Q1. What is the Role of Computer in Accounting?
Or What are the different softwares used in the accounting?
Ans. Softwares used in the accounting are as follows –
(I) General Ledger: Once a transaction is recorded through a Computer, it is automatically posted to various accounts. As such, the Ledgers always contain upto- date informations.
(II) Accounts Receivable: This software is used to maintain the upto-date and accurate accounts of the debtors. This software is also helpful in printing periodical reminders to be sent to debtors.
(III) Accounts Payable: It keeps a upto-date record of all the Creditors.
(IV) Inventory Control: It keeps a complete record of receipts and issue of all the items in the stores. As such, the information regarding the stock in hand of each item is readily available.
(V) Payroll Accounting: It prepares the wages and salary sheet of thousands of employees very accurately and in no time.
Q2. Name and explain the different Commercial Softwares / Softwares used in Business?
Ans. Although a very large number of softwares used in business are available in the market, following are most commonly used:
(A) Electronic Spread Sheets: It is a type of programme on a large sheet of paper. There are various columns on the spread sheet and various figures are filled in these columns. Size and number of the columns can be increased or decreased according to the needs. A spread sheet has the following utility in accounting:
I. Pay-roll accounting: It is used for calculating the salary of each employee. In the spread-sheet one row is used for each employee and there are columns for basic pay, D.A., house rent allowance, other allowances, gross salary, deductions and the net amount payable.
II. Recalculation: If some values are changed: We can find out the answer of 'What if' question quickly by a spread sheet by changing the formulae in it. For example, if the formula of D.A. is changed in the spread sheet, the new figures of D.A. and the total salary of each employee will be readily available.
III. Graphic representation: Data in the spread sheet can be represented in the form of graphs, charts and diagrams. For example, the figures and trend of sales, profits or salary cost can be shown in the form of a graph.
IV. Depreciation Accounting: The spread sheets can be used in selecting the proper method of charging depreciation on fixed assets and also to determine the appropriate rate of depreciation.
V. Budgeting and financial forecasts: It can also be used for preparing budgets and for forecasting the furore trend of sales, profits etc. relating to the business enterprise.
(B) Word Processor: A word processor may be called a jet-age typewriter which enables the user to draft the letters, reports and other text material on a video screen with a facility to make changes very conveniently and as many times as desired. Advantages of word processor.
I. Instead of typing the full matter again, any word, line or paragraph previously typed can be changed, erased or shifted to new location.
II. Printing facilities are also available in a word processor.
III. The word processor also helps in checking the spelling of words. It contains a dictionary and automatically identifies the words in the typed matter that are not found in the dictionary.
IV. Text of letters, documents and contracts etc. can be stored in the memory of the computer and any part of it may be taken out without delay.
(C) Data Base Management: It records all the useful and relevant information relating to a business at one centralised place. These datas are usually stored on floppy discs and the Data Base Management (or D.B.M.) converts the data into useful information. For example, we can obtain duly prepared and reconciled Trial Balance and Final Accounts any time when desired.
Advantages of Data Base Management: Data base management is useful in debt collecfion, inventory control, production planning and control, preparation of budgets, invoicing, preparing payrolls and in various other areas of decision making.
Q3. Difference between computerised and manual accounting?
Ans. Comparison is as follows:
|Basis of difference||Manual accounting||Computerised accounting|
|1.Identifying Financial Transactions||The identification of transactions, based on application of accounting principles.||The identification of transactions, based on application of accounting principles.|
|2. Recording||Recording in the books of orginal entry and related calculations is done manualy.||Recording or storing in the data base is done manualy but calucations are done by computers.|
|3. classification||In this system the books of original entry are further classified by posting into ledger accounts manually.||In this system the stored data is processed automatically by the softwares.|
|4. summarising||In this system the summarising and the preparation of trial balance is done manually.||In this system the stored data is processed automatically by the softwares and produces trial balances.|
|5. adjustment entry||The identification, recording, posting of adjustment entry is done manually.||The identification & recording is done manually but their posting is done by softwares.|
|6. Financial Statements||In a manual system of accounting, the preparation of financial statements is based on trial balance.||In this system of accounting the prepration of financial statement is not based on trial based.|
Q4. What is computerised accounting system also gives its advanatges and limitations?
Ans. A computerised accounting system is an accounting information system that processes the financial transactions and events to produce reports as per user requirements. It is based on the concept of database and has two basic requirements:
(a) Accounting framework and
(b) Operating Procedure.
Advantages of Computerised Accounting System:
• Speed • Accuracy
• Automated document production • Reliability
• Up-to-date • Scalability • Legibility
• Efficiency • Quality Report
• MIS Reports • Real time user interface
• Storage and Retrieval • Motivation and Employees interest.
Limitations of Computerised Accounting System:
• Cost of training • Staff Opposition
• Disruption • System failure
• Breache of security • Ill-effects on health
• Inability to check unanticipated errors.
Q5. What is Application of Computers in Accounting?
Ans. It is not only confined to pay roll only but it also performs the functions of recording, posting, classification, summarisation and also interpretation by the analysis of results.
1. Recording of all business transactions:
All the relevant business transactions are recorded accurately and regularly for making available uptodate accounting information to the management.
2. Preparation of various ledger accounts:
It prepares various ledger accounts such as Cash, Bank, Sales, Purchases, Debtors and various nominal and real accounts.
3. Processing the payroll information:
It processes the payroll information relating to wages and salaries paid or payable during the accounting period.
4. Preparation of Trial Balance:
It prepares the trial balance to ensure the arithmetical accuracy of accounting transactions so recorded, arranged and classified systematically.
5. Preparation of Final Accounts:
It is helpful in preparing the' final accounts such as Manufacturing Account, Trading Account, Profit and Loss Account, Profit & Loss Appropriation Account and the Balance Sheet at the end of the accounting period.
Q6. Name and explain the different information systems at various organisation levels?
Ans. An organisation has various types of information systems at various organisational levels as given in the following:
(i) Executive Support System (ESS):
They help in making decisions at the strategic level through advanced graphics and communications.
(ii) Management Information System (MIS):
These are the information systems at the management level of an organisation that serve the functions of planning, controlling and decision making by providing routine summary and exception reports.
(iii) Decision Support Systems (DSS):
They are the information systems at the organisations management level that combine data and analytical reports to support the decisions.
(iv) Transaction Processing Systems (TPS):
They are the computerised systems that perform and record the daily routine transactions which are necessary to conduct the business. TPS serve the organisation at the operational level.
Q7. Write short notes on:
c. Accounting Reports.
A. An accounting information system gathers data describing the organisation's activities, maintains a detailed financial record of the organisations operations, transforms the data into information and makes the information available to users both inside and outside the organisation.
Features or Characteristics of AIS:
1. AIS helps in handling and manipulating accounting and financial transactions of an organisation.
2. AIS is responsible for meeting information needs by generating reports.
3. AIS is helpful in producing futuristic data in the form of budget forecasts etc.
4. AIS is helpful in maintaining accounting information as per the guidelines of the law.
5. AIS is highly crucial for the organisation and thus can easily be harmfully manipulated. AIS Sub-systems:
There are four main sub-systems of an AIS namely:
Purposes of Accounting Information Systems:
Accounting Information systems serve six important purposes which are:
1. Sales order Processing
2. Inventory Control
3. Accounts Receivable
4. Accounts Payable
6. General Ledger.
B. A management information system is an information system that generates, accurate, timely and organised information to help managers make decisions, control process, solve problems, supervise activities and track progress.
Every accounting system is a part of the Accounting Information System which in turn is a part of the broader system i.e. the management information system.
C. Accounting reports Data from various sources is collected and manipulated in such a way as to provide certain information. Then the related information is comprised to render certain use, and such summarised information is known as a report.
Report must have the following characteristics:
Steps in designing the accounting report:
1. Defining the Objectives
2. Content and format of the report
3. Manipulating the data base
4. Finalising the report
Types of Reports:
(l) Customer Reports: Reports generated as per the requirement of the management, depicting the top 10 customers, or top 10 defaulting customers or list of customers who have made no purchase at all in last six months or so, etc.
(2) Supplier Reports: Reports generated as per the requirements of the management, showing various aspects of the suppliers.
(3) Summary Reports: A summary report is a summarised report of all the activities of an organisation for example P & L Account.
(4) Demand Reports: Demand reports are prepared only on demand of the management for example : Inventory Valuation Report.
Do it yourself (other important questions):
Q1. What is a computer ? what are its important features?
Q2. What is difference between a computer and a calculator?
Q3. Explain the main parts of a computer system?
Q4. Give any three limitations of a computer system?
Q5. Give any two point of difference between a hardware and a software?
Q6. Briefly explain the relationship between AIS & MIS?
Q7. What is the use of database management?