Question 1: Define a computerised accounting system. Distinguish between a manual and computerised accounting system.
Answer:
A Computerised Accounting System is that accounting information system that helps in processing the financial transactions and events as per the Generally Accepted Accounting Principles (GAAP) and leads to the generation of reports as per the requirements of the users.
An accounting system whether manual or computerised has two parameters, namely,
1) It has to follow the well defined concepts known as the accounting principles
2) It has to maintain the user-defined structure for maintained of records and generation of reports.
| Basis of Distinction |
Manual
Accounting |
Computerised
Accounting |
| 1. Identifying Financial Transactions |
In this system, identification of financial transactions is done manually by applying the principles of accounting. |
In this system also identification of financial transactions is done manually by applying the principles of accounting. |
| 2. Recording |
In this system, the recording of transactions in the books of original entry and related calculations such as adding, subtraction and totalling are done manually. |
In this system, the recording of transactions i.e., storing of data in database is done manually and all other calculations are done by computers. |
| 3. Classification |
In this system, classification i.e., posting to ledger accounts is done manually.
|
In this, the stored data are processed automatically by the software to give us ledger accounts. |
| 4. Summarising |
In this system, summarising i.e., balancing of ledger accounts and the preparation of trial balance is done manually. |
In this, transactions once recorded are stored in the database which will produce trial balance automatically. |
| 5. Adjustment Entries |
The identification, recording and posting of adjustment entries is done manually. |
In this, identification and recording of adjustment entries is done manually and their posting etc. is done by software. |
| 6. Financial Statements |
In the manual process, preparation of trial balance is essential to produce the financial statements. |
In this, financial statements are generated from the software itself and therefore there is no need to prepare a trial balance. |
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