Computer and Computerized Accounting System Part 1

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As we already know that every business keeps all of its business transactions in a proper manner for a particular period. This we call it as accounting system. If it is a small business enterprise or a single proprietorship the number of transactions will be less. But, if the business enterprise is big then it involves huge number of transactions every day. In such a situation, Manual method of keeping and maintaining records is a difficult task and we need an alternative method which requires less time and gives more accuracy. That is being provided by the application of computers in accounting system and we call it as Computerized Accounting System.

Image of Computerized accounting system

Image of Computerized Accounting System

Image of Computerized accounting system

Computer and Its Characteristics:

Computer: Computer is electronic device which receives input data, stores or process the input data as per user instructions and provides the output in desired format.

Characteristics of Computer: Computer is unique in its characteristics

  • Speed: Computers can perform a task very fast. They can process millions of instructions per second. Basically, the speed of computer depends on memory speed and processor speed etc. All those computer operations are because of electrical pulses which are travelling at the speed of light. And the speed is measured in number of cycles per second.

  • Storage: Computers are capable of storing huge data in a very small physical space. It can also be retrieved if we lost, by using some means. Data is safe from normal wear and tear associated with paper.

  • Accuracy: Computers produce every output with an exceptional accuracy. Of course, sometimes they may generate errors but that is because of either human errors or technical errors. Basically it is determined based on design of computer.

  • Diligence: A computer is free from tiredness, fatigue and lack of concentration unlike human beings. A computer can perform every activity with the same accuracy even after hours of work.

  • Versatility: Computers can perform wide range of jobs with same speed and accuracy.

  • Communication Tool: Computer is a powerful communication tool which is being used in every industry, through network of computers.

  • Processing Power: They can process any kind of data whether it is simple or complex. More powerful processors are used to estimate the climate and weather conditions, to do more complex tasks.

Simple Workflow of a Computer:

Image of Simple Workflow of a computer:

Image of Simple Workflow of a Computer:

Image of Simple Workflow of a computer:

Components of Computer:

Image of Components of Computer

Image of Components of Computer

Image of Components of Computer

Input Unit: It involves various input devices which provide input data to the computer.

Ex: Keyboard, Mouse, Scanner, Light pen, Graphic tablet, Joy stick, Touch pad, Touch screen, Track ball, Gesture Recognizers, Webcams and microphones etc.

Central Processing Unit (CPU): It is an electronic circuit within the computer and consist three units.

  • Control Unit (CU) – It controls all the functions of the computer and all parts of computer interact through the central unit.

  • Arithmetic Logic Unit (ALU) – It is responsible for all mathematical (Ex: Addition, subtraction, division, multiplication), logical (>,<,=) and decision operations etc.

  • Memory Unit: This unit stores data before being actually processed. This is of two types – primary memory which resides within CPU and secondary memory or external storage.

Output Unit: It involves various output devices which provide desired output in the desired format to the user.

Ex: Visual Display Units i.e. Monitor, Printers, speakers, plotters etc.

Limitations of Computer:

  • Cost of installation and maintenance - Computers are costly and they need frequent updates for software and hardware components.

  • Lack of common sense

  • Lack of decision making – computer perform as instructions being provided by input. They do not have knowledge, wisdom and ability to judge.

  • Zero IQ

Note: New technology Artificial Intelligence makes computers in understanding and self-decision making.

Danger for Health – computers should be used in a proper way. Over utilization may pose many health problems.

Role of Computer in Accounting:

As we already know that accounting is very essential for every business. Accounting is basically done in manual manner i.e. recording and keeping all transactions by humans. Accountants prepare Journals, Ledgers and Financial Statements manually.

Problems of Manual Accounting

  • It takes more time

  • It involves more cost (cost of books, accountant salaries etc.)

  • More possibility for errors and manipulations

  • Less confidential

As business transactions are growing day by day and need faster methods of accounting. To reduce time and cost, to eliminate errors and confidential problems we need some advanced tools as a part of accounting. Computers can provide advanced tools to make accounting process more reliable. This we call as Computerized Accounting System. As a part of Computerized Accounting System we use different accounting soft wares such as Tally, Zoho Office, Quickbooks, SAP etc. These soft wares will use data base system to gather information and to process the data to provide required output.

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