Applications of Computers in Accounting Class 11 Notes CBSE Accountancy Chapter 12 (Free PDF Download)

Meaning and Elements of Computer System 

In basic terms, a computer is an electronic device which can perform numerous kinds of operations that are guided by a certain set of instructions called programmes. Computers are used widely to store data and process it. There are six elements that combine to form a computer system: hardware, software, people, procedures, data, and connectivity. 

1) Hardware 

Any physical component, which is electronic and electromechanical, used in a computer system is called hardware. For example: Keyboard, Monitor, Mouse, Speakers, Processor, etc. all form a part of the computer system’s hardware.

2) Software

A software is a set of instructions/programmes that are used to work with the hardware. A firmware is a coded set of instructions which is stored in the form of circuits. 

A software can be classified into the following six types: 

(a) Operating System

This software contains an integrated set of specialised programmes, which not only facilitate the operation of a computer system, but also manage its resources. The operating system is the link between the hardware of the system and its user.

(b) Utility Programmes

These contain a set of computer programmes that perform certain supporting operations, which includes formatting a disk, reorganising stored data and programmes, duplicating a disk, etc.

(c) Application Software

These constitute user-oriented programmes that perform certain specified tasks, which includes accounting of inventory, financial accounting, etc.

(d) Language Processors

A source programme is a programme written in a computer language. The language that the computer is capable of understanding is called machine language. Language processors are the software which performs the task of checking the language syntax and translating the source programme into machine language.

(e) System Software

These softwares are a set of programmes designed to control internal functions. For example: Internal functions such as reading data from input devices, transmitting the processed data to the output devices, etc. These softwares also check the system regularly to ensure proper functioning of the components.

(f) Connectivity Software

Connectivity softwares are a set of programmes designed to create a connection between a server and a computer, control the connection, and enable the computer to share resources and communicate with other computers that are connected to the server or the computer.

3) People

Computers are electronic devices that cannot function without proper instructions. The task of interacting with the computers is performed by the live-ware of the computer system, that is, the people. Live-ware also includes the people who respond to the procedures instituted in the computer system for executing programmes.

People are the most important part of the computer system because of the following reasons: 

• The data processing systems are designed by people called System Analysts. 

• The programmes are written to guide the computer and implement the data processing system are designed by people called Programmers. 

• The computers are operated by people called Operators.

4) Procedures 

A set of operations meant to be completed in a certain order to achieve a desired result is called a procedure. The procedures in a computer system can be classified as:

• Hardware–oriented procedure: These provide a set of operations related to components and their method of operation. 

• Software-oriented procedure: These provide a set of operations related to the software of a computer system and the instructions required to use it.

• Internal procedure: These provide a sequence of operations related to each sub-system of the computer system to ensure that the data flows smoothly to computers.

5) Data 

Facts that are gathered and entered into a computer system are collectively called data. This may include numbers, text, etc. By following a predetermined set of instructions, a computer system is capable of storing data, retrieving it, classifying it, organising it, and synthesizing it to produce information. In simpler words, a computer system processes and organises data to create information that is useful and relevant for decision making.

6) Connectivity 

The sixth element of the computer system is connectivity. The element of connectivity includes the manner in which a computer system can be connected to any other computer system. Such a connection may be formed through telephone lines, satellite links, microwave transmission, or through any other suitable method.

Capabilities of Computer System 

A computer system is more capable than human beings in certain areas. These are as follows: 

1) Speed

Speed refers to the time taken by computers to complete a task or an operation. Computers are much faster and require far less time than human beings to perform a task. They can perform certain tasks in fractions of a second.

2) Accuracy

Accuracy refers to the degree of exactness of computations or operations achieved by computers when performing a task. Computers perform most complex operations accurately, and rarely commit errors. It automatically detects and corrects errors attributable to hardware.

3) Reliability

Reliability refers to the ability with which computers serve the users. Computers can perform repetitive operations without tiredness, boredom, or fatigue. Even in the rare cause of failure of a computer, the back-up facility of computers takes over the operations without loss of time.

4) Versatility

Versatility is the capability of a computer to handle and perform a number of different types of tasks. Unless designed for a specific application, computers can perform a variety of tasks and ensure fuller utilisation of their capabilities.

5) Storage

Storage refers to the data storing capability of computers. A computer provides storing of data with instant access to it, and has a huge capacity to store a large amount of data in a small physical space. 

Limitations of a Computer System 

Even though computers are better than human beings in most areas, they have certain limitations being a machine.

1) Lack of Common Sense

Computer systems do not have any common sense. They blindly follow the set of instructions. There is no full-proof algorithm that has been designed to programme common sense into a computer system. 

2) Zero IQ

A computer is a dumb device, incapable to think or visualise. They have zero Intelligence Quotient (IQ), and can perform a certain task only if they are programmed to perform it.

3) Lack of Decision-making

A computer is a device incapable of making decisions on its own. They lack the knowledge, intelligence, wisdom, and the ability to judge to make complex decisions.

Components of a Computer 

In a computer system, the functional components include the Input Unit, the Central Processing System and the Output Unit. These components may be embedded in a different architectural design in different computers. These components are called the essential building blocks of a computer system. 

The components of a computer system may be represented diagrammatically as follows: 

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1) Input Unit 

This unit is responsible for controlling the input devices in a computer system, which are used for entering data. Some examples of input devices are keyboard and mouse. Devices that respond to voice or physical touch are input devices as well.

2) Central Processing Unit (CPU) 

This unit is the main part of computer hardware,responsible for processing data as per instructions. The CPU controls the data flow by instructing the data to enter the system, then placing the data into its memory, and finally retrieving the same data whenever required. The CPU also directs the data output as instructed. 

The three main parts of the CPU of a computer system are: 

(a) Arithmetic and Logic Unit (ALU):The ALU is the unit responsible for performing the arithmetic computations. These arithmetic computations include addition, subtraction, division, multiplication and exponentiation. 

(b) Memory Unit: The memory unit is responsible for storing the data before being processed. The data stored can be instantly accessed and processed as per the instructions programmed into the computer system. The processed data is then transmitted from the input devices to the memory.

(c) Control Unit:The control unit is the unit responsible for the control and coordination of the activities performed by all other units of the computer system. The functions performed by the control unit include reading instructions from memory, decoding them, setting up routes for data, and determining the input device from where the next instruction will be received.

3) Output Unit 

The information produced after processing the data is to be made available to users in a manner which can be read and understood by human beings. For this purpose, computers require an output device to translate the processed data from machine language to human language. A commonly used output device is the monitor.

Evolution of Computerised Accounting 

With improvement in technology, newer versions of machines evolved, having exponential increase in speed, storage and processing capacity. These machines are connected to a computer which operates them. The success of an organisation which is growing starts to depend upon optimisations of resources and fast decision-making. 

Due to the complexity of the transactions, it became almost essential to maintain accounting data on a real-time basis, electronically on a computerised accounting system. Because of the increase in use of information systems, Transaction Processing Systems (TPS) have become increasingly important in supporting business operations. 

Many devices are available to facilitate the automation of the input process for a TPS.

Transaction Processing System (TPS)

One of the earliest computerised systems made for fulfilling the requirements of large business enterprises is the Transaction Processing Systems (TPS). TPS facilitates recording, processing, validating, and storing of various types of transactions, such that they can be easily retrieved and used whenever needed. 

A TPS follows the following steps when processing a transaction. Consider the case that a customer withdraws money using the Automated Teller Machine (ATM) facility. The procedures involved in the process are:

1) Data Entry: The first step involves entering the action data into the system using an input device such as keyboard, mouse, etc. 

2) Data Validation: The next step involves ensuring that the input data is accurate and reliable. This is done by comparing the input data with some predetermined standards or known data. Error detection and error correction procedures are used to perform data validation.

3) Processing and Revalidation: The third step in this process involves the processing of the data. The processing occurs almost instantly if the system is an Online Transaction Processing system, provided that the data entered is valid. This is referred to as checking the input validity. Revalidation is also performed to make sure that the transaction has been completed by the ATM, that is the money has been delivered. This is referred to as checking output validity. 

4) Storage: The processed actions materialise into financial transaction data. This means that the action of withdrawing the money by the customer is stored into the transaction database of the computerised personal banking system.

5) Information: The data which is stored is processed with the help of the query facility. The processing of the data produces the desired information. For example: Structured Query Language (SQL) support will be there in any database supported by DBMS. The translation of data into information by accounting software is done either via Batch Processing or Real-time Processing.

6) Reporting: The final step involves preparation of reports on the basis of the information obtained. The information content used to prepare the reports depends upon the usefulness of the report.

Features of Computerised Accounting System 

Generally, a computerised accounting system provides the following features: 

1) Accounting data can be input online and stored for further processing.

2) Purchase and sales invoices can be printed. 

3) It provides a logical scheme by assigning a unique code to every account and transaction.

4) It groups accounts from the very beginning. 

5) Provides instant reports for the management. The reports include the Aging Statement, Stock Statement, Trial Balance, Trading and Profit and Loss Account, Balance Sheet, Stock Valuation, GST, Returns, Payroll Report, etc. 

Management Information System (MIS) 

AManagement Information System, abbreviated as MIS,is a system that provides the information required for decision making and the information necessary for effective management of the organisation.This system supports the long-term strategic goals and objectives of the organisation, and is used at many levels by management, for instance, at the operational level, the tactical level, and the strategic level.

Accounting Information System (AIS) 

An Accounting Information System (AIS) is a system which is used to identify, collect, and process economic information about an entity, and then communicate it to a number of users that require such information. The processed information is organised such that correct decisions can be made using it. The AIS contains all accounting systems, which itself is a part of the organisation’s Management Information System. 

Designing of Accounting Reports 

A report is a summary of related information that aims at meeting a particular need. The content and design of the report depends upon the level to which it is submitted. Decision-making is made on the basis of the submitted report. 

It is important that an accounting report is effective and efficient for the users such that the decision-making process is smooth. Therefore, it must fulfil the following criterion:

1) Relevance 

2) Timeliness 

3) Accuracy 

4) Completeness 

5) Summarisation

The reports generated can be either routine reports or specific reports made to fulfil some specific requirement. Generally, the MIS reports related to accounting can be either summary reports, demand reports, customer reports, exception reports, or responsibility reports.

Data Interface between the Information System 

An important component of MIS in an organisation is the accounting information system. It receives information and communicates information to other MIS. 

Following are some examples illustrating the relationship and data interface between the various sub-components of MIS. 

I) Accounting Information System, Manufacturing Information System and Human Resource Information System 

The Human Resource (HR) department sends the list of workers to the manufacturing department, which then sends the details of production achieved by the workers to the HR department. The HR department communicates the details to the finance and accounts (F&A) department for the payment of wages. 

Then, the F&A department sends the details of the wages paid and statutory dues to the production department and the HR department. Finally, the HR department communicates the details about the good/bad performance to the other departments, which facilitates decision-making on various operational matters.

II. AIS and Marketing Information System 

The Marketing and Sales department inquires, creates contacts, receives orders, dispatches goods, and bills the customers. In this case, the transaction cycle of the accounting subsystem includes processing of sales orders, custody of the goods, credit authorisation, inventory position, shipping information, receivables, etc. Also, the accounting system keeps track of the accounts of each customer, which facilitates the generation of the Aging Report. 

III. AIS and Manufacturing Information System 

The production department prepares plans and schedules, issues material requisition forms and job cards, issues inventory, issues orders for procurement of raw materials, handles vendor invoices, and finally handles the payment to the vendors. In this case, the transaction cycle of the accounting subsystem includes processing of purchase orders, updating the inventory status, keeping track of advances to vendors, accounts payables, etc.

Thus, a computerised accounting system is the sub component of the AISwhich facilitates the transformation of financial data into relevant and meaningful information, and then communicating the information to the decision-makers at various levels of the organisation.

Class 11 Accountancy Chapter 12 Revision Notes

The chapter discusses the applications of computers in accounting. The use of computers for the purpose of calculation and maintaining the accounts book is discussed in a wide system in the chapter. Students need to keep up with their effective revision in order to get promoted in the class 12 with good results, hence we have prepared these revision notes for the students.

Accountancy is a subject that needs revision in the study routine. Students will forget their previous learnings if they are out of touch with the chapters, and then these revision notes come into play. Students are suggested to download the same and enjoy their revision schedule with us. These are assured notes capitulating the whole chapter in brief. Questions are expected to arise from this chapter and so we also have included the NCERT solution material for their study of the questions and answers.

Topics Included in Revision Notes

In our revision notes we included these topics - Meaning and Elements of Computer System, Capabilities of Computer System, Limitations of Computer System, Components of Computer, Evolution of Computerized Accounting, transaction Processing System, Features of Computerized Accounting, Management Information System, Accounting Information System, Designing of Accounting Reports, Data Interface Between the Information System, Accounting Information System, Manufacturing Information System, and Human Resource Information System.

The motive here is to provide the students a brief knowledge of the whole content keeping it short and crisp.

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 as follows:

1. Meaning and Elements of Computer System

The basic elements of a computer system should be well known to the students. This question can come via a short answer type mode.

2. Capabilities of Computer System

Students should be able to write the capabilities in points. Brief answer type questions might arise from this section.

3. Transaction Processing System

Students should be aware about the Transaction Processing System and should know what it is. This is a very vital part which will arise in the exams.

4. Features of Computerized Accounting System

The features are also important, students need to keep note for the same.

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. Students are able to regain their study in this chapter.

2. They do not need to make extra notes for their revision.

3. This is a very important chapter hence revision is a must in this chapter from our revision notes.

4. Our revision notes capitulated the whole chapter in brief to make it feasible for the students to study them with less invested time.

NCERT Solutions Chapter 12 Class 11 Accountancy Revision Notes

The NCERT Solutions are provided for free in our portal itself. Students need to download the NCERT solutions from there to revise from those solutions as well. NCERT solutions prove to be a great help to the students. It is a very standard guide, providing solutions to the students that will help them secure good marks in Class 11. This class forms a base for the students to study and achieve good results in their HS, hence they should not be carefree and ignorant about these free resources provided by us.