Notes : Computers in Accounting - 2 Class 11 Notes | EduRev

Class 11 : Notes : Computers in Accounting - 2 Class 11 Notes | EduRev

 Page 1


144 
 
Unit:11 
Computers & Accounting Information System 
                       
Unit  at a Glance : - 
? Meaning of Computer 
? Components of a Computer 
? MIS & AIS 
? Advantages of Computerized AIS 
? Limitations of Computerized AIS 
? Role of Computers in Accounting 
? Customized & Readymade Software 
? Database & DBMS 
? Structured Query Language 
? Practice Questions 
 
                                                                   
According to International Standards Organization –  
“ A Computer is a data processor that can perform substantial computations, including 
numerous arithmetic & logical operations, with intervention by a human operator during the 
run.”     
     
Components of a Computer  
1. Input Devices : Such as Keyboard, Mouse etc. 
 
2. CPU: It has three components – The control unit, memory unit and the logical unit. 
 
3. Output Devices: Such As Monitor, Printer. 
 
4. Hardware & Software 
 
The System Software such as MS DOS, Windows 7 etc.- are a set of programs which control 
the operations & help processing. 
The Application software such as MS Word, Tally etc. enables the user to perform useful 
specific functions. 
 
Management Information System (MIS): Is an information system that provides the 
needed information to the managers to manage the organization effectively. It combines the 
three resources viz; technology, information & people for the efficient management of an 
enterprise. 
 
Page 2


144 
 
Unit:11 
Computers & Accounting Information System 
                       
Unit  at a Glance : - 
? Meaning of Computer 
? Components of a Computer 
? MIS & AIS 
? Advantages of Computerized AIS 
? Limitations of Computerized AIS 
? Role of Computers in Accounting 
? Customized & Readymade Software 
? Database & DBMS 
? Structured Query Language 
? Practice Questions 
 
                                                                   
According to International Standards Organization –  
“ A Computer is a data processor that can perform substantial computations, including 
numerous arithmetic & logical operations, with intervention by a human operator during the 
run.”     
     
Components of a Computer  
1. Input Devices : Such as Keyboard, Mouse etc. 
 
2. CPU: It has three components – The control unit, memory unit and the logical unit. 
 
3. Output Devices: Such As Monitor, Printer. 
 
4. Hardware & Software 
 
The System Software such as MS DOS, Windows 7 etc.- are a set of programs which control 
the operations & help processing. 
The Application software such as MS Word, Tally etc. enables the user to perform useful 
specific functions. 
 
Management Information System (MIS): Is an information system that provides the 
needed information to the managers to manage the organization effectively. It combines the 
three resources viz; technology, information & people for the efficient management of an 
enterprise. 
 
145 
 
Accounting Information System (AIS): Is an information system based on the accounting 
database of an organization, helping in storage, processing, summarizing & reporting 
information about an organization. 
It has 3 elements viz: Computerized Accounting, Information and System. 
 
Advantages of Computerized AIS :  
 
1. High Speed : of recording, storage, processing & retrieval of information. 
2. Accuracy : As all the calculations etc. are done by the computer it has accuracy. 
3. Reliability : The information is reliable. 
4. Real Time User Interface : AIS enables direct & simultaneous interaction between user 
& the machine.  
  
    Limitations of Computerized AIS :  
1. Staff Opposition : As it reduces the no of employees, staff usually opposes it. 
2. High Development Costs : Development requires qualified engineering staff & training 
also, so it?s a costly affair. 
3. Security Considerations : Cyber crime & hacking etc. are becoming very common 
these days, therefore security is always a concern. 
4. High costs  makes it suitable only for medium & large sized firms & not for small firms. 
 
Role of Computers in Accounting 
Owing to Globalization the business operations are becoming large scale & complex. The need 
therefore arose to record, compile, summarize & present the accounting information to the large 
number of interested users with greater speed, accuracy & utility. 
Thus computerized accounting is the only appropriate solution to these needs. 
 
Computerized accounting serves this purpose by using both the AIS & MIS very effectively by 
combining the following : 
 
1. Customer Relationship Management (CRM) 
2. Debtors Management 
3. Inventory Management 
4. Supply Chain Management 
5. Payroll Accounting 
6. Enterprise Resource Planning (ERP) 
7. Enterprise Performance Management (EPM)  
8. Computerized preparation of Financial Statements  
9. Tax Planning & Management      
10.  Sales & Marketing Management 
 
 
 
Page 3


144 
 
Unit:11 
Computers & Accounting Information System 
                       
Unit  at a Glance : - 
? Meaning of Computer 
? Components of a Computer 
? MIS & AIS 
? Advantages of Computerized AIS 
? Limitations of Computerized AIS 
? Role of Computers in Accounting 
? Customized & Readymade Software 
? Database & DBMS 
? Structured Query Language 
? Practice Questions 
 
                                                                   
According to International Standards Organization –  
“ A Computer is a data processor that can perform substantial computations, including 
numerous arithmetic & logical operations, with intervention by a human operator during the 
run.”     
     
Components of a Computer  
1. Input Devices : Such as Keyboard, Mouse etc. 
 
2. CPU: It has three components – The control unit, memory unit and the logical unit. 
 
3. Output Devices: Such As Monitor, Printer. 
 
4. Hardware & Software 
 
The System Software such as MS DOS, Windows 7 etc.- are a set of programs which control 
the operations & help processing. 
The Application software such as MS Word, Tally etc. enables the user to perform useful 
specific functions. 
 
Management Information System (MIS): Is an information system that provides the 
needed information to the managers to manage the organization effectively. It combines the 
three resources viz; technology, information & people for the efficient management of an 
enterprise. 
 
145 
 
Accounting Information System (AIS): Is an information system based on the accounting 
database of an organization, helping in storage, processing, summarizing & reporting 
information about an organization. 
It has 3 elements viz: Computerized Accounting, Information and System. 
 
Advantages of Computerized AIS :  
 
1. High Speed : of recording, storage, processing & retrieval of information. 
2. Accuracy : As all the calculations etc. are done by the computer it has accuracy. 
3. Reliability : The information is reliable. 
4. Real Time User Interface : AIS enables direct & simultaneous interaction between user 
& the machine.  
  
    Limitations of Computerized AIS :  
1. Staff Opposition : As it reduces the no of employees, staff usually opposes it. 
2. High Development Costs : Development requires qualified engineering staff & training 
also, so it?s a costly affair. 
3. Security Considerations : Cyber crime & hacking etc. are becoming very common 
these days, therefore security is always a concern. 
4. High costs  makes it suitable only for medium & large sized firms & not for small firms. 
 
Role of Computers in Accounting 
Owing to Globalization the business operations are becoming large scale & complex. The need 
therefore arose to record, compile, summarize & present the accounting information to the large 
number of interested users with greater speed, accuracy & utility. 
Thus computerized accounting is the only appropriate solution to these needs. 
 
Computerized accounting serves this purpose by using both the AIS & MIS very effectively by 
combining the following : 
 
1. Customer Relationship Management (CRM) 
2. Debtors Management 
3. Inventory Management 
4. Supply Chain Management 
5. Payroll Accounting 
6. Enterprise Resource Planning (ERP) 
7. Enterprise Performance Management (EPM)  
8. Computerized preparation of Financial Statements  
9. Tax Planning & Management      
10.  Sales & Marketing Management 
 
 
 
146 
 
Comparision between Customized  & Readymade Software Packages  
 
Basis Readymade Software Customized Software 
Time It saves time as it readymade It takes time for development  
Cost  It is cost effective as money is 
not to be spent on its 
development 
It is costlier  
After Sales 
Service 
Is promptly available because of 
well developed professionals as 
well as  market 
Has to depend on the programmer who 
has developed the package specially 
for the needs of the firm 
Ready 
Availability 
It is readily available in the 
market 
It is not readily available as it is tailor 
made to the firm?s need.  
 
Database & Database Management System 
 
Database is data bank storing voluminous information about the entities within an organization 
and also the entities interacting with the organization. 
 
Database Management System is the electronic data processing of information stored in the 
database. DBMS is “a set of programs that controls and manages creation, utilization and 
maintenance of database of a business organization.”   
 
Components of Database System : 
? Data 
? Hardware 
? Software 
? Users 
 
Advantages of DBMS : 
 
1.  Reduced Data Redundancy 
 
2. Protection of information 
 
3. Greater Consistency 
 
4. Reduced Costs 
 
5. Back-up & Recovery facility 
      
   
 
Page 4


144 
 
Unit:11 
Computers & Accounting Information System 
                       
Unit  at a Glance : - 
? Meaning of Computer 
? Components of a Computer 
? MIS & AIS 
? Advantages of Computerized AIS 
? Limitations of Computerized AIS 
? Role of Computers in Accounting 
? Customized & Readymade Software 
? Database & DBMS 
? Structured Query Language 
? Practice Questions 
 
                                                                   
According to International Standards Organization –  
“ A Computer is a data processor that can perform substantial computations, including 
numerous arithmetic & logical operations, with intervention by a human operator during the 
run.”     
     
Components of a Computer  
1. Input Devices : Such as Keyboard, Mouse etc. 
 
2. CPU: It has three components – The control unit, memory unit and the logical unit. 
 
3. Output Devices: Such As Monitor, Printer. 
 
4. Hardware & Software 
 
The System Software such as MS DOS, Windows 7 etc.- are a set of programs which control 
the operations & help processing. 
The Application software such as MS Word, Tally etc. enables the user to perform useful 
specific functions. 
 
Management Information System (MIS): Is an information system that provides the 
needed information to the managers to manage the organization effectively. It combines the 
three resources viz; technology, information & people for the efficient management of an 
enterprise. 
 
145 
 
Accounting Information System (AIS): Is an information system based on the accounting 
database of an organization, helping in storage, processing, summarizing & reporting 
information about an organization. 
It has 3 elements viz: Computerized Accounting, Information and System. 
 
Advantages of Computerized AIS :  
 
1. High Speed : of recording, storage, processing & retrieval of information. 
2. Accuracy : As all the calculations etc. are done by the computer it has accuracy. 
3. Reliability : The information is reliable. 
4. Real Time User Interface : AIS enables direct & simultaneous interaction between user 
& the machine.  
  
    Limitations of Computerized AIS :  
1. Staff Opposition : As it reduces the no of employees, staff usually opposes it. 
2. High Development Costs : Development requires qualified engineering staff & training 
also, so it?s a costly affair. 
3. Security Considerations : Cyber crime & hacking etc. are becoming very common 
these days, therefore security is always a concern. 
4. High costs  makes it suitable only for medium & large sized firms & not for small firms. 
 
Role of Computers in Accounting 
Owing to Globalization the business operations are becoming large scale & complex. The need 
therefore arose to record, compile, summarize & present the accounting information to the large 
number of interested users with greater speed, accuracy & utility. 
Thus computerized accounting is the only appropriate solution to these needs. 
 
Computerized accounting serves this purpose by using both the AIS & MIS very effectively by 
combining the following : 
 
1. Customer Relationship Management (CRM) 
2. Debtors Management 
3. Inventory Management 
4. Supply Chain Management 
5. Payroll Accounting 
6. Enterprise Resource Planning (ERP) 
7. Enterprise Performance Management (EPM)  
8. Computerized preparation of Financial Statements  
9. Tax Planning & Management      
10.  Sales & Marketing Management 
 
 
 
146 
 
Comparision between Customized  & Readymade Software Packages  
 
Basis Readymade Software Customized Software 
Time It saves time as it readymade It takes time for development  
Cost  It is cost effective as money is 
not to be spent on its 
development 
It is costlier  
After Sales 
Service 
Is promptly available because of 
well developed professionals as 
well as  market 
Has to depend on the programmer who 
has developed the package specially 
for the needs of the firm 
Ready 
Availability 
It is readily available in the 
market 
It is not readily available as it is tailor 
made to the firm?s need.  
 
Database & Database Management System 
 
Database is data bank storing voluminous information about the entities within an organization 
and also the entities interacting with the organization. 
 
Database Management System is the electronic data processing of information stored in the 
database. DBMS is “a set of programs that controls and manages creation, utilization and 
maintenance of database of a business organization.”   
 
Components of Database System : 
? Data 
? Hardware 
? Software 
? Users 
 
Advantages of DBMS : 
 
1.  Reduced Data Redundancy 
 
2. Protection of information 
 
3. Greater Consistency 
 
4. Reduced Costs 
 
5. Back-up & Recovery facility 
      
   
 
147 
 
   Limitations of DBMS:  
 
1. High setting up costs 
 
2. Lack of Expertise Knowledge 
 
3. Security Problems 
 
4. Hardware & Software costs due to fast obsolescence 
 
    Structured Query Language 
 
     It is a 4
th
 generation Computer Programming language which greatly facilitates the writing of 
a program or application by the programmer in one tenth of time taken in older & third 
generation language like COBOL. 
 
Practice Questions 
 
1. Explain the components of a Computer. 
 
2. What is a computer? 
 
3. What is MIS? 
 
4. What is AIS? 
 
5. What are the advantages of AIS? 
 
6. Which of the two is better – Ready-made Accounting Software or Customized 
Accounting Software? Give reasons in support of your answer. 
 
7. What is database? 
 
8. What is DBMS? 
 
9. What is the role of computers in accounting? 
 
10.  What is the difference between Manual & Computerized Accounting    
       system.  
 
11. What is SQL ? (Structured Query Language)   
 
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