Computerised Accounting System Class 11 Notes CBSE Accountancy Chapter 13 (Free PDF Download)

Concept of Computerised Accounting System 

An accounting information system which is used for processing financial transactions in accordance with the accounting principles is called a computerised accounting system. They are stored on a computer, network server, or remotely via the Internet. These systems help in setting up various income and expense accounts, and handle the large amount of data. 

Most computerised accounting systems are based on databases that are well organised. Accounting databases contain an active interface which enables the user to use various accounting application programs and reporting systems.

Generally, each computerised accounting system has two basic requirements: 

1) Accounting Framework: This requirement contains a certain set of principles, coding and grouping structure of accounting. 

2) Operating Procedure: The operating procedure should be well-defined, and it should be suitably blended with the organisation’s operating environment.

Computers, when used in any database-oriented application, have four basic requirements:

1) Front-end Interface: This acts as a link between the user and the software. The user can interact with the front-end interface to communicate with the back-end database.

2) Back-end Database: This is the data storage system which cannot be accessed by the user. It responds and provides the user with the required data depending upon the extent of authority to access.

3) Data Processing: This requirement involves a sequence of actions that need to be taken such that the data can be transformed into useful information.

4) Reporting System: The reporting system is an integrated set of various objects that form the report using the information.

Comparison between Manual and Computerised Accounting 

The process of identifying, recording, classifying and summarising financial transactions to produce the financial reports for ultimate analysis is called accounting. 

The following table compares the manual accounting system to the computerised accounting system.

Advantages of Computerised Accounting System 

Some of the advantages of computerised accounting over manual accounting system are described as follows:

1) Speed: Speed refers to the time taken by computers to complete a task or an operation. The computerised accounting system processes data at a much faster speed and requires far less time than human beings to perform a task. They can perform certain tasks in fractions of a second.

2) Accuracy: In computerised accounting, the chance for an error to occur is eliminated because the data used is entered only once, that is at the very beginning. The same data is used to prepare the accounts and make the reports. 

3) Reliability: Reliability refers to the ability with which computers serve the users. The computer system can perform repetitive operations without tiredness, boredom, or fatigue, and are thus, more reliable than human beings. 

4) Up-to-Date Information: When accounting data is entered into the computerised accounting system, the effect is recorded in all the corresponding accounts and transactions automatically. This means that the computer updates the existing accounting records as soon as the new data is entered and stored into the system.

5) Real Time User Interface: The accounting systems are not limited to one computer screen. They are interconnected through a wide network of computers, such that the information is available and accessible to multiple users simultaneously.

6) Automated Document Production: The computerised accounting systems usually consist of a standardised format of accounting reports, which are defined by the user. The reports are generated automatically by the system, and can be obtained whenever required just by a click of the mouse.

7) Scalability: The Computerised system can process and store a large amount of data. For storing additional vouchers, the only requirement is to introduce more data entry operators. Due to this, the cost of processing any additional transactions is very less as compared to manual accounting systems. This makes a computerised accounting system highly scalable.

8) Legibility: In a computerised accounting system, the data is displayed using standardised fonts. This removes the possibility of the data being difficult to read due to untidy written figures such as in a manual accounting system.

9) Efficiency: Computerised accounting system ensures an optimum and efficient use of time and resources. This facilitates efficient decision-making and report generation.

10) Quality Reports: The computerised accounting system helps in generating true accounting reports that are highly reliable. This is because the system contains data handling and inbuilt checking features.

11) MIS Reports: The computerised accounting system assists the management in effective control and monitoring of the business by enabling real time production of reports related to management information. 

12) Storage and Retrieval: A large amount of data can be stored in a computerised accounting system within a small physical space. Thus, it saves a large amount of physical space while storing a higher amount of data as compared to manual accounting systems.

13) Motivation and Employees Interest: A computerised accounting system needs trained staff. Due to this, the organisation conducts special training of their staff. This boosts the morale of the staff and develops an interest for the job.

Limitations of Computerised Accounting System 

Despite the several advantages of computerised accounting systems, it also has some limitations that emerge from the operating environment. These limitations are described as follows: 

1) Cost of Training: A computerised accounting system requires specialised staff. Due to this, the organisation conducts special training of their staff. This results in high training costs because the staff are trained through a continuous use of the hardware and software. 

2) Staff Opposition: A computerised accounting system is resisted by the existing accounting staff, because they fear that the computerised accounting system, being much better than manual accounting, would eliminate the need of the existing accounting staff, and their roles would reduce to being a data entry operator.

3) Disruption: When an organisation switches from a manual accounting system to a computerised accounting system, a lot of working hours are lost because of the changes in the working environment. Also, the requirement of specialised staff means that more work hours would be required for training purposes until the staff is well-adapted to the new system.

4) System Failures: System failures such as system crashes or hardware failures can result in a huge loss of work. This is a serious issue to be considered when using a computerised accounting system. 

5) Inability to Check Unanticipated Errors: The error detection system in the computerised accounting system is designed to detect and check known and anticipated errors. Unanticipated errors cannot be detected because the computers lack the capability to judge.

6) Breaches of Security: There are numerous techniques in which the data or programmes can be altered for fraud or embezzlement. It is even possible to emulate the legitimate user of a system, or discover his password through trickery, and thus gain access to the entire accounting information. 

7) Ill-effects on Health: Continuous use of the computer systems for long hours leads to various health problems such as back issues, eyestrain, muscular pain, etc. This drastically affects the efficiency with which the accounting staff can work, and also increases their medical expenditure.

8) Obsolescence: A major limitation of computer systems is obsolescence. Hardware and software become outdated in years, and sometimes even in months due to the constant improvement in technology. Various upgrades are required as well to keep the systems updated. This results in a great cost to the organisation. 

Sourcing of Accounting Software 

Accounting software is operated by people. The expertise of the people responsible for accounting is an important factor to be considered before acquiring accounting software. The need to acquire an accounting software arises in the two cases stated below: 

a) When the computerised accounting system is implemented as a replacement to an existing manual accounting system. 

b) When the new computerised accounting system is required as a replacement to an existing computerised accounting system because of changing needs of the organisation.

Accounting Packages 

A computerised accounting system is introduced to record and store accounting data, and generate reports as required. The accounting packages used in the computer system are generally classified into the following categories: 

1) Ready to use software

Ready-to-use software is easy to use, cheaper to install, and suitable for small businesses. The training required to use such software is simple. However, the level of secrecy is relatively low, and offers very low scope of linking to other information systems. This type of software is generally used by small and conventional business enterprises.

2) Customised software

Customised software is the software which is customised for some special requirements of the user. Such software is suitable for medium and large businesses, can be linked to other information systems, and can be modified. However, the installation and training costs are relatively high. This type of software is generally used by large and medium sized business enterprises.

3) Tailored software

Tailored software is suitable for large business organisations which are spread out over a large geographical area. These can be used by multiple users, and are designed for meeting their specific requirements. The level of secrecy is high, but the cost of training and installation is huge because specialised staff is required. This type of software is generally used by large, unique, and typical business enterprises.

The different types of accounting packages have different features. This means that the choice of the accounting software would depend upon the requirement and suitability to the organisation. 

Generic Considerations before Sourcing an Accounting Software 

Before sourcing an accounting software, various factors need to be considered. This includes flexibility of the software, costs of installing, size of the organisation, level of secrecy, etc. An organisation needs to consider these factors and choose the suitable accounting software as per their requirements.

The factors that need to be considered before sourcing an accounting software are as follows: 

1) Flexibility 

The flexibility of an accounting software is an important consideration before sourcing it. This factor involves the availability and design of various reports expected from the accounting software, the data entry, the flexibility between the multiple users, etc. The accounting software should be able to run on a wide variety of machines and systems, such as on Linux.

2) Cost of Installation and Maintenance 

Another important factor to be considered is the cost of installation and maintenance of the software. The organisation must conduct a cost benefit analysis before sourcing a particular accounting software. 

An accounting software can appear cheap to buy, but might involve huge installation and maintenance costs. Similarly, an accounting software can appear expensive, but might involve very less installation and maintenance costs, making it a more feasible option.

3) Size of Organisation 

The type of accounting software to be sourced also depends upon the size of the organisation. Small organisations do not need customised or tailored software, whereas an organisation spread over a large geographical region would require tailored software to meet their needs.

4) Ease of Adaptation and Training needs 

The ease of adaptation and the training required to use a software also impacts the choice of the accounting software. Some accounting software are easy to adapt to and require simple training, whereas some accounting software require sophisticated and continuous training before the users can adapt to the accounting software.

5) Utilities/MIS Reports 

The requirement of MIS reports, and the extent to which they are required also affects the choice of accounting software. For producing simplified financial statements, cash flows, and ratio analysis, a ready-to-use software is good enough. If the organisation requires cost records as well, then the software needs to be customised as per the requirements.

6) Expected Level of Secrecy (Software and Data) 

The level of secrecy is an important factor to consider because cheap accounting software is usually obtained at the cost of secrecy. The security features of an accounting software should be checked. The software should prevent unauthorised access to the system. A tailored software provides great security, but is expensive as compared to ready-to-use software. 

The operating system also affects the security of the system. For example: In Unix, a user cannot use the computer system unless the user clicks with a password. This is not restricted in Windows.

7) Exporting/Importing Data Facility 

The software should enable the user to directly transfer the database from one system or software to another. For example: Transferring information from ledger to spreadsheet software. The software must ensure untouched data transfer.

8) Vendors Reputation and Capability 

The reputation and capability of the vendor must be considered before sourcing the accounting software. The number of years the vendor has been in the software development business, and the availability of support mechanisms outside the premises of the vendor affects the vendor’s reputation.

Class 11 Accountancy Chapter 13 Revision Notes

This chapter basically introduces the students about the growing advantage of the Computerised world in the business or accounting level even. This is an emerging study that is to be well acknowledged and understood by the student. A very important chapter as well, in regard to the practicality of the business as well as examination point of view. We present our capsuled revision notes for the chapter that will help the students in revising the same. The students can easily download the free pdf given by us and enhance their preparation level with these revision notes.

In the notes we revised on – Concept of Computerised Accounting system, Accounting Framework, Operating Procedure, Comparison between manual and Computerised accounting, Advantages of Computerised Accounting, Limitations of Computerised Accounting, Sources of Accounting Software, Accounting Packages, Generic considerations before sourcing an accounting software.

Key Takeaways of the Revision Notes and Few Suggestions for the Students

Students revising from these notes are equally ready for the exam and have a strong foothold over the chapter, the important topics revised here are as follows:

1. Concept of Computerised Accounting System - The concept of this system had to be clear in the mind of the students. They should know what to write when this question appears in the exam.

2. Accounting Framework - The Accounting framework in regard to Computerised accounting should be clear in the minds of the students.

3. Accounting Packages - This topic is also very important; they need to know the packages related to each software.

4. Generic Considerations - This point too needs to be well read by the students as questions may arise from these sections.

Why These Revision Notes?

Students follow the revising strategy mandatorily to prepare for the HS exam, they should revise side by side of their new learning:

1. This chapter is new, hence they might fall off track, these revision notes will not allow me to do the same.

2. Accounting, generally is a subject of calculations, more than theory students here practice the sums, which is very unusual to this chapter, where theory questions are asked too hence the students might have a tendency to ignore this chapter, then they can refer to these capsuled notes to prepare for their exams.

3. The revision notes will keep them on track with the revising strategy.

4. Before the exam, they can only revise this chapter and focus more in the practical chapters by investing less time in this chapter.