Class 12 Computerised Accounting System –
Unit 1: Overview of Computerised Accounting System
This unit provides a comprehensive understanding of Computerised
Accounting System (CAS) and its applications in modern businesses.
1.1 Introduction: Application in Accounting
What is a Computerised Accounting System (CAS)?
• A Computerised Accounting System (CAS) is a software-based
method for maintaining financial records, processing
transactions, and generating reports.
• It replaces manual accounting systems, reducing errors and
improving efficiency.
• Common CAS software includes Tally, Busy, QuickBooks, SAP,
and Marg ERP.
Need for Computerised Accounting System
1. Speed and Accuracy:
o Automates calculations and data processing, reducing
human errors.
2. Real-time Data Access:
o Updates transactions instantly, providing up-to-date
financial reports.
3. Integration with Other Systems:
o Connects with inventory, payroll, and banking systems for
better business management.
4. Data Security and Backup:
Protects financial records with passwords, encryption, and
o
cloud backups.
5. Compliance with Accounting Standards:
o Ensures financial reports meet GAAP (Generally Accepted
Accounting Principles) and IFRS (International Financial
Reporting Standards).
Comparison: Manual vs. Computerised Accounting
Feature Manual Accounting Computerised Accounting
Speed Slow Fast and automated
Accuracy Prone to errors Highly accurate
Low initial cost but high High initial cost but cost-
Cost
in long run effective in long run
Data Secure with encryption and
Risk of damage/loss
Security backups
Reports Manually prepared Auto-generated reports
1.2 Features of Computerised Accounting System
1.2.1 Automation & Speed
• CAS automates recording, classification, and summarization of
transactions.
• Reports like Trial Balance, Profit & Loss Account, and Balance
Sheet are generated instantly.
1.2.2 Accuracy & Error Reduction
• In-built error-checking mechanisms prevent incorrect entries.
• Audit Trails track all changes made to financial data.
1.2.3 Scalability & Flexibility
• Can be used by small, medium, and large businesses.
• Easily customizable for specific industries like retail,
manufacturing, or banking.
1.2.4 Integration with Other Business Functions
• Links with Inventory, Payroll, GST filing, and Banking software.
• Reduces duplication of work and improves efficiency.
1.2.5 Security & Reliability
• Uses password protection, encryption, and cloud storage.
• Ensures data safety from cyber threats and accidental loss.
1.2.6 Cost-Effective
• Reduces manual labor costs and time spent on bookkeeping.
• Provides financial insights for better decision-making.
1.3 Structure of Computerised Accounting System (CAS)
A CAS consists of the following components:
1.3.1 Hardware
• Computers, Printers, Scanners, Storage Devices (HDD, SSD,
Cloud Servers).
• Networking devices (for multi-user access).
1.3.2 Software
• Accounting Software: Tally, Busy, QuickBooks, SAP, Marg ERP,
Zoho Books.
• Database Management Software: MySQL, MS Access, Oracle
(stores financial data).
• Spreadsheet Software: MS Excel, Google Sheets (used for
financial analysis).
1.3.3 People (Users)
• Accountants, Finance Managers, Auditors, Business Owners.
• Different users have restricted access based on roles.
1.3.4 Procedures & Rules
• Set of rules for entering, processing, and retrieving data.
• Includes accounting standards and legal compliance.
1.4 Software Packages for CAS
1.4.1 Generic Software
• Pre-designed software for general accounting needs.
• Examples: Tally, QuickBooks, Busy, Zoho Books.
• Advantages:
o Low cost, easy to use, widely available.
• Disadvantages:
o Limited customization options.
1.4.2 Specific Software
• Designed for specific industries like hotels, hospitals, or
educational institutions.
• Examples:
o Hospital Management Software (HMS) for medical billing.
o Hotel Management Software for room bookings and
billing.
• Advantages:
o Tailored to industry needs, improves efficiency.
• Disadvantages:
o Expensive, requires training.
1.4.3 Tailored Software
• Fully customized software built for a company’s specific
requirements.
• Examples:
o Large enterprises like Reliance, Tata, Infosys use
customized ERP systems.
• Advantages:
o Provides maximum flexibility and automation.
• Disadvantages:
o High cost, requires expert maintenance and support.
Advantages & Disadvantages of CAS
Advantages:
Faster processing of transactions.
Reduces human errors in calculations.
Provides real-time financial reports.
Integrates with other business functions (inventory, payroll, GST).
Improves data security with encryption and backups.
Disadvantages:
High initial cost of software and training.
Risk of cyber threats like hacking and data breaches.
Dependency on technology (system failures can disrupt work).
Regular updates & maintenance required.
Summary of Unit 1
Topic Key Points
Computerised Accounting
Software-based accounting method
System (CAS)
Need for CAS Speed, accuracy, security, integration
Automation, accuracy, scalability,
Features of CAS
security
Hardware, Software, People,
Structure of CAS
Procedures
Software Packages Generic, Specific, Tailored software
Faster processing, reduced errors,
Advantages
real-time reports
High cost, cyber risks, technology
Disadvantages
dependency
Conclusion
A Computerised Accounting System is essential for modern
businesses to manage financial transactions efficiently. It automates
accounting tasks, improves accuracy, and integrates with other
business processes. However, proper training, security measures, and
maintenance are crucial for successful implementation.
Unit 2: Accounting Application of Electronic Spreadsheet
2.1 Concept of Electronic Spreadsheet
What is an Electronic Spreadsheet?
A spreadsheet is a digital tool that organizes data in a table format
(rows & columns).
Used for financial calculations, data analysis, and accounting
applications.
Examples: MS Excel, Google Sheets, LibreOffice Calc.
Importance in Accounting
Helps in managing financial records, budgets, taxation, and payroll.
Automates financial calculations and reduces manual errors.
Provides visual representation of data through graphs and charts.
2.2 Features of an Electronic Spreadsheet
Data Entry & Storage:
Allows input and management of large financial datasets.
Formula & Functions:
Built-in formulas like SUM, AVERAGE, IF, VLOOKUP, HLOOKUP
automate calculations.
Sorting & Filtering:
Helps organize and analyze accounting data efficiently.
Conditional Formatting:
Highlights specific financial trends (e.g., overdue payments, low
inventory).
Data Validation & Verification:
Ensures accurate data entry through drop-down lists, error alerts,
and data restrictions.
Graphical Representation:
Converts financial data into charts, graphs, and pivot tables for better
analysis.
2.3 Application in Generating Accounting Information
2.3.1 Bank Reconciliation Statement (BRS)
A spreadsheet can be used to compare the cash book and bank
statement.
Helps in identifying errors, omissions, and outstanding cheques.
2.3.2 Asset Accounting
Maintains records of fixed assets, depreciation, and revaluation.
Automates depreciation calculations using formulas like:
Straight Line Method (SLM): Depreciation = (Cost – Salvage Value) /
Life
Reducing Balance Method (RBM): Depreciation = Book Value × Rate
2.3.3 Loan Repayment Schedule
Helps in installment calculations, interest tracking, and EMI
schedules.
Formulas like PMT() in Excel calculate loan payments:
=PMT(rate, number_of_payments, principal_amount)
2.3.4 Ratio Analysis
Used for financial performance evaluation through:
Profitability Ratios: Net Profit Ratio, Return on Investment (ROI).
Liquidity Ratios: Current Ratio, Quick Ratio.
Solvency Ratios: Debt-to-Equity Ratio.
2.4 Data Representation – Graphs, Charts, and Diagrams
Types of Graphs and Charts in Accounting
Bar Chart:
Used to compare financial data across multiple periods.
Pie Chart:
Shows the proportion of different components (e.g., expense
distribution).
Line Graph:
Helps track revenue, expenses, or profit trends over time.
Pivot Tables & Dashboards:
Summarize large datasets for decision-making.
Advantages & Disadvantages of Using Spreadsheets in Accounting
Advantages:
Fast and efficient calculations.
Accurate financial reports.
Customizable data analysis.
Graphical representation for better understanding.
Disadvantages:
Risk of human error in data entry.
Limited automation compared to full accounting software.
Data security risks if not password protected.
Summary of Unit 2
Topic Key Points
Electronic Spreadsheet Used for accounting calculations and
analysis
Features Data validation, formulas, sorting,
filtering, charts
Bank Reconciliation Statement (BRS) Compares cash book and bank
statement
Asset Accounting Manages fixed assets and depreciation
Loan Repayment Schedule Calculates EMI and loan repayments
Ratio Analysis Measures financial performance
Data Representation Graphs, Charts, Pivot Tables
Conclusion
Spreadsheets play a crucial role in accounting and financial
management. They help in automating calculations, organizing data,
and presenting reports visually. However, proper data validation and
security measures are essential to avoid errors and protect sensitive
financial data.
Unit 3: Using Computerised Accounting System
3.1 Steps in Installation of CAS
What is Computerised Accounting System (CAS) Installation?
Installation of CAS involves setting up accounting software,
configuring accounts, and ensuring data security.
The correct setup ensures smooth functioning of financial operations.
Steps for Installation
Identify Accounting Needs
Determine business requirements such as invoicing, taxation,
inventory, and payroll management.
Select the Right Software
Choose Tally, Busy, QuickBooks, SAP, or Zoho Books based on
business needs.
Install and Configure the Software
Install software on computers, cloud servers, or networks.
Set up company details, accounting periods, and user accounts.
Define the Chart of Accounts (COA)
Classify accounts into Assets, Liabilities, Income, and Expenses.
Example: Cash (Asset), Loan (Liability), Sales (Income), Rent
(Expense).
Data Entry and Security Setup
Assign user roles and permissions to ensure data security.
Enable password protection and data backup.
3.2 Codification and Hierarchy of Account Heads
What is Codification of Accounts?
Codification is assigning unique codes to accounts for easy
identification and tracking.
Example:
1001 – Cash in Hand
2001 – Accounts Payable
3001 – Sales Revenue
Hierarchy of Account Heads
Primary Accounts: Assets, Liabilities, Income, Expenses.
Sub-Groups: Current Assets, Fixed Assets, Short-term Liabilities, etc.
Ledger Accounts: Individual accounts under sub-groups (e.g., Bank
Account, Creditors).
3.3 Data Entry, Validation, and Verification
3.3.1 Data Entry in CAS
Recording financial transactions like sales, purchases, payments, and
receipts in accounting software.
Types of Data Entry:
Single Entry (only one side of transaction recorded).
Double Entry (debit and credit recorded).
3.3.2 Data Validation
Ensures data accuracy and consistency before finalizing transactions.
Methods:
Setting predefined formats (e.g., date format: DD/MM/YYYY).
Using drop-down lists for categories.
3.3.3 Data Verification
Cross-checks entered data with invoices, receipts, and ledgers.
Ensures financial statements are error-free.
3.4 Adjusting Entries
What are Adjusting Entries?
Adjusting entries update financial records before preparing financial
statements.
Types of Adjusting Entries
Depreciation: Records asset value reduction.
Outstanding Expenses: Expenses due but not paid.
Prepaid Expenses: Payments made in advance.
Bad Debts: Amount unlikely to be received from customers.
3.5 Preparation of Financial Statements
Closing Entries
Transfers revenue and expense balances to the Profit & Loss Account.
Example:
Debit: Sales Revenue ₹5,00,000
Credit: Profit & Loss Account ₹5,00,000
Opening Entries
Carries forward balances from the previous accounting period.
Example:
Debit: Opening Stock ₹1,00,000
Credit: Capital Account ₹1,00,000
Preparation of Profit & Loss Account and Balance Sheet
Profit & Loss Account:
Shows business profit or loss for a period.
Formula: Net Profit = Revenue – Expenses
Balance Sheet:
Shows assets, liabilities, and equity at a specific date.
Formula: Assets = Liabilities + Equity
3.6 Need and Security Features of CAS
Why is CAS Security Important?
Protects financial data from fraud, hacking, and accidental loss.
Ensures confidentiality, integrity, and availability of accounting
records.
Security Features in CAS
User Authentication:
Requires login credentials and role-based access.
Data Encryption:
Protects data from unauthorized access.
Regular Backups:
Prevents data loss due to system failures.
Audit Trail:
Keeps records of who made changes and when.
Firewall and Antivirus Protection:
Prevents cyber threats and malware attacks.
Advantages & Disadvantages of CAS
Advantages:
Automates accounting tasks and reduces errors.
Generates instant financial reports.
Ensures data security with encryption and backups.
Reduces paperwork and improves efficiency.
Disadvantages:
Requires initial investment in software and training.
Cybersecurity risks if not properly secured.
Dependence on technology (system failures may affect
operations).
Summary of Unit 3
Topic Key Points
Installation of CAS Steps include software selection, setup, and
security configuration
Codification of Accounts Assigning unique codes to accounts
Data Entry & Validation Ensuring accurate transaction records
Adjusting Entries Depreciation, outstanding expenses, prepaid
expenses
Financial Statements Profit & Loss Account, Balance Sheet
Security Features User authentication, encryption, backups, audit
trails
Conclusion
A Computerised Accounting System (CAS) simplifies financial
management, improves accuracy, and enhances security. Proper
installation, data validation, and security measures are essential for
effective implementation and protection against fraud or cyber
threats.