is one where the software is developed on the basis of requirement specifications provided by the organisation. First of all, a feasibility study is made, If it is decided to go ahead, requirements of the business unit are noted.

Based on these requirements, the system analyst prepares a requirement specification which is handed over to the top management for approval. After the requirement specification has been approved, the designing process is started. After development of the system, it is tested. If it is found satisfying, it is implemented.

Advantages:

The following are the advantages of a customised accounting package:

(i) All the functional areas are covered as per requirement.

(ii) The input screens can be tailor-made to match the input documents for ease of data entry,

(iii) The reports can be as per specifications of the organisation.

(iv) Bar-code scanners can be used as input devices suitable for the specific needs of an organisation

Disadvantages:

The following are the disadvantages that may arise in a customised accounting package:-

(i) The system may work in a defective manner if

(a) requirement specifications are incomplete or ambiguous.

(b) documentation is incomplete, or

(c) control measures are inadequate

(ii) Inadequate testing may result in bugs remaining in the software.

(iii) Vendor of the software may be unwilling to give support due to other commitments. He

may also be not willing to part with the source code or enter into an escrow agreement,

(vi) If frequent changes are made to the system and they are not well handled, there may be defective functioning.


6. Enterprise Resource Planning (ERP) Software:

Enterprise Resource Planning (ERP) Software is an integrated software package that manages the business across the entire organisation. Big organisations often adopt this package.

Advantages:

The following are the advantages of an ERP:-

(i) An ERP is a generalized package which covers most of the common functions

(ii) Most of the desired reports are available. Moreover, these reports are standardized across industry and acceptable to the users.

(iii) As it is an integrated package, duplication of data entry is avoided.

(iv) Much more information is made available by this package than what is available otherwise.

Disadvantages:

The following are the disadvantages of an ERP:-

(i) At times, the user may have to modify his business procedure to use ERP effectively.

(ii) ERP is often too expensive for the small and medium sized organisations.

(iii) There may be implementation hurdles.

(iv) It is a complex software.

Choice of an ERP:

The following factors determine the choice of an ERP:

(i) The ERP that matches most of the requirements of an organisation is preferred. It is evaluated whether all the reports required by the business will be available or not.

(ii) The reputation and track record of vendor is considered

(iii) Costs of different available ERPs are compared.


7. Outsourcing of Accounting Function:

The accounting function may be outsourced to an outside party for a fee. It is done to save cost and more importantly to take the advantage of expertise of the outside party. Accounting software is used by the outside party which processes the data given to it and which hands over different reports to the client from time to time.

Advantages:

The following are the advantages of outsourcing the accounting functions:

(i) it is more economical.

(ii) It saves time thus enabling the concern to concentrate on the core area of business activity.

(iii) It enables the organisation to take the advantage of expert knowledge of the outside party to whom the accounting function is outsourced.

(iv) The organisation is not bothered about the people leaving the organisation in accounting department.

Disadvantages:

The following are the disadvantages of outsourcing the accounting function;

(i) The data related to the organisation is in the hands of an outside party. It may endanger security and confidentiality of the organisation data.

(ii) The outside agency may provide inadequate services. The desirable standards may not be met and ultimately the system may prove to be more costly rather than cheaper.

(iii) The outside agency may be catering to a large number of clients due to which service may not be timely.

Choice of outsourcing vendor:

The following factors are considered while choosing an outsourcing vendor:

(i) The extent to which the services offered by the vendor meet the requirements of the concern.

(ii) The reputation, background and track-record of the vendor.

(iii) The comparative costs proposed by the different vendors.


8. Choice of an Alternative:

To a business concern different alternatives are available. The alternatives include spread-sheet package, pre-packaged accounting software, customised accounting package, ERP package and outsourcing of the accounting function to an outside party.

The following points are considered while choosing an alternative:

(i) Scale of operation. A small or medium sized concern may pick a pre-packaged accounting package while a large sized organisation may have to opt for customised software or ERP package.

(ii) If the operation to be computerised is complex with several functional areas, customised software or an ERP package may be the choice.

(iii) Customised software is the solution if the organisation has several non-standard requirements.

(iv) The capacity of the concern to bear the cost is also considered. The spread sheet and pre-p­ackaged accounting software are cheaper. The customised software and the ERP package are comparatively costly.


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