CAT FA1 Course Notes Contents Page
Introduction to a computerised accounting system
Most accounting systems are now computerises and these systems should offer the following advantages over manual systems:
- faster provision of information
- provision of information that would not be easily available without a computerised accounting system
- once the system is set up, cheaper information
- more accurate information because arithmetic and certain other errors will be eliminated.
Of course sometimes things go wrong and systems break down or incorrect information is produced. IN particular, if incorrect data is entered, incorrect information will be produced (garbage-in, garbage-out, GIGO).
A computerised accounting system can be represented as:
For example:
Input: Orders are input over the internet
Processing: Prices are accessed on a product file and the order value worked out.
The customers’ account in the receivables ledger (now held on a computer file) is debited.
Inventory records (now on a computer file) are updated.
Output: An invoice is printed for the customer.
Despatch information is displayed on a screen in the warehouse to show the goods that have to be sent.
In general there are two types of processing that can be carried out: batch processing and real-time on-line processing.
Batch processing: transactions are accumulated into batches and then all processed together. Because transactions have to be accumulated it means that there is a delay in processing them so the information held in the accounting system is generally out-of-date. For example, if sales transactions were accumulated during the week and processed to the receivables file on the last day of the week, for most of the time the balances shown owing from each customer would be understated. The balances would be correct only just after processing. Batch processing is not so common now.
Real-time, on-line processing: ‘real-time’ means that files are updated as transaction happen; ‘on-line’ means that the files are permanently accessible to be updated. For example, when you withdraw cash from a cash machine, the machine can access your bank account record (it is on-line) to see if you have the funds. When you take the money out your bank account is immediately updated (real-time).
Accounting documents and management reports produced.
Many accounting documents and reports will be routine: invoices, statements, sales analyses, monthly sets of financial statements. However, computerised accounting systems excel at producing exception reports.
Exception reporting is the concept of directing managers’ attention to areas of operations which seem to be performing either exceptionally badly or exceptionally well.
If operations are going more or less as planned, then it is assumed that not much management care is needed there. Managers should concentrate their efforts where operations seem to be diverging from what is expected. Exception reports include:
- Slow-paying customers
- Slow-moving stock
- Expenses much greater than expected
- Failed password attempts at accessing data.
While!!!!! This is truly amazing….