AAC 220

NAME: MAZIN (HUSAIN FRIEND)

 COMPUTERISED ACCOUNTING SYSTEM ITS BENEFIT AND
DRAWBACKS

Computerised accounting system is the system of maintaining the information related

to the accounting, which is done by making use of the software application in very
systematic way. Book keeping processes and complication calculations are done using
the method of digital accounting which saves a lot of time in calculations. (Firdausi,
2017)

o Benefits

 Most of the business owner find challenging to maintain the financial

record of the company. so, this is where it helps the business owner to
make use of the accounting software to maintain the record of the
company.

 This accounting software program is consumer friendly where most of

the small or medium enterprise can also make use of it, as it easy to use
just by installing the software and updating the records.

 Business owners of the company can determine the funds available in

the company at any time as the software programs are reliable and easy
to use.

 Accounting are cost effective as it saves lot of funds of the business

owner. As appointing the Book keeper or accounting firm becomes
costly but in this just a set up of the software program will be done.
(Leonard, 2018)

o Drawbacks

 There is a more chances of a potential fraud in a company, as an owner

of the company cannot be fully dependent on the software. The data
stored in the software can also be hacked if they use employee
 identification tax number, This will put risk on the assets of the
company.
 There might be technical issues on software, if there is any sort of virus
on the computer than there are more chances that the data will be
erased from the computer which will be major issue for the company.
(Leonard, 2018)

 DIFFERENT TYPES OF ACCOUNTING SOFTWARE

Accounting software are used to collect the information on the transaction of the
business, there are different types of software used in a company: (Lucy, 2015)

 Spread sheets: This type of software are used by small business as these are
inexpensive and very easy to use. Most of the financial statement done using
in spread sheet are incorrect. So, the low volume of transactions are recorded
in this software.

 Commercially of the shelf software (COTS): COTS software is the most

commonly used by the large companies to record the financial transaction of
the company. It detects the error in the financial entries and gives the standard
report for the company. Installing this software might require consult to install
this software on the computer.

 ERP (Enterprise Resource Planning) Software: ERP software helps the

company to store the information in one single database. It is more expensive,
so it is not used by the medium or small enterprises. This type of software is
used in complex businesses. Installation of this software may take more than
half of the year. By help of this software, the large organization will have good
co-ordination among every management and data stored in this software will
be safely secured by the company.

 Custom Accounting Software: This software is used by the company to

perform the specific task. In order to complete the complicated task of the
 company, this type of software will be used for the special purposes of the
enterprises. This software is rarely used by the company because its buggy and
its maintenance is costlier. (Bragg, 2017)

 GOALS OF THE INVENTORY MANAGEMENT AND ITS TYPES

Inventory Management is a step of maintaining the order, storing and using the
inventories of the company, In this management it also includes the production of raw
material and finished goods. (Mukta, 2017)

o Goals of Inventory Management

 To Maintain the availability of the raw material or stocks of the

company whenever it is required for the company.

 To reduce the cost of the material by overstocking the Inventory which

help the company to reduce the expense on Overstocking material.

 To ensure that the quality goods are produced in the company. (Mukta,
2017)

o Four types of Inventory Management

 Periodic Inventory Management: In this system of management, the

calculation will be done based on the sales of the stock and it reorder,
which will help the company to know the required material for
production of stock.

 Perpetual Inventory Management: In Perpetual inventory system,

every movement of the stock will be recorded, this will help them to
know up to date information about all the stock sold. Most of the
company use this type of management system to help their customer to
track their product.
  MRO - Maintenance, Repair and Operation Inventory Management:
MRO is mainly used in the process of the supply chain, where the
condition of the assets in the location can be identified. This will help
the companies to know their conditions of the business assets.

 MRP- Material Requirement Planning reordering: MRP is mainly

used by the Manufacturer to meet the excessive demands and ensure
that the extra order of the items are completed on time. (Steven, 2019)

 CALCULATION OF ENDING INVENTORY BY USING WEIGHTED

AVERAGE AND FIFO METHOD

DATE PARTICULARS UNIT PRICE AMOUNT

1/01/14 Opening stock 250 1.200 300

5/01/14 Purchase of material 350 1.275 446.25

7/01/14 Material Purchased 425 1.340 569.50

10/01/14 Material Sold 800 800

12/01/14 Material Purchased 550 1.425 783.73

15/01/14 Sale of Material 620

20/01/14 Material Sold 120

CLOSING
INVENTORY 35

FIFO (First In, First Out) Method

We found Closing Inventory is of 35 Units (350+250+425-120-620+550-800), the remaining

clearing unit is purchased on 12/01/14. The rate is used as 1.425 from the FIFO method of
valuing the ending inventory and the value from the FIFO method is of 49.88

Cost of goods sold (COGS) from FIFO is of 2049.63 (Total purchase of inventory value
is 2099.50 less 49.88)

Weighted Average Cost (WAC) method

Materials of WAC= (Purchase Value+ Opening Inventory Value)/ (Purchase Unit+ Opening
Unit)

= (783.75+569.50+300+446.25)/ (550+350+250+425)

= 1.33

Therefore, from WAC method we have found Closing inventory is of 46.66 (35 * 1.33)

From WAC, the cost of goods sold (COGS) is of 2052.84 (Total purchase of inventory
value is 2099.50 less 46.66)
 REFERENCE

Firdausi,2017.[online]Available at: <https://www.toppr.com/guides/accountancy/computerised-

accounting-system/concept-of-computerized-accounting-system/> [Accessed 15 November
2020].

Leonard, 2018. Advantages & Disadvantages Of Computerized Accounting. [online] Small

Business - Chron.com. Available at: <https://smallbusiness.chron.com/advantages-
disadvantages-computerized-accounting-4911.html> [Accessed 15 November 2020].

Lucy, 2015. Accounting Software: Types, Benefits & Uses | Tally Solutions. [online] Tally.
Available at: <https://tallysolutions.com/erp-software/accounting-software-and-its-benefits/>
[Accessed 15 November 2020].

Bragg, 2017. Types Of Accounting Software — Accountingtools. [online] AccountingTools.

Available at: <https://www.accountingtools.com/articles/types-of-accounting-software.html>
[Accessed 15 November 2020].

Mukta, 2017. What Are The Objectives Of The Inventory Management System? - Asset
Infinity. [online] Asset Infinity Blog. Available at: <https://www.assetinfinity.com/blog/inventory-
management-system-objectives#:~:text=The%20objectives%20of%20inventory
%20management%20are%20as%20follows%3A,the%20time%20of%20customers
%20demand.&text=To%20keep%20material%20cost%20under,eliminate%20duplication
%20in%20ordering%20stocks.> [Accessed 15 November 2020].

Steven, 2019. Types Of Inventory Management | Business.Org. [online] Business.org.

Available at: <https://www.business.org/finance/inventory-management/types-of-inventory-
management/> [Accessed 15 November 2020].