Computerized Accounting System

In the present day, accountants no longer record every transaction of a company or any corporate body with the help of pen and pencils using a ledger book. After the birth of computers and the emergence of digitalisation in most professional sectors in India, accounting is also computerised.

For the past few decades, computerised data was used mainly in the field of science and technology. However, as the years go by, computerised accounting systems are also becoming quite common.

Introduction to Computerised Accounting

Several accounting firms still perform book-keeping manually, while most firms comprise financial transactions that can be a lot for a manual accounting process. 

Moreover, the complicated financial transactions of a firm are quite difficult to be recorded manually. That led to the introduction of the concept of computerised accounting systems. 

Before you learn the meaning of computerised accounting, it is important to know about the various factors to consider before using such a system.

Features of Computerized Accounting Systems

The characteristic features of computerised accounting systems are as follows –

  1. Components of computerised accounting systems are software programs which are installed on a company machine, network server or accessed remotely with the help of the Internet.

  2. Such a system allows accounting professionals to set up income and expense accounts such as purchases and sales accounts, salary distribution account, advertising expenses account, etc. 

  3. The process of computerised accounting systems includes programs that can be used to manage and control bank accounts, prepare company budgets, etc.

  4. Depending upon the program and how advanced it is accountants can also construct tax documents, handle company payroll, and manage project expenses properly.

  5. Programs in this system can be customised as per user demands. This feature helps every accounting professional to meet the requirements of their firm. 

However, it is essential for the employees of a firm who are using a computerised accounting system to get proper training so that they can use the system correctly and execute the required programs accurately.

What are MIS and AIS?

MIS or Management Information System is a digitised database where all the financial information of a company is organised and input in the system. With its help, the program can execute daily reports on management operations of a company.

AIS or Accounting Information System is nothing but means of collection, storage and execution of accounting data of a firm. This system is a popular choice for a company before it needs to take an important decision for any purpose. 

Components of AIS include data, users, i.e. people, software programs, accounting procedure, information technology, and other internal variables. 

Types of Computerised Accounting Software

Multiple accounting software programs are used by professionals across the globe. They can be classified as three types, which are -

A. Readymade Software

This kind of software is developed for all users in general and does not possess any tweaks or elements that would help out a specific category of users substantially. Readymade software programs are suitable for a firm where the overall volume of accounting work is relatively low. 

Compared to other accounting software programs, readymade software programs require minimum system requirements and are usually cheap. Moreover, such programs have an easy and dynamic learning curve. 

B. Customised Software

Customised accounting software programs are those readymade software programs that have been altered to meet the specific requirements of any user. Such programs are usually used in large and medium scale organisations. 

In the case of customised accounting software programs, not only the installation expense but also the cost of maintenance is relatively higher than other accounting programs. In most cases, to acquire its services, users need to pay the vendor a certain amount as a customisation fee. 

The advantages of using such an accounting program include enhanced security and secrecy of data along with easier maintenance. Moreover, users are required to undergo proper training before using this program for professional work. 

c. Tailor-Made Software

As its name suggests, tailor-made accounting software programs are developed for particular firms. Such programs form an integral part of MIS. 

These kinds of programs are usually designed for large scale businesses only and require specialised training before users are adept in working with this software to execute programs accurately. 

Advantages of Computerised Accounting Systems

The benefits of such systems are as follows –

  1. Speed, accuracy, and reliability of accounting executions

  2. High efficiency along with top security

  3. Real-time user interference along with quality report preparation, which is mostly automated

Limitations of Computerised Accounting Systems

The limitations of Computerised Accounting Systems are as follows –

  1. Failure of systems such as technical failures like virus attack, circuit problems in the computer, etc.

  2. The cost of training to master Computerised accounting systems is usually a bit expensive.

  3. Disruptions are quite common

  4. Most accounting systems suffer from an inability to check errors that are not anticipated.

At Vedantu, we hope that this discussion on Computerised Accounting Systems will help substantially in fetching you top marks in the upcoming board exams! You can visit our website or app for more such discussions on various topics from senior secondary Commerce curriculum.

FAQ (Frequently Asked Questions)

1. What is a Computerised Accounting System?

Ans. A computerised accounting system is one where the financial transactions of a company are accounted for as per the GAAP to execute accounting reports as per user requirements.

2. What do you Understand by AIS? State its Components.

Ans. AIS or Accounting Information System refers to the collection, storage and execution of financial data of a firm. The components of AIS include users, accounting programs, the procedure of data execution, information technology, and others. 

3. What are the Limitations of Computerised Accounting Systems?

Ans. The limitations of Computerised Accounting Systems are failure of systems, high cost of training, frequent disruptions, and inability to find out unanticipated errors.