OVERVIEW OF COMPUTERISED
ACCOUNTING SYSTEM
Contents
1. Components of CAS
2. Data and information
3. Features of CAS
4. Grouping of Accounts
5. Codification of Accounts
6. Security features of CAS
7. Advantages and Limitations of CAS
8. Accounting Information Sub system
Computerised Accounting
Computerised accounting is the process of recording business
transactions and generating financial statements and reports with
the use of computer
Components of Computerised Accounting
The Computerised Accounting System (CAS) has the following components:
Procedure A logical sequence of actions to perform a task.
Data The raw fact (as input) for any business application
People Users.
Hardware Computer, associated peripherals, and their network.
Software System software and Application software.
The components of Computerised Accounting System are :
(a) Data, Report, Ledger, Hardware, Software;
(b) Data, People, Procedure, Hardware, Software;
(c) People, Procedure, Ledger, Data, Chart of Accounts;
(d) Data, Coding, Procedure, Rules, Output.
Find the odd one:
Data, People, Hardware, Virus.
Which among the following is not a component of CAS:
Data, Software, Procedure, Decisions
Computerised Accounting System
A system designed for accounting with the use of computers for
recording, reporting and analysing the financial data of a business is
called computerised accounting system.
Processing data
Input of data Output of data
Computer files
CAS takes accounting transactions as inputs that are processed through Accounting
Software to generate the following reports:
• Day books/Journals
• Ledger
• Trial Balance
• Position Statement (Balance Sheet)
• Statement of Profit and Loss (Profit and Loss
Account)
Data and Information
Data refers to facts or figures, that are stored in or used by a computer.
Data when processed becomes information.
Various elements (items) of accounting transactions are
essentially the data items, which are processed through an
accounting software to generate different sets of information in
the form of accounting reports such as journals, ledger, etc
Data Information
Data is raw, un organized When data is processed,
facts that need to be it is called information
processed
Data act as input Information act as
output
Features of Computerised Accounting System
Simple and Integrated:
Computerised accounting is easy and integrated with the various functions
of business
Transparency and Control
With computerised accounting, the organisation will have greater transparency
for day-to-day business operations and access to the vital information
Accuracy and Speed
CAS provides user-definable templates (data entry screens or forms) for fast,
accurate data entry of the transactions. It also helps in generalising desired
documents and reports.
Scalability
CAS enables in changing the volume of data processing in tune with the
change in the size of the business. The software can be used for any size of
the business and type of the organisation
Reliability
CAS makes sure that the generalised critical financial information is
accurate, controlled and secured.
Grouping of Accounts
Grouping of Accounts is the process of classifying the ledger accounts and organizing
them under major heads of accounts. Accounting information can be easily
interpreted when reports are presented having grouped them in a scientific way.
The basic classifications of different accounts embodied in a transaction are
resorted through accounting equation
Accounting Equation
Assets = Liabilities + Capital
Each component of the above equation can be divided into groups of accounts as
follows:
• Share Capital
EQUITY AND LIABILITIES • Reserves and Surplus
• Money Received against Share Warrents
• Share Application Money Pending Allotment
• Non-Current Liabilities
• Long Term Borrowings
• Deferred Tax Liabilities (net)
• Other Long Term Liabilities
• Long Term Provisions
• Current Liabilities
• Short Term Borrowings
• Trade Payables
1. Non current Assets 2. Current Assets
• Fixed Assets • Current Investments
• Tangible Assets • Inventories
• Intangible Assets • Trade Receivables
ASSETS • Capital Work-in-Progress • Cash and Cash Equivalents
• Intangible Assets Under • Short Term Loans and Advances
Development • Other Current Assets
• Fixed Assets held for Sales
• Non Current Investments
• Deferred Tax Assets (net)
• Long Term Loans and
Advances
• Other Non-Current Assets
REVENUES • Sales
• Other Income
• Material Consumed
EXPENSES • Salary and Wages
• Manufacturing Expenses
• Depreciation
• Administrative Expenses
• Interest
• Selling and Distribution Expenses
There is a hierarchical relationship between the groups and its components. In order to
maintain the hierarchical relationships between a group and its sub-groups, proper
codification is required to ensure neatness of classification
CODIFICATION OF ACCOUNTS
Codification means giving an identity to every account by allotting a number or
alphabets in hierarchical order
The coding scheme of Account-heads should be such that it leads to
grouping of accounts at various levels so as to generate Position Statement
(Balance Sheet) and Statement of Profit and Loss (Profit-Loss Account).
Method of Codification
Sequential Codes
In this method, numbers or letters or combination of both are assigned in
consecutive order. This method is applied commonly to identify source
documents such as Bills, Cheques, Invoices etc. The sequential order helps in
quick searching of documents
For Example,
CODES ACCOUNTS
CL001 GCERT LTD
CL002 XYZ LTD
CL003 ARIL CORPORATION OF INDIA
Block Codes
In this method of coding , a range of numbers is divided into desired sub –ranges
is allotted to specific group. Under each sub range sequential codes are allotted
to each items of corresponding group.
Mnemonic Codes
Alphabets or abbreviations are used as symbols to codify the item or information
For Example :
PJ – Purchase Journal
BB – Bank Book
CB – Cash Book
The code 301-399 for soap is an example of ------- type of code.
Range of numbers are used for codification in --------------
(Block, Sequential, Mnemonic, All of these)
CLT-Kozhikode is an example of _________.
(a)Sequential codes
(b)Block code
(c)Mnemonic codes
(d)None of these
Classify the following into mnemonic code, sequential code and block code:
CA, CL – for current assets and current liabilities.
001,002 – for customer 1 and 2
001 to099 – Soap, 100 to 199- Powder.
SECURITY FEATURES OF CAS SOFTWARE
Password Security
It is secret key word used by an authorized person to get access to
computer, file or program
Data Audit
This features of CAS helps to fix responsibility upon a person who have used
the computer in a defined period and track changes have been made during
this time.
Data Vault
It helps to maintain confidentiality of information by encrypting the data
……… helps to maintain confidentiality of information by
encrypting the data.
(Password, data audit, data check, data vault)
ADVANTAGES OF CAS
1. Timely generation of reports and information in desired
format.
2. Efficient record keeping.
3. Ensures effective control over the system
4. Economy in the processing of accounting data.
5. Confidentiality of data is maintained
6. Saves time and money
7. Automated document preparation
LIMITATIONS OF CAS
1. Danger of hawkers and stealing of data
2. Data may be lost or corrupted due to power
interruptions.
3. Non availability of skilled personnel
4. Un-programmed and un-specified reports cannot be
generated.
5. Huge training cost of employees
6. Problems with technology
Accounting Information System
Accounting Information System
Accounting Information system is an integral part of the management
information system (MIS). AIS collects, processes and communicates
financial information to various users for decision making. AIS and its sub
systems can be implemented through CAS
CASH AND BANK SUB- It deals with the receipt and payment of
SYSTEM cash both physical cash and electronic fund
transfer.
SALES AND ACCOUNTS It deals with recording of sales, maintaining
RECEIVABLE SUB-SYSTEM of sales ledger and receivables.
INVENTORY SUB-SYSTEM It deals with the recording of different items
purchased and issued specifying the price,
quantity and date. It generates the
inventory position and valuation report.
PURCHASE AND It deals with the purchase and payments to
ACCOUNTS PAYABLE SUB- creditors. It also generates periodic reports
SYSTEM about the performance of suppliers,
payment schedule and position of the
creditors.
PAYROLL ACCOUNTING It deals with payment of wages and salary
SUB-SYSTEM to employees.
FIXED ASSETS It deals with the recording of purchases,
ACCOUNTING SUB- additions, deletions, usage of fixed assets it
SYSTEM also generates reports about the cost,
depreciation, and book value of different
assets.
EXPENSE ACCOUNTING This sub-system records expenses under
SUB-SYSTEM broad groups such as manufacturing
administrative, financial, selling and
distributions and others.
TAX ACCOUNTING SUB- This sub-system deals with compliance
SYSTEM requirement value-added tax (VAT), excise,
customs and income tax. This sub-system
used in large size organisation
FINAL ACCOUNTS SUB- This subsystem deals with the preparation
SYSTEM of Profit and Loss accounts, Balance Sheet
and cash flow statements for reporting
purposes.
COSTING SUB-SYSTEM It deals with the ascertainment of cost of
goods produced. It has linkages with other
accounting sub-systems for obtaining the
necessary information about cost of
material, labour, and other expenses
BUDGET SUB-SYSTEM It deals with the preparation of budget for
the coming financial year as well as
comparison with the current budget of the
actual performances.
MANAGEMENT Management Information System (MIS)
INFORMATION SYSTEM deals with generation and processing of
reports that are vital for management
decision-making.