Page 286 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes The user operates on such database using the required and desired interface and also takes the
desired reports by suitable transformations of stored data into information. Therefore, the
fundamentals of computerised accounting embrace all the basic requirements of any database-
oriented application in computers. Accordingly, the computerised accounting system has the
above four additional requirements.
13.2.1 Need and Requirements of Computerised Accounting System

The need for computerised accounting arises from advantages of speed, accuracy and lower cost
of handling the business transactions.

 Numerous Transactions: The computerised accounting system is capable of handling large
number of transactions with speed and accuracy.

 Instant Reporting: The computerised accounting system is capable of offering quick and
quality reporting because of its speed and accuracy.
 Reduction in paper work: A manual accounting system requires large physical storage
space to keep accounting records/books and vouchers/documents. The requirement of
stationery and books of accounts along with vouchers and documents is directly dependent
on the volume of transactions beyond a certain point. There is a dire need to reduce the
paper work and dispense with large volumes of books of accounts. This can be achieved
by introducing computerised accounting system.

 Flexible reporting: The reporting is flexible in computerised accounting system as compared
to manual accounting system. The reports of a manual accounting system reveal balances
of accounts on periodic basis while computerised accounting system is capable of
generating reports of any balance as when required and for any duration which is within
the accounting period.
 Accounting Queries: There are accounting queries which are based on some external
parameters. For example, a query to identify customers who have not made the payments
within the permissible credit period can be easily answered by using the structured query
language (SQL) support of database technology in the computerised accounting system.
But such an exercise in a manual accounting system is quite difficult and expensive in
terms of manpower used. It will still be worse in case the credit period is changed.

 On-line facility: Computerised accounting system offers online facility to store and process
transaction data so as to retrieve information to generate and view financial reports.

 Scalability: Computerised accounting system is fully equipped with handling the growing
transactions of a fast growing business enterprise. The requirement of additional manpower
in Accounts department is restricted to only the data operators for storing additional
vouchers. There is absolutely no additional cost of processing additional transaction data.

 Accuracy: The information content of reports generated by the computerised accounting
system is accurate and therefore quite reliable for decision-making.
In a manual accounting system the reports and information are likely to be distorted,
inaccurate and therefore cannot be relied upon.

It is so because it is being processed by many people, especially when the number of
transactions to be processed to produce such information and report is quite large.

 Security: Under manual accounting system it is very difficult to secure such information
because it is open to inspection by any eyes dealing with the books of accounts. However,
in computerised accounting system only the authorized users are permitted to have access

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