Computerized accounting is not a very complex or complicated concept to adapt to or to embrace. The execution and rightful operation of computerized accounting can come as a major challenge. Not only do start-up establishments stumble upon it but many well-established organizations do as well. Adequate and appropriate training is crucial in order to implement computerized accounting.
It is quite noticed that commerce and accountancy students are taught to equip themselves with the knowledge of various advanced accounting techniques. But these techniques are rarely taught to be applied in computerized accounting. Hence, major percent of the commerce student population learn to account in books but not in computers.
Considering the immense advancements in accounting technology, the most basic technical adaptation is the inevitable use of a computer. The accountants who make use of computers for various accounting purposes should be confident in the work done by them. They should also know their way through the process of computerized accounting. In order to be able to do so, it is essential to have a strong foundation on the concept of computerized accounting and the role it plays in an organization.
Introducing the concept of Computerized Accounting
Accounting refers to the process of gathering, storing, interpreting and sharing of financial information of an organization for over a particular period of time (usually 1 accounting or financial year). This process begins by gathering information from vouchers (invoices or receipts), storing them in journals (book-keeping), converting them into meaningful information such as financial reports and financial statements, and finally sharing them with the decision makers of the organization.
Computerized accounting systems make use of computer technology in order to perform all the above-mentioned functions of accounting. Computers gather data from digital receipts and invoices. Due to their vast memory space, they store the collected data for future reference. And finally, the stored data is accurately and effectively converted into valuable reports with the help of various computer software.
Features or Characteristics
The unique features and characteristics of computerized accounting are mentioned below:
- It is aided by the technology of a computer.
- Accounting with the help of computers yields accurate and efficient results after data interpretation.
- It is capable of storing very large quantities of accounting data. Data of the past 10 years can be stored in the accounting database.
- Computer accounting systems make precise accounting reports that are of good quality.
- It is capable of interpreting very large quantities of accounting data.
- Converting journal entries into ledger accounts can be done with ease and precision.
- Accounting with the help of computers reduces the process time drastically.
- Adopting computer-based accounting will ensure that you stay updated with the needs and changes in the company.
- This type of accounting demands accountants to have a strong subject foundation. They should also have adequate knowledge of working with computers.
Requisites or Pre-requisites
As mentioned earlier in the article, computerized accounting is not a very complicated process. It is beneficial if the organization is fully equipped with the necessary requisites. The requirements for implementing effective computerized accounting are as follows:
- An effective accounting policy which determines the financial functions and ethics of the organization.
- A computer system with (or without) satisfactory internet connection.
- A well-organized accounting database.
- Well-trained, efficient and competent accountants who have adequate computer knowledge.
- An appropriate accounting software that is compatible with the computer specification as well as the organization’s needs.
- A well-established and organized accounting framework and operational strategy.
- In case of technical glitches, an alternative accounting software is of paramount importance.
- An effective backup arrangement of all accounting database is necessary in order to avoid technical crash and loss of data.
Importance or Need or Significance
Computerized accounting is the need for the hour and is being adopted by domestic as well as global industries. Considering its high demand, it is needed by every organization for the following reason:
- It processes data quickly and saves a lot of business time.
- Performing large number of business transactions is possible with computerized accounting.
- Computer accounting can develop instant financial reports because of its accuracy and speed.
- This system of accounting reduces the manpower effort.
- Computer accounting reduces the amount of paperwork.
- It also ensures the security of accounting information from thefts and frauds.
- Accounting information can be stored online (cloud facility) for longer durations. This frees up system space, speeds up the RAM and increases performance.
Benefits or Merits or Advantages
Along with the adoption of computer-based accounting comes many benefits. A few of such benefits of computer accounting are mentioned below:
- An overall increase in the level of accuracy, effectiveness and efficiency of the financial statements are accounting reports.
- Another key benefit is that this type of accounting reduces operation cost due to errors and repetitive working.
- Computerized accounting improves financial performance and efficiency.
- It ensures standardization of process and end-results.
- Computer-based accounting reduces the frequency of routine errors.
- It reduces the investment in training costs.
- Financial workflow of the organization will not be hindered by the absence of accountants.
- Moreover, this type of accounting portrays that the company is updated and adaptable.
- Unique accounting techniques and procedures which are relevant to the particular organization can be created.
- Accounting will become significantly independent of manpower.
Complexities or Disadvantages or Demerits
There are disadvantages to adopting the computer-based accounting system. The complexities are discussed below.
- This system explicitly steals human jobs as manpower, in particular, is replaced by computers.
- The added expense to install a computer/computers is an additional key point.
- Furthermore, there is a requirement for special skills among employees performing accounting tasks.
- This accounting system will eventually depend entirely on the system. As a result of this, there will arise the added risk of system failure and hindrance of business operations.
- Editing of data that has been misplaced under the wrong category can be very challenging.
- Spotting of errors that occur in the middle of the accounting process will be difficult to identify and locate.
- Since organizations have a lot of workloads, they may not have the resources (time or human) to create backups. Hence, loss of valuable accounting data/information is a high possibility.
Here is the PDF format of a chapter on Computerized Accounting (a.k.a computer accounting or computer-based accounting). This chapter will provide all the information that you need. Click on the link here Computer-Accounting
To sum up the entire article, there are basically 3 kinds of computerized accounting.
- Computer inbuilt software like spreadsheets.
- Commercial accounting software that is available in the market.
- Specialized accounting software made especially for/by a particular organization for its financial operations.
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