Detailed, Step-by-Step NCERT Solutions for 11 Accountancy Chapter 13 Computerised Accounting System Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.
Computerised Accounting System NCERT Solutions for Class 11 Accountancy Chapter 13
Computerised Accounting System Questions and Answers Class 11 Accountancy Chapter 13
Test Your Understanding
I. Fill in the blanks :
(i) The framework of storage and processing of data is called as ……………..
(ii) Database is implemented using ………….
(iii) A sequence of actions taken to transform the data into decision useful information is called ……………..
(iv) An appropriate accounting software for a small business organisation having only one user and single office location would be ……………..
(i) Operating Environment
(iii) Data Processing
(iv) Ready to use
Short Answer Type Questions
State the four basic requirements of a database applications.
A computerised accounting system is an accounting system that records and process the accounting transactions and events and produces the reports as per requirement of the user, according to Generally Accepted Accounting Principles (GAAP).
Modern accounting system uses the concept of database. It is implemented using a DBMS i.e Data Base Management System. A Database is a collection of related information stored so that it is available to many users for different purposes. The management of data in a database system is done by means of a general purpose software package which is called Data Base Management System.
Computerised accounting system based on database application is a system where data is collected, stored, processed and interpreted to generates the report for decision-making purpose of management.
The use of computer in any database-oriented application has four basic requirements which are following :
(1) Front-end Interface
(2) Back-end Database
(3) Data Processing
(4) Reporting System.
(1) Front-end Interface – It is an interactive link between the user and the database-oriented software, through which the user communicates to the back-end database.
(2) Back-end Database – It is the data storage system that stores data hidden from the user, it responds to the requirement of the user only to the extent he is authorised to access.
(3) Data Processing – It is a sequence of action that makes data an information. In other words, it is the process of transaction of data into information useful for taking decision by sequence of actions.
(4) Reporting System – It is the system which helps in composing all the information in some integrated form that constitute the report.
Name-the various categories of accounting package.
Today, there are number of readymade software accounting packages that are available in the market. Since the application in the area of accounting are standard, difference is in the number of features provided by an individual package. Every accounting package is implemented to perform, recording, classifying, storing and summarising of accounting data and generates reports according to requirement of the user.
The accounting package are classified into following categories:
(1) Ready to use
(1) Ready-to-use – Ready-to-use software package is suited to small organisation who have low volume of transaction. The cost of installation is low and the number of user is also limited. Ready- to-use package is relatively easier to learn, so its training need less time and sometimes even the vendor of this package offer free training. The level of secrecy of this software is low thus the software is highly prone to data frauds. This type of software offer very little scope of linking to other information system. Some of the ready-to-use accounting softwares available in the market are Tally, Ex., Busy and The Professional Accountant.
(2) Customised – Accounting software may be customised to meet , the special requirement of the customer. It means making changes in the ready-to-use software package to suit the specific requirement of the user.
Customised software packages is suited to large and medium organisations. The cost of installation and maintenance is relatively high because a high cost is to be paid to vendor for customisation.
It is relatively difficult to learn as it include modification and addition to the software contents. It is important to train software user, so the training cost are high. The level of secrecy of data and software can be better maintained in customised software. This software can be linked to the other information systems.
(3) Tailored – It refers to designing and developing user specific software. These are developed on the basis of discussions between the user and developers. This type of software packages are usually required in large business organisation. The cost of installation and maintenance is very high. It requires special training because it is difficult to learn. They involves sophisticated application so their training cost are very high. The level of secrecy and authenticity checks are robust in such software. They can be effectively linked to some specific information systems.
Give examples of two types of operating systems.
Operating system is an organised collection of software that controls the overall operations of a computer. It is a very complex and intricated programme that basically supervise and direct the operations of the computer for the user. Operating system isolates the user of the computer from the technicalities of the actual working of the computer.
They are rather like the secretaries in the office who isolate the manager from having to worry about where the various files are stored or wasting time in making phone calls or fixing appointments etc. The user of the computer then has to only concentrate on providing instruction for the specific application to be performed.
The nitty-gritty of how the instruction will actually be executed are handled by operating system. So, the operating system is a powerful software that handle programme execution, processes commands and manages the various devices attached to the computer.
There are two types of operating systems :
(1) Single-User Operating Systems
(2) Multi-User Operating Systems.
(1) Single-User Operating Systems – The Personal Computer (PC) is small, general purpose system that can execute programmes to perform in a wide variety of tasks. The PC, however, was designed for use by one person at a time, that is, it is single-user oriented with MS-DOS as the de facto standard operating system for this range of machines. Single-user operating systems became very popular d’ e to the low cost hardware and wide range of software available ; K these machines.
(2) Multi-User Operating System – As opposed to single-user systems, there are also larger system, which more than one person can use at any time. Such systems are referred to as multi-user operating systems. Multi-user systems would be required when a number of applications have to run simultaneously, or common resources, like printers and disks, are to be shared by a number of users.
Multi-user operating systems are expected to handle multiple user as well as multiple peripheral devices concurrently. Such operating systems have to be more efficient and sophisticated than simpler single-user operating systems. Unix, Linux were designed for a multi-user system
List the various advantages of computerised accounting systems.
Advantages of Computerised Accounting System – The computerised accounting system of accounting has various advantages which are following :
(1) High speed – Computer system process accounting data at a very high speed and consume less time.
(2) Accurate – If the data entered in computer is correct then the possibility of error in processing is eliminated.
(3) High reliability – Computers are immune to tiredness, boredom or fatigue. It is well-adapted to performing repetitive operations. So, this system is highly reliable.
(4) Up-to-date information – All the related accounting records in a computerised accounting system get automatically updated when any data is entered and stored. So, it always produces the up-to-date information.
(5) Large volume of transactions – The computerised accounting system can store and process large volume of transactions with great speed and accuracy.
(6) Realtime user interface – Most of the modern computerised accounting system are inter-linked through the network of computer. It facilitates the availability of information to different user at the same time.
(7) Less paper work – In computerised accounting system, paper work is very less.
(8) Automated document production – Computerised accounting system have standardised user-defined format of accounting reports that are. generated automatically.
(9) Efficiency – Computerised accounting system ensure better and efficient use of resources and time.
(10) Scalability – Computerised accounting system is scalable to handle the growing transactions.
(11) Legibility-The data, information and reports displayed on computer monitor is legible.
(12) Quality reports – Inbuilt checks and untouchable features of data handling features produce true and quality reports by the computerised accounting system.
(13) MIS reports – The computerised accounting system facilitates the generation of management information reports at a very high speed, which will help the management to control the organisation effectively.
(14) Lower cost-The cost of maintaining the books of accounts is low in computerised accounting system.
(15) Storage and retrieval – Computerised accounting system does not need large amount of space for storing the data , because it stores data in CDs. hard disks etc. This system also permits fast and accurate retrieval of data as and when required.
(16) Queries – Replies of queries is very fast under the computerised accounting system.
Give two examples each of the organisations where ‘ready-to-use’, ‘customised’ and ‘tailored’ accounting packages respectively and suitable to perform the accounting activity.
The suitability of accounting package depends upon the various factors, i.e.,
(1) Size and nature of the business
(2) Volume of transactions
(3) Special requirements of organisation
(4) Need for online network of information
(5) Training requirement.
For small size, conventional business where volume of transaction is not much and no need of network of information. Ready-to-use accounting package is suited. Its training is also easy and small business V has not any special requirement for accounting. Then only need the standardised accounting package.
Examples – Small departmental stores, sole-tradership business, CAs. school, college, restaurant etc. For medium and large business v where volume of transaction is large and is need of information network requires customised accounting package. For example, big departmental stores, shopping malls, hospitals etc.
For large typical business with geographically scattered locations tailored accounting package is best suited. For example, banking, mobile phone service etc.
Distinguish between a ‘ready-to-use’ and ‘tailored’ accounting software.
Ready-to-use accounting software is available off-the-shelf. These are net user-specific but for the large number of users. .It is developed by the group of professionals. It is easy to Seam and cost effective. Tailored accounting software are not available off-the-shelf, ft is user-specific software. It is designed and developed by group of professionals on the basis of discussions with the user.
Difference between a ‘Ready-to-use’and ‘Tailored’ accounting software :
Long Answer Type Questions
Define a computerised accounting system. Distinguish between a manual and computerised accounting system.
Accounting is called the language of business. It communicates financial information to variety of users for preparing financial reports. It is considered as a system which collects and. processes financial information of an enterprise and reports that information to user to enable them to make appproriate decisions. Accounting helps to summarise a lot of financial transactions and events and enable the accountants to convey economic information to its user.
It is very important that accounts of different enterprise are prepared on uniform basis and an enterprise maintain consistency in preparation of financial accounts over a period of time. To have uniformity and consistency in preparation and presentation of financial accounts, accounting operates w ithin a framework of ‘Generally Accepted Accounting Principles’ (GAAP).
When the accounts are maintained with the help of computer, it is called Computerised Accounting. Most of the computer programmes help in proper basic recording of business transaction. Now-a-days computer is being w idely used in the field of accounting It, itself can do the calculations, collects, process accounting data and presents the results in the form of proper reports to the management for decision making purpose.
It also performs the function of recording, posting, classification, summarisation and interpretation of results.
A computerised accounting system is an accounting information system that records and process the accounting transactions and events and produces the reports as per requirement of the user, according to Generally Accepted Accounting Principles (GAAP).
The framework of storage and processing of data in computerised accounting system is called the operating environment. Operating environment of computerised accounting system consists of hardware and software of the computer system. They are both dependent to each other. The type of software determines the structure of hardware whereas selection of hardware depends upon the type and number of user, size of organisation, network and working of the organisation, extent of working etc.
Modem computerised accounting system uses the concept of database. It is implemented using a DBMS i.e. Data Base Management System. Computerised accounting system based on database application is a system where data is collected, stored, processed and interpreted to generate the report for decision making purpose of management.
Difference between Manual and Computerised Accounting System – As we know that, accounting is the process of identiying recording, classifying and summarising financial transactions to generate the financial reports. Let us compare manual and computerised accounting system on the basis of above definition.
(1) Identifying Financial Transactions – The identification of financial transaction on the basis of accounting principles are same in both the systems.
(2) Recording of Transaction – The recording of transaction in the proper books of accounts, performing arithmetical functions is carried out manually in manual accounting system. In computerised accounting system only transaction is recorded in the books of accounts and other functions is done automatically. Data is stored in well-designed accounting database.
(3) Classifying Transactions – In the manual system, transactions . from the books of accounts are posted into ledger accounts. It means that data is duplicated. In computerised system data is not duplicated. The stored data is processed by software and produced as classified.
(4) Summarising – In manual system, the transactions in each ledger accounts are summarised i.e. balance of each account is ascertained and prepare the trial balance. Therefore, preparation of ledger is must in manual system.
In computerised system, the transaction stored in well-designed database processed to prepare trial balance. Ledger accounts are not necessary to get the trial balance in this system.
(5) Adjusting Entries – In manual system, these entries make to adhere to cost matching revenue principle. Some other entries are also made to rectifying the errors. In computerised system, there is no need of passing adjusting entries for errors and rectification, except for rectifying an error of priniciple by having wrong recording.
(6) Financial Statements – In manual system, financial statements i.e. Trading Account. Profit & Loss Account and Balance Sheet are prepared on the basis of trial balance. In computerised system, .there is no such requirement of trial balance. The generation of financial statement is independent to trial balance by direct processing of stored data.
(7) Closing the books – After the year-end, preparation is made for the next accounting period by passing the closing entries. The balances of nominal accounts transferred to the Trading and Profit & Loss Account and of other accounts, closing balances transferred as the opening balance for the next accounting period. In computerised system, the process of closing books is performed by computer itself and the opening balances for the next according period are stored in the database.
Discuss the advantages of computerised accounting system over the manual accounting system.
The computerised accounting system has several advantages over manual accounting system.
(1) High speed – In computerisec accounting system, accounting data is processed much faster than that of a manual system.
(2) Accuracy – The possibility of error is eliminated once a particular data is fed in computerised system. It is 100% accurate. The results produced by manual system can vary due to carelessness, tiredness etc.
(3) Reliability – The computer system are immune to tiredness, boredom or fatigue. It is well-adapted to performing repetitive operations. So they are more reliable than manual systems.
(4) Up-to-date information – In computerised systems, all accounting records are updated automatically as and when, they are entered and stored. In manual system all the records will have to be altered one by one.
(5) Large volume of transactions – Computerised system can store and process large volume of transactions with great speed and accuracy than manual system.
(6) Realtime user interface – Computerised systems are inter¬linked through a network of computers, which facilitates the availability of information to different user at the same time whereas it is not possible in manual system.
(7) Less paper work – In computerised system paper work is less as compared to the paper work in manual system.
(8) Automated document production – Statement of accounts are obtained in a standardised user-defined format just by click of mouse in computerised accounting system which is not possible in manual system. It takes time.
(9) Efficiency – Computerised system ensures better use of resources .and time as compared to manual system.
(10) Scalability – Computerised accounting system is scalable to handle the growing number of transaction as compared to manual system.
(11) Legibility – In computerised system characters are type written using standard fonts so they are legible.
There is untidy written figures in a manual system.
(12) Quality reports – Reports produced by computerised system are highly objective and reliable because of inbuilt check, which is not possible in manual system.
(13) “MIS reports – The computerised system facilitates the generation of the MIS reports at a very high speed whereas the generation of the same reports manually is very time consuming and less accurate.
(14) Storage and retrieval – The storage of data in computerised system does not require a large amount of physical space, because it stores data in CD-ROMs, hard disks, floppies etc. which requires very few space in comparison to books of accounts prepared under manual system. It also permits the fast and accurate retrieval of accounting data as and when required.
(15) Lowercost – The cost of maintaining the books of accounts under the computerised system is lower than the cost under the manual system.
(16) Queries – Replies of queries under the computerised system is obtained easily.
Describe the various types of accounting softwares along with their advantages and limitations.
Today, there are number of ready-made software packages that are available in the market. Since the application in the area of accounting are standard, difference is in the number of features provided by an individual package. An accounting software is an integral part of the computerised accounting system.
Types of Accounting Software
(1) Ready-to-use – Ready-to-use accounting software available off the shelf. They are not user-specific for the large number of users. It is suited to smaU/conventional business organisation where the frequency or volume of transactions is low. The cost of installation and maintenance is low and its user is also limited. It is easierto learn, so training cost is very low. This is prone to data frauds because the level of secrecy is relatively low. It offer little scope of linking to other information systems.
- Ready-to-use software is developed by the group professionals having varied experience.
- It has better after sale maintenance service.
- It is used by number of users, so the accounting persons who have the knowledge of this are easily available.
- It is cost effective.
- It save time in installation and learning.
- It will give misleading results, if the grouping of accounts is incorrect.
- Their software are window based software, the output in physical form is a slow process.
- The level of secrecy is low, as it is prone to data frauds.
- It is not linked with the other information system.
(2) Customised – Ready-to-use software can be customised to meet the special requirement of the user. The developer, to meet the specific user requirement can modify the ready-to-use software. The user bear the cost of modifications. It is suited to large and medium business organ isation. It can be linked to other information
system. Secrecy of data and software can be better maintained in this software. .
- It is user-specific.
- It can be linked to other information system.
- The level of secrecy is good so data and software can be better maintained.
- It has better after sale service.
- It is cost effective.
- Cost of installation and maintenance is high because high cost is paid to developer to modify the ready-to-use software.
- Training cost is also high.
(3) Tailored – Tailored accounting Software are not available off- the-shelf. It is user-specific software, which is designed and developed by group of professionals on the basis of discussion with the user. It is used by large business organisation with multi-user and geographically scattered locations. It requires the special training. The secrecy and authenticity checks are robust in such software.
- It takes care of the accounting reports and MIS.
- The enterprise may have to engage a software engineer to maintain it, so the problems faced can be solved immediately.
- It require well-trained user to use software therefore they can maximum utilization of the software.
- The secrecy and authenticity checks are robust in such software.
- It gives the misleading results, if the grouping of accounts are not correct.
- The development cost is much higher.
- Training requirement is also very high.
Accounting software is an integral part of the computerised accounting system? Explain. Briefly list the generic constitutions before sourcing an accounting software.
When the accounts are maintained with the help of computer, it is called computerised accounting. A computerised accounting system is an accounting system that records and process the accounting data and events and produces the reports as per requirement of the user, according to Generally Accepted Accounting Principles (GAAP).
Every accounting system works under a framework of well-defined principles i.e. accounting principles and in user-defined network for maintenance of records and generation of reports. The framework of storage and processing of data in computerised accounting system is called the operating environment.
Operating environment of computerised accounting system consists of hardware and software of the computer system. Hardware and software of computer system are both dependent on each other. The type of software determines the structure of hardware whereas selection of hardware depends upon the type and number of user, size of the organisation etc.
In small business where the number and variety, of transactions are small, a personal computer with standard software may be perfect. But in large organisation, some powerful computer system with sophisticated software is needed to maintain the accounting data. For this purpose multi-user system such as Unix, Linux etc. are used.
So, it is clear from the above discussion that computerised accounting system cannot do anything without the proper software. Hardware becomes idle without the software. It is the software which makes them run. It is the software which perform recording, classifying, storing and summarising of accounting data and generates reports according to the requirement of the user. So’, we can say that accounting software is an integral part of the computerised accounting system.
Today, there are number of software packages available in market. Since the application in the field of accounting are standard, difference is in the number of features provided by an individual package. It is the people, who are responsible for accounting not the computer, so before acquiring the accounting software it is very important to analyses the expertise level of the people who would use it.
Generic consideration before sourcing an accounting software :
(1) The cost of installation and maintenance-A simple cost benefit analysis is done before sourcing an accounting software. The cost of acquiring installation, hardware requirement and its maintenance are the factors which must be considered before sourcing any software.
(2) Flexibility Flexibility of software is an important consideration before sourcing. Software should be easily upgraded and modified, user should be able to run the software on variety of platforms e.g. Window 98/XP etc.
(3) Size of organisation- The choice of software depends upon the size and volume of transaction of the organisation. For siriall organisation, single user operated software is opted. But for a large and geographically scattered organisation multi-user software with complex networks are required.
(4) Adaptability arid training needs – Accounting software should be easy to understand and adaptable. It should not require extensive training.
(5) Utilities/MlS reports – The degree of use and utility of MIS reports also determine the acquisition of software.
(6) Level of secrecy – Security features is another consideration before sourcing the software. The level of secrecy should be high to protect system from unauthorised accessing.
(7) Exporting/Importing data facility – Sometimes, transfer of data or information are also considered before acquiring the software.
(8) Vendor reputation and capability – Vendor reputation and capability to handle software, in software business, after sale service etc. are also considered before sourcing the accounting software.
‘Computerised Accounting Systems are best form of accounting system.’ Do you agree? Comment.
‘Computerised Accounting Systems are best form of accounting system.’ I am very much agree with this statement. Computers have increased the efficiency of accounting departments.
The work which was previously done by number of people is done by computer very fast and accurately. Computer has an inbuilt system of making calculation, collecting and processing accounting data and presenting the results in the form of reports to the management for decision-making purpose.
The computerised accounting system is based on the concept of database management system. It does not involves the process of creating and maintaining journal, ledgers etc. which are necessary in the manual accounting system.
A computerised accounting system comprises of the following main features
- On screen input and printout of invoices
- Updating the ledger
- Recording invoices ‘
- Recording bank receipts
- Making payments to suppliers and for expenses
- Automatic updation of ledger
- Automatic adjustment of stock records
- Provide up-to-date reports.
It has the following advantages :
- Saving time
- Saving money
- Being accurate.
In the area of accounting, there is lot of monotonous work, which is required to be done manually. For example, making entries into journal, updating the ledger, writing day book, preparing vouchers etc. Now all these repetitive activities are performed by the computer. Once the data relating to particular transaction is keyed in, the rest of the posting in the appropriate accounts and books is done by the system itself. From the same data voucher are generated.
Computerised accounting system eliminates the substantial manual efforts involved in posting entries in various books of accounts. It provides any information with ease and greater speed. This system provides automatic updation of books of accounts, automatic reconciliation and saves the storage space. All these benefits have made computerised accounting system the best form of accounting system.