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 Page 1


Applications of Computers in Accounting 12
C
omputer technology and its usage have
registered a significant development during the
last three decades. Historically, computers have
been used effectively in science and technology to
solve the complex computational and logical
problems. They have also been used for carrying
out economic planning and forecasting processes.
Recently, modern day computers have made their
presence felt in business and industry. The most
important impact of computers has been on the
manner in which data is stored and processed
within an organisation. Although manual data
processing for Management Information System
(MIS) has been quite common in the past, modern
MIS would be nearly impossible without the use of
computer systems. In this chapter we shall discuss
the need for the use of computers in accounting,
the nature of accounting information system and
the types of accounting related MIS reports.
12.1 Meaning and Elements of Computer System
A computer is an electronic device, which is capable
of performing a variety of operations as directed by
a set of instructions. This set of instructions is called
a computer programme. A computer system is a
combination of six elements:
12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware
Hardware of computer consists of physical components
such as keyboard, mouse, monitor and processor. These
are electronic and electromechanical components.
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to :
• state the meaning,
elements and capabilit-
ies of computer system;
• explain the need for
computers in account-
ing;
• describe the automa-
tion of accounting
process;
• explain design of
accounting reports
from the accounting
data;
• list the various
Management Informa-
tion System (MIS)
reports and their uses;
• explain the data
interface between
information systems.
2022-23
Page 2


Applications of Computers in Accounting 12
C
omputer technology and its usage have
registered a significant development during the
last three decades. Historically, computers have
been used effectively in science and technology to
solve the complex computational and logical
problems. They have also been used for carrying
out economic planning and forecasting processes.
Recently, modern day computers have made their
presence felt in business and industry. The most
important impact of computers has been on the
manner in which data is stored and processed
within an organisation. Although manual data
processing for Management Information System
(MIS) has been quite common in the past, modern
MIS would be nearly impossible without the use of
computer systems. In this chapter we shall discuss
the need for the use of computers in accounting,
the nature of accounting information system and
the types of accounting related MIS reports.
12.1 Meaning and Elements of Computer System
A computer is an electronic device, which is capable
of performing a variety of operations as directed by
a set of instructions. This set of instructions is called
a computer programme. A computer system is a
combination of six elements:
12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware
Hardware of computer consists of physical components
such as keyboard, mouse, monitor and processor. These
are electronic and electromechanical components.
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to :
• state the meaning,
elements and capabilit-
ies of computer system;
• explain the need for
computers in account-
ing;
• describe the automa-
tion of accounting
process;
• explain design of
accounting reports
from the accounting
data;
• list the various
Management Informa-
tion System (MIS)
reports and their uses;
• explain the data
interface between
information systems.
2022-23
464 Accountancy
12.1.2 12.1.2 12.1.2 12.1.2 12.1.2     Software Software Software Software Software
A set(s) of programmes, which is used to work with such hardware  is called
its software. A coded set of instructions stored in the form of circuits is called
firmware. There are six types of software as follows:
(a) Operating System : An integrated set of specialised programmes that
are meant to manage the resources of a computer and also facilitate its
operation is called operating system. It creates a necessary interface
that is an interactive link, between the user and the computer hardware.
(b) Utility Programmes : These are a set of computer programmes, which are
designed to perform certain supporting operations: such as programme
to format a disk, duplicate a disk, physically reorganise stored data and
programmes.
(c) Application Software : These are user oriented programmes designed
and developed for performing certain specified tasks: such as payroll
accounting, inventory accounting, financial accounting, etc.
(d) Language Processors : These are the software, which check for language
syntax and eventually translate (or interpret) the source programme
(that is a programme written in a computer language) into machine
language (that is the language which the computer understands).
(e) System Software : These are a set of programmes which control such
internal functions as reading data from input devices, transmitting
processed data to output devices and also checking the system to ensure
that its components are functioning properly.
(f) Connectivity Software : These are a set of programmes which create and
control a connection between a computer and a server so that the
computer is able to communicate and share the resources of  server
and other connected computers.
12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People
People interacting with the computers are also called live-ware of the computer
system. They constitute the most important part of the computer system :
• System Analysts are the people who design data processing systems.
• Programmers are the people who write programmes to implement the data
processing system design.
• Operators are the people who participate in operating the computers.
People who respond to the procedures instituted for executing the computer
programmes are also a part of live-ware.
12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures
The procedure means a series of operations in a certain order or manner to
achieve desired results. There are three types of procedures which constitute
2022-23
Page 3


Applications of Computers in Accounting 12
C
omputer technology and its usage have
registered a significant development during the
last three decades. Historically, computers have
been used effectively in science and technology to
solve the complex computational and logical
problems. They have also been used for carrying
out economic planning and forecasting processes.
Recently, modern day computers have made their
presence felt in business and industry. The most
important impact of computers has been on the
manner in which data is stored and processed
within an organisation. Although manual data
processing for Management Information System
(MIS) has been quite common in the past, modern
MIS would be nearly impossible without the use of
computer systems. In this chapter we shall discuss
the need for the use of computers in accounting,
the nature of accounting information system and
the types of accounting related MIS reports.
12.1 Meaning and Elements of Computer System
A computer is an electronic device, which is capable
of performing a variety of operations as directed by
a set of instructions. This set of instructions is called
a computer programme. A computer system is a
combination of six elements:
12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware
Hardware of computer consists of physical components
such as keyboard, mouse, monitor and processor. These
are electronic and electromechanical components.
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to :
• state the meaning,
elements and capabilit-
ies of computer system;
• explain the need for
computers in account-
ing;
• describe the automa-
tion of accounting
process;
• explain design of
accounting reports
from the accounting
data;
• list the various
Management Informa-
tion System (MIS)
reports and their uses;
• explain the data
interface between
information systems.
2022-23
464 Accountancy
12.1.2 12.1.2 12.1.2 12.1.2 12.1.2     Software Software Software Software Software
A set(s) of programmes, which is used to work with such hardware  is called
its software. A coded set of instructions stored in the form of circuits is called
firmware. There are six types of software as follows:
(a) Operating System : An integrated set of specialised programmes that
are meant to manage the resources of a computer and also facilitate its
operation is called operating system. It creates a necessary interface
that is an interactive link, between the user and the computer hardware.
(b) Utility Programmes : These are a set of computer programmes, which are
designed to perform certain supporting operations: such as programme
to format a disk, duplicate a disk, physically reorganise stored data and
programmes.
(c) Application Software : These are user oriented programmes designed
and developed for performing certain specified tasks: such as payroll
accounting, inventory accounting, financial accounting, etc.
(d) Language Processors : These are the software, which check for language
syntax and eventually translate (or interpret) the source programme
(that is a programme written in a computer language) into machine
language (that is the language which the computer understands).
(e) System Software : These are a set of programmes which control such
internal functions as reading data from input devices, transmitting
processed data to output devices and also checking the system to ensure
that its components are functioning properly.
(f) Connectivity Software : These are a set of programmes which create and
control a connection between a computer and a server so that the
computer is able to communicate and share the resources of  server
and other connected computers.
12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People
People interacting with the computers are also called live-ware of the computer
system. They constitute the most important part of the computer system :
• System Analysts are the people who design data processing systems.
• Programmers are the people who write programmes to implement the data
processing system design.
• Operators are the people who participate in operating the computers.
People who respond to the procedures instituted for executing the computer
programmes are also a part of live-ware.
12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures
The procedure means a series of operations in a certain order or manner to
achieve desired results. There are three types of procedures which constitute
2022-23
465 Applications of Computers in Accounting
part of computer system: hardware-oriented, software-oriented and internal
procedure. Hardware–oriented procedure provide details about components
and their method of operation. The software-oriented procedure provides a
set of instructions required for using the software of computer system. Internal
procedure is instituted to ensure smooth flow of data to computers by
sequencing the operation of each sub-system of overall computer system.
12.1.5 Data 12.1.5 Data 12.1.5 Data 12.1.5 Data 12.1.5 Data
These are facts and may consist of numbers, text, etc. These are gathered and
entered into a computer system. The computer system in turn stores, retrieves,
classifies, organises and synthesises the data to produce information according
to a pre-determined set of instructions. The data is, therefore, processed and
organised to create information that is relevant and can be used for decision-
making.
12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity
It is being acknowledged as a sixth element of the computer system. The manner
in which a particular computer system is connected to others say through
telephone lines, microwave transmission, satellite link, etc. is the element of
connectivity.
12.2 Capabilities of Computer System
A computer system possesses some characteristics, which, in comparison to
human beings, turn out to be its capabilities. These are as follows ;
Speed : It refers to the amount of time computers takes in accomplishing a
task or completes an operation. Computers require far less time than human
beings in performing a task. Normally, human beings take into account a
second or minute as unit of time. But computers have such a fast operating
capability that the relevant unit of time is fraction of a second. Most of the
modern computers are capable of performing a 100 million calculations per
second and that is why the industry has developed Million Instructions per
Second (MIPS) as the criterion to classify different computers according to
speed.
Accuracy : It refers to the degree of exactness with which computations are
made and operations are performed. One might spend years in detecting errors
in computer calculations or updating a wrong record. Most of the errors in
Computer Based Information System (CBIS) occur because of bad programming,
erroneous data and deviation from procedures. These errors are caused by human
beings. Errors attributable to hardware are normally detected and corrected by
the computer system itself. The computers rarely commit errors and perform all
types of complex operations accurately.
2022-23
Page 4


Applications of Computers in Accounting 12
C
omputer technology and its usage have
registered a significant development during the
last three decades. Historically, computers have
been used effectively in science and technology to
solve the complex computational and logical
problems. They have also been used for carrying
out economic planning and forecasting processes.
Recently, modern day computers have made their
presence felt in business and industry. The most
important impact of computers has been on the
manner in which data is stored and processed
within an organisation. Although manual data
processing for Management Information System
(MIS) has been quite common in the past, modern
MIS would be nearly impossible without the use of
computer systems. In this chapter we shall discuss
the need for the use of computers in accounting,
the nature of accounting information system and
the types of accounting related MIS reports.
12.1 Meaning and Elements of Computer System
A computer is an electronic device, which is capable
of performing a variety of operations as directed by
a set of instructions. This set of instructions is called
a computer programme. A computer system is a
combination of six elements:
12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware
Hardware of computer consists of physical components
such as keyboard, mouse, monitor and processor. These
are electronic and electromechanical components.
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to :
• state the meaning,
elements and capabilit-
ies of computer system;
• explain the need for
computers in account-
ing;
• describe the automa-
tion of accounting
process;
• explain design of
accounting reports
from the accounting
data;
• list the various
Management Informa-
tion System (MIS)
reports and their uses;
• explain the data
interface between
information systems.
2022-23
464 Accountancy
12.1.2 12.1.2 12.1.2 12.1.2 12.1.2     Software Software Software Software Software
A set(s) of programmes, which is used to work with such hardware  is called
its software. A coded set of instructions stored in the form of circuits is called
firmware. There are six types of software as follows:
(a) Operating System : An integrated set of specialised programmes that
are meant to manage the resources of a computer and also facilitate its
operation is called operating system. It creates a necessary interface
that is an interactive link, between the user and the computer hardware.
(b) Utility Programmes : These are a set of computer programmes, which are
designed to perform certain supporting operations: such as programme
to format a disk, duplicate a disk, physically reorganise stored data and
programmes.
(c) Application Software : These are user oriented programmes designed
and developed for performing certain specified tasks: such as payroll
accounting, inventory accounting, financial accounting, etc.
(d) Language Processors : These are the software, which check for language
syntax and eventually translate (or interpret) the source programme
(that is a programme written in a computer language) into machine
language (that is the language which the computer understands).
(e) System Software : These are a set of programmes which control such
internal functions as reading data from input devices, transmitting
processed data to output devices and also checking the system to ensure
that its components are functioning properly.
(f) Connectivity Software : These are a set of programmes which create and
control a connection between a computer and a server so that the
computer is able to communicate and share the resources of  server
and other connected computers.
12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People
People interacting with the computers are also called live-ware of the computer
system. They constitute the most important part of the computer system :
• System Analysts are the people who design data processing systems.
• Programmers are the people who write programmes to implement the data
processing system design.
• Operators are the people who participate in operating the computers.
People who respond to the procedures instituted for executing the computer
programmes are also a part of live-ware.
12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures
The procedure means a series of operations in a certain order or manner to
achieve desired results. There are three types of procedures which constitute
2022-23
465 Applications of Computers in Accounting
part of computer system: hardware-oriented, software-oriented and internal
procedure. Hardware–oriented procedure provide details about components
and their method of operation. The software-oriented procedure provides a
set of instructions required for using the software of computer system. Internal
procedure is instituted to ensure smooth flow of data to computers by
sequencing the operation of each sub-system of overall computer system.
12.1.5 Data 12.1.5 Data 12.1.5 Data 12.1.5 Data 12.1.5 Data
These are facts and may consist of numbers, text, etc. These are gathered and
entered into a computer system. The computer system in turn stores, retrieves,
classifies, organises and synthesises the data to produce information according
to a pre-determined set of instructions. The data is, therefore, processed and
organised to create information that is relevant and can be used for decision-
making.
12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity
It is being acknowledged as a sixth element of the computer system. The manner
in which a particular computer system is connected to others say through
telephone lines, microwave transmission, satellite link, etc. is the element of
connectivity.
12.2 Capabilities of Computer System
A computer system possesses some characteristics, which, in comparison to
human beings, turn out to be its capabilities. These are as follows ;
Speed : It refers to the amount of time computers takes in accomplishing a
task or completes an operation. Computers require far less time than human
beings in performing a task. Normally, human beings take into account a
second or minute as unit of time. But computers have such a fast operating
capability that the relevant unit of time is fraction of a second. Most of the
modern computers are capable of performing a 100 million calculations per
second and that is why the industry has developed Million Instructions per
Second (MIPS) as the criterion to classify different computers according to
speed.
Accuracy : It refers to the degree of exactness with which computations are
made and operations are performed. One might spend years in detecting errors
in computer calculations or updating a wrong record. Most of the errors in
Computer Based Information System (CBIS) occur because of bad programming,
erroneous data and deviation from procedures. These errors are caused by human
beings. Errors attributable to hardware are normally detected and corrected by
the computer system itself. The computers rarely commit errors and perform all
types of complex operations accurately.
2022-23
466 Accountancy
Reliability : It refers to the ability with which the computers remain functional to
serve the user. Computers systems are well-adapted to performing repetitive
operations. They are immune to tiredness, boredom or fatigue. Therefore, they are
more reliable than human beings. Yet there can be failures of computer system
due to internal and external reasons. Any failure of the computer in a highly
automated industry is unacceptable. Therefore, the companies in such situations
provide for back-up facility to swiftly take over operations without loss of time.
Versatility : It refers to the ability of computers to perform a variety of tasks: simple
as well as complex. Computers are usually versatile unless designed for a specific
application. A general purpose computer is capable of being used in any area of
application: business, industry, scientific, statistical, technological, communications
and so on. A general purpose computer, when installed in an organisation, can
take over the jobs of several specialists because of its versatility.  computer system
when installed can take over the jobs of all these specialists because of being highly
versatile. This further ensures fuller utilisation of its capability.
Storage : It refers to the amount of data a computer system can store and
access. The computer systems, besides having instant access to data, have
huge capacity to store such data in a very small physical space. A CD-ROM
with 4.7” of diameter is capable of storing a large number of books, each
containing thousands of pages and yet leave enough space for storing more
such material. A typical mainframe computer system is capable of storing
and providing online billion of characters and thousands of graphic images.
It is clear from the above discussion that computer capabilities outperform
the human capabilities. As a result, a computer, when used properly, will
improve the efficiency of an organisation.
12.3 Limitations of a Computer System
In spite of possessing all the above capabilities, computers suffer from the
following limitations :
Lack of Commonsense : Computer systems as on date do not possess any
common sense because no full-proof algorithm has been designed to
programme common sense. Since computers work according to a stored
programme(s), they simply lack of commonsense.
Zero IQ : Computers are dumb devices with zero Intelligence Quotient (IQ).
They cannot visualise and think what exactly to do under a particular situation,
unless they have been programmed to tackle that situation. Computers must
be directed to perform each and every action, however, minute it may be.
Lack of Decision-making : Decision-making is a complex process involving
information, knowledge, intelligence, wisdom and ability to judge.  Computers
cannot take decisions on their own because they do not possess all the
essentials of decision-making. They can be programmed to take such decisions,
2022-23
Page 5


Applications of Computers in Accounting 12
C
omputer technology and its usage have
registered a significant development during the
last three decades. Historically, computers have
been used effectively in science and technology to
solve the complex computational and logical
problems. They have also been used for carrying
out economic planning and forecasting processes.
Recently, modern day computers have made their
presence felt in business and industry. The most
important impact of computers has been on the
manner in which data is stored and processed
within an organisation. Although manual data
processing for Management Information System
(MIS) has been quite common in the past, modern
MIS would be nearly impossible without the use of
computer systems. In this chapter we shall discuss
the need for the use of computers in accounting,
the nature of accounting information system and
the types of accounting related MIS reports.
12.1 Meaning and Elements of Computer System
A computer is an electronic device, which is capable
of performing a variety of operations as directed by
a set of instructions. This set of instructions is called
a computer programme. A computer system is a
combination of six elements:
12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware 12.1.1 Hardware
Hardware of computer consists of physical components
such as keyboard, mouse, monitor and processor. These
are electronic and electromechanical components.
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to :
• state the meaning,
elements and capabilit-
ies of computer system;
• explain the need for
computers in account-
ing;
• describe the automa-
tion of accounting
process;
• explain design of
accounting reports
from the accounting
data;
• list the various
Management Informa-
tion System (MIS)
reports and their uses;
• explain the data
interface between
information systems.
2022-23
464 Accountancy
12.1.2 12.1.2 12.1.2 12.1.2 12.1.2     Software Software Software Software Software
A set(s) of programmes, which is used to work with such hardware  is called
its software. A coded set of instructions stored in the form of circuits is called
firmware. There are six types of software as follows:
(a) Operating System : An integrated set of specialised programmes that
are meant to manage the resources of a computer and also facilitate its
operation is called operating system. It creates a necessary interface
that is an interactive link, between the user and the computer hardware.
(b) Utility Programmes : These are a set of computer programmes, which are
designed to perform certain supporting operations: such as programme
to format a disk, duplicate a disk, physically reorganise stored data and
programmes.
(c) Application Software : These are user oriented programmes designed
and developed for performing certain specified tasks: such as payroll
accounting, inventory accounting, financial accounting, etc.
(d) Language Processors : These are the software, which check for language
syntax and eventually translate (or interpret) the source programme
(that is a programme written in a computer language) into machine
language (that is the language which the computer understands).
(e) System Software : These are a set of programmes which control such
internal functions as reading data from input devices, transmitting
processed data to output devices and also checking the system to ensure
that its components are functioning properly.
(f) Connectivity Software : These are a set of programmes which create and
control a connection between a computer and a server so that the
computer is able to communicate and share the resources of  server
and other connected computers.
12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People 12.1.3 People
People interacting with the computers are also called live-ware of the computer
system. They constitute the most important part of the computer system :
• System Analysts are the people who design data processing systems.
• Programmers are the people who write programmes to implement the data
processing system design.
• Operators are the people who participate in operating the computers.
People who respond to the procedures instituted for executing the computer
programmes are also a part of live-ware.
12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures 12.1.4 Procedures
The procedure means a series of operations in a certain order or manner to
achieve desired results. There are three types of procedures which constitute
2022-23
465 Applications of Computers in Accounting
part of computer system: hardware-oriented, software-oriented and internal
procedure. Hardware–oriented procedure provide details about components
and their method of operation. The software-oriented procedure provides a
set of instructions required for using the software of computer system. Internal
procedure is instituted to ensure smooth flow of data to computers by
sequencing the operation of each sub-system of overall computer system.
12.1.5 Data 12.1.5 Data 12.1.5 Data 12.1.5 Data 12.1.5 Data
These are facts and may consist of numbers, text, etc. These are gathered and
entered into a computer system. The computer system in turn stores, retrieves,
classifies, organises and synthesises the data to produce information according
to a pre-determined set of instructions. The data is, therefore, processed and
organised to create information that is relevant and can be used for decision-
making.
12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity 12.1.6 Connectivity
It is being acknowledged as a sixth element of the computer system. The manner
in which a particular computer system is connected to others say through
telephone lines, microwave transmission, satellite link, etc. is the element of
connectivity.
12.2 Capabilities of Computer System
A computer system possesses some characteristics, which, in comparison to
human beings, turn out to be its capabilities. These are as follows ;
Speed : It refers to the amount of time computers takes in accomplishing a
task or completes an operation. Computers require far less time than human
beings in performing a task. Normally, human beings take into account a
second or minute as unit of time. But computers have such a fast operating
capability that the relevant unit of time is fraction of a second. Most of the
modern computers are capable of performing a 100 million calculations per
second and that is why the industry has developed Million Instructions per
Second (MIPS) as the criterion to classify different computers according to
speed.
Accuracy : It refers to the degree of exactness with which computations are
made and operations are performed. One might spend years in detecting errors
in computer calculations or updating a wrong record. Most of the errors in
Computer Based Information System (CBIS) occur because of bad programming,
erroneous data and deviation from procedures. These errors are caused by human
beings. Errors attributable to hardware are normally detected and corrected by
the computer system itself. The computers rarely commit errors and perform all
types of complex operations accurately.
2022-23
466 Accountancy
Reliability : It refers to the ability with which the computers remain functional to
serve the user. Computers systems are well-adapted to performing repetitive
operations. They are immune to tiredness, boredom or fatigue. Therefore, they are
more reliable than human beings. Yet there can be failures of computer system
due to internal and external reasons. Any failure of the computer in a highly
automated industry is unacceptable. Therefore, the companies in such situations
provide for back-up facility to swiftly take over operations without loss of time.
Versatility : It refers to the ability of computers to perform a variety of tasks: simple
as well as complex. Computers are usually versatile unless designed for a specific
application. A general purpose computer is capable of being used in any area of
application: business, industry, scientific, statistical, technological, communications
and so on. A general purpose computer, when installed in an organisation, can
take over the jobs of several specialists because of its versatility.  computer system
when installed can take over the jobs of all these specialists because of being highly
versatile. This further ensures fuller utilisation of its capability.
Storage : It refers to the amount of data a computer system can store and
access. The computer systems, besides having instant access to data, have
huge capacity to store such data in a very small physical space. A CD-ROM
with 4.7” of diameter is capable of storing a large number of books, each
containing thousands of pages and yet leave enough space for storing more
such material. A typical mainframe computer system is capable of storing
and providing online billion of characters and thousands of graphic images.
It is clear from the above discussion that computer capabilities outperform
the human capabilities. As a result, a computer, when used properly, will
improve the efficiency of an organisation.
12.3 Limitations of a Computer System
In spite of possessing all the above capabilities, computers suffer from the
following limitations :
Lack of Commonsense : Computer systems as on date do not possess any
common sense because no full-proof algorithm has been designed to
programme common sense. Since computers work according to a stored
programme(s), they simply lack of commonsense.
Zero IQ : Computers are dumb devices with zero Intelligence Quotient (IQ).
They cannot visualise and think what exactly to do under a particular situation,
unless they have been programmed to tackle that situation. Computers must
be directed to perform each and every action, however, minute it may be.
Lack of Decision-making : Decision-making is a complex process involving
information, knowledge, intelligence, wisdom and ability to judge.  Computers
cannot take decisions on their own because they do not possess all the
essentials of decision-making. They can be programmed to take such decisions,
2022-23
467 Applications of Computers in Accounting
which are purely procedure-oriented. If a computer has not been programmed
for a particular decision situation, it will not take decision due to lack of
wisdom and evaluating faculties. Human beings, on the other hand, possess
this great power of decision-making.
12.4 Components of Computer
The functional components of computer system consist of Input Unit, Central
Processing System and  Output Unit. The way these components are embedded
in a computer may differ from one architectural design to another, yet all of
them constitute the essential building blocks of a computer system.
Diagrammatically, these components may be presented as follows:
Fig. 12.1 : Block diagram of main components of computer
12.4.1 Input Unit 12.4.1 Input Unit 12.4.1 Input Unit 12.4.1 Input Unit 12.4.1 Input Unit
It controls various input devices which are used for entering data into the
computer system.  Keyboard and Mouse, for instance, are  the most commonly
used input device. Other such devices are magnetic tape, magnetic disk, light
pen, optical scanner, Magnetic Ink Character (MICR) Recognition, Optical
Character Recognition (OCR), bar code reader, smart card reader, etc. Besides,
there are other devices which respond to voice and physical touch. A menu
layout is displayed on a touch sensitive screen. Whenever user touches a menu
item on touch-screen, the computer senses which particular menu item has
been touched and accordingly performs the operation associated with that menu
item. Such  touch screens have been installed at major railway stations for
obtaining the online information about arrival and departure of trains.
2022-23
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FAQs on NCERT Textbook - Applications of Computer in Accounting - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

1. What is the role of computer applications in accounting?
Ans. Computer applications play a crucial role in accounting by automating various tasks such as bookkeeping, financial analysis, and reporting. They help in data entry, calculation, storage, and retrieval of financial information, thereby improving accuracy, efficiency, and timeliness in accounting processes.
2. How do computer applications facilitate financial analysis in accounting?
Ans. Computer applications in accounting enable financial analysis by providing tools for data organization, calculation, and presentation. They can generate financial statements, perform ratio analysis, track budget variances, and create visual representations of financial data. These applications streamline the analysis process, allowing accountants to gain insights into a company's financial health and make informed decisions.
3. Can computer applications in accounting handle different accounting methods?
Ans. Yes, computer applications in accounting are designed to handle various accounting methods such as cash basis, accrual basis, and hybrid methods. These applications can accommodate different recording and reporting requirements based on the chosen accounting method. Accountants can set up the software accordingly and ensure accurate financial records and reports.
4. How do computer applications ensure data security in accounting?
Ans. Computer applications employ various measures to ensure data security in accounting. They use encryption techniques to protect sensitive financial information from unauthorized access. Backup and recovery features are implemented to prevent data loss. Additionally, access controls and user authentication mechanisms are in place to restrict unauthorized users from tampering with or manipulating financial data.
5. What are the advantages of using computer applications in accounting?
Ans. Using computer applications in accounting offers several advantages. It improves efficiency by automating repetitive tasks, reduces the chances of errors through accurate calculations, enables faster processing of financial transactions, and provides real-time access to financial information. These applications also enhance data analysis capabilities, facilitate collaboration among accountants, and ensure compliance with accounting regulations.
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