Accounting: Components of Computerized Accounting Software and Transaction Processing System (For CBSE, ICSE, IAS, NET, NRA 2022)

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They are used to

  • Prepare Accounting documents like Cash Memo, Bills and Invoices etc.
  • Record transactions every day and every transaction will be given a unique code.
  • Groping of Accounts can be done from the first stage.
  • Prepare Trial Balance, Financial Statements i.e.. Profit and Loss A/c, Balance sheet etc.
Compenents of Coputerized Accounting Software

Transaction Processing System (TPS)

It is the first stage of computerized accounting system. It involves

  • Data Entry – recording of all transactions as per their occurrence by human being.
  • Data Validation – It ensures accuracy and reliability of input data by showing ‘Error Detection’ and ‘Error Correction’ .
  • Processing and Revalidation – Processing of data occurs instantly, and only valid data fed to the system.
  • Storage – Valid data is stored in a safe manner in database.
  • Information – The stored data is processed to produce required information.
  • Reporting – Reports can be prepared on the basis of requirement and usefulness of the report.
Transaction Processing System (TPS)

Need of Computerized Accounting

Computerized accounting is needed to provide many solutions to the accounting system.

  • Numerous Transaction – Number of transactions of any business enterprise are growing faster.
  • Instant Reporting – we need all information with in short time. Instant Reporting is very important in present system of business. Every firm need to produce quick reports with quality information.
  • Flexible Reporting – To acquire any kind of information as per our convenience.
  • Accounting Queries – Computerized accounting uses structured query language (SQL) to address any kind of query using available database.

Ex: Query regarding customers who have not paid their bills can be addressed easily.

  • On-line facility – we can access information at any time.
  • Reduction in paper work
  • Reduction in workforce required to do accounting
  • Accuracy – Recording of transactions and producing of reports with accuracy.
  • Security – All the data can be stored safely. And recording of transactions and maintenance of accounts can be authenticated. No external person can enter any unnecessary transactions.
  • Easy Decision making – Financial reports can be compared with the help of available historical data and required improvement or corrections can be done easily.

Requirements of Computerized Accounting

  • We need standardized Accounting framework of accounting principles, coding and grouping structure to perform computerized accounting.
  • Also we need a well-conceived and designed operating procedure to work with computerized accounting.

Difference between Manual Accounting and Computerized Accounting:

Table Supporting: Requirements_of_Computerized_Accounting
Point of DifferenceManual AccountingComputerized Accounting
  1. Recording of transactions
  2. Classification
  3. Summarizing
  4. Adjusting Entries
  5. Financial Statements
Through books of original entry. (in books)

Original entries are further classified by posting them into ledger accounts. This results data duplicity.

Transactions are summarized to produce trial balance by ascertaining the balances of various accounts.

Adjusting entries are made to adhere to the principles of matching.

Preparation of financial statements assumes the availability of trial balance.

Data content of those transactions is stored in well-designed data base.

No such data duplication is made. Stored data is processed to as classified data.

The generation of ledger accounts is not necessary condition for trial balance.

No need of making adjustment entries for errors and rectifications.

Preparation of Financial statements is independent of producing the trial balance.

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