Q1.

Features of Computerised accounting System:

a) SIMPLE AND INTEGRATED

CAS is designed to automate and integrate all the business operations, such as sales, finance, purchase,
inventory and manufacturing. Thus CAS helps in providing accurate, up-to-date business information

rapidly. The CAS can be combined with enhanced MIS (Management Information System), Multi-lingual
and Data Organisation capabilities to simplify all the business processes of the organisation easily and

cost-effectively.

b) TRANSPARENCY AND CONTROL:

CAS provides sufficient time to plan, increases data accessibility and enhances user satisfaction. With
computerised accounting, the organisation will have greater transparency for day-to-day business

operations and access to the vital information.

c) ACCURACY AND SPEED:

The information and reports generated are accurate and quite reliable for decision-making. CAS
provides user-definable templates which enables fast accurate entry of transactions..

d) SCALABILITY:

CAS enables in changing the volume of data processing in tune with the change in the size of the
business. In a computerised accounting system, the requirement of additional manpower is confined to
data entry operators for storing additional vouchers. The additional cost of processing additional
transactions is almost negligible. As a result the computerised accounting systems are highly scalable.
The software can be used forany size of the business and type of the organisation.

e) RELIABILITY:

CAS makes sure that the financial information is accurate, controlled and secured.

Because the calculations are so accurate, the financial statements prepared by computers are
highly reliable. They can perform repetitive functions effectively as compared to human beings.
Thus information generated is highly reliable.
Q2. Explain codification

Code is an identification mark. Generally, computerised accounting involves codification of

accounts. Codification of accounts is needed where there are numerous accounts heads in an
organisation. There is a hierarchical relationship between the groups and its components. In
order to maintain the hierarchical relationships between a group and its sub-groups, proper
codification is required.
The coding scheme of account heads should be such that it leads to grouping of accounts at
various levels so as to generate various reports. For example, the codes for various accounts
may be allotted as follows:

i. Liabilities and Capital ii. Assets iii. Revenues iv. Expenses

Under Liabilities and Capital

i. Capital ii. Non-current liabilities iii. Current liabilities

Under Assets

i. Non-current assets ii. Current assets

The above codification scheme utilises the hierarchy present in grouping of accounts. Major
advantage of such coding is that if the account codes are listed in ascending order, these will be
automatically listed as per the desired hierarchy.

The different methods of codification are : Sequential code, Mnemonic codes and Block codes

Q2. Explain Sequential Codes , Mnemonic Codes and Block Codes

The coding scheme of Account-heads should be such that it leads to grouping of accounts at various
levels so as to generate Position Statement (Balance Sheet) and Statement of Profit and Loss (Profit-Loss
Account).

Sequential Codes: Sequential codes are those codes in which the numbers or letters are
arranged in a consecutive order.These types of codes are mostly applied in source
documents such as cheques, invoices. It facilitates document searches. Sequential codes are
appropriate for items in either an ascending or descending sequence, such as the numbering of
cheques or source documents. An advantage is that during batch processing, any gap
detected in the sequence is a signal that a transaction may be missing. It follows a basic
sequence (00, 01, 02, 03…), to find daily entries in the general ledger.
Example:
CODES ACCOUNTS
CL001 GCERT LTD
CL002 XYZ LTD
Mnemonic Codes: Mnemonic codes are those codes that consist of alphabets or
abbreviations as symbols for codifying a piece of information. E.g. HQ for headquarters,
DLI for Delhi in train bookings, BRC for Baroda, The major advantage of mnemonic codes is that
they are very easy to memorise: once we have understood the pattern or system.

Block Code: This code organizes data into sets or blocks of numbers .In a block code, a
range of numbers is partitioned into a desired sub-ranges and each sub-range is allotted to a
specific group. Blocks are usually found in multiples of 10 (like 100, 1000, etc) but can be as
many digits as desired.
Example:
CODES DEALER-TYPE
100 - 199 Small Pumps
200 - 299 Medium Pumps
300 - 399 Pipes
400 - 499 Motors
Q3. Explain the SECURITY FEATURES OF CAS SOFTWARE

Every accounting software ensures data security, safety and confidentiality. Therefore every, software
provides the following:

• Password Security

• Data Audit

• Data Vault

Password Security: Password is a mechanism, which enables a user to access a system including data.

It is a code that allows access to the system. The system defines the user rights according to
organisation policy. Thus a person in an organisation may be given access to a particular set of a data
while he may be denied access to another set of data.

Data Audit: This feature enables one to know as to who and what changes have been made in the
original data thereby helping and fixing the responsibility of the person who has manipulated the data
and also ensures data integrity.

Data Vault: Software provides additional security through data encryption.

The purpose of encryption is confidentiality—concealing the content of the message by

translating it into a code. Encryption essentially scrambles the information so that it becomes
extremely difficult to interpret. Encryption ensures security of data. Thus even if the data lands
in wrong hands, the receiver of data will not be able to decode and interpret it.

Q4. Advantages of CAS

1.Accuracy

Computerized accounting increases accuracy by eliminating human errors in calculation.

Accounting errors are one of the biggest problems that businesses face in their accounting
process. Accounting software is designed to anticipate common errors and correct them
before they are added to the company’s records. It is more accurate than most manual
systems.
2. Scalability: Computerised accounting system is scalable to handle the growing
transactions.
CAS enables in changing the volume of data processing in tune with the change in the size of
the business.
3. Timely generation of reports and information: Availability of reports on time enables the
management to take quick decisions which is an important element for the success of the
enterprise.
4. Simplicity and Integrated: CAS is designed to automate and integrate all the business operations,
such as sales, finance, purchase, inventory and manufacturing. Thus CAS helps in providing accurate, up-
to-date business information.

5. Efficient record keeping. Data can be stored quickly in computerized accounting.

Regardless of the size of a company, accounting software is designed to be straightforward
and easy to use. Companies perform backups on the system regularly to avoid losing any
information. All transactions can be saved and backed up, in case of fire or other mishaps.

6. Ensures effective control over the system. A computerized Accounting system

helps the management of a company to have greater control over its
operations. This is more suitable for a company which is large in size and has
multiple departments. All vital information is easily available with one click.

As the work is automatically

7. Economy in the processing of accounting data:
done and all reports are kept in one area, everything is completed quicker
and this saves time massively.Also, there is less paper work as compared
to the paper work in manual process.
8. Confidentiality of data is maintained. A computerized accounting system allows
users to store their data in a central location. In this way, if any piece of paper
that contains valuable information is lost, no one is at risk of having their
information stolen. All the data is hence stored at a central location.
9. Security: The data under computerized accounting can be kept secure by using a
password. So that only authorized user can access the data.

Q5. LIMITATIONS OF CAS:

1. Heavy investment cost: Computer hardware needs replacement and software

needs to be updated from time to time with the availability of newer versions
.Faster obsolescence of technology necessitates investment in shorter period of
time.
2. Loss of data:Data may be lost or corrupted due to power interruptions. The
danger of a system crashing due to some failure in hardware can lead to
subsequent interruption of work
3. Breach of Security:Data are prone to hacking. The person who has created
the specific programme can easily defraud by tampering with the original records.
4. Un-programmed and un-specified reports cannot be generated.
5. Human error: Although the transactions entered under computerized
accounting system are more reliable , human error may occur at the time of
entering the data into the computer.
6. Ill-effects on Health : The extensive use of computers systems may lead to development of various
health problems: bad backs, eyestrain, muscular pains, etc. This affects adversely the working efficiency
of accounting staff on one hand and increased medical expenditure on such staff on the other.

The subsystems of AIS are as follows:

CASH AND BANK SUB-SYSTEM: deals with the receipt and payment of cash
both physical cash and electronic fund transfer. Electronic fund transfer takes
pace without having physical entry or exit of cash by using credit cards or
electronic banking.
SALES AND ACCOUNTS RECEIVABLE SUB-SYSTEM(IMPORTANT): deals
with recording of sales, maintaining of sales ledger and receivables. Generates
periodic reports about sales, collection made,overdue accounts, receivables
positions , ageing schedules of debtors.
INVENTORY SUB-SYSTEM: deals with the recording of different items
purchased and issued specifying the price, quantity and date. Generates
inventory position and valuation reports.
PURCHASE AND ACCOUNTS PAYABLE SUB-SYSTEM: deals with the purchase and payments to creditors.
It provides for ordering of goods, sorting of purchase expenses and payment to the creditors.

Generates reports about performance of suppliers,payment schedule and position of creditors.

PAYROLL ACCOUNTING SUB-SYSTEM: deals with payment of wages and salary to employees.

FIXED ASSETS ACCOUNTING SUB-SYSTEM: deals with the recording of purchases, additions, deletions,
usage of fixed assets such as land and buildings, machinery and equipments,

EXPENSE ACCOUNTING SUB-SYSTEM: records expenses under broad groups such as manufacturing
administrative, financial, selling and distributions and others
TAX ACCOUNTING SUB-SYSTEM: deals with compliance requirement value-added tax (VAT), excise,
customs and income tax.It is used in large sized organisations.

FINAL ACCOUNTS SUB-SYSTEM: deals with the preparation of Profit and Loss accounts, Balance Sheet
and cash flow statements

COSTING SUB-SYSTEM(IMPORTANT): It deals with the ascertainment of cost of goods produced. It has
linkages with other accounting sub-systems for obtaining the necessary information about cost of
material, labour, and other expenses. This system generates information about changes in the cost that
takes place during the period under review.

BUDGET SUB-SYSTEM: deals with preparation of budget for coming financial year as well as comparison
of actual performance with current budget.

MANAGEMNT INFORMATION SYSTEM(IMPORTANT): It deals with the generation and Processing of

reports that are vital for management decision making. The information system should be so flesible as
to provide customized reports to support various managerial functions such as planning, organizing
,staffing,oversight ,control and decision making including operational,functional and strategic nature.

Grouping of Accounts (IMPORTANT)means classification of accounts from assets,liabilities,

capital,revenue and expenses.

There is hierarchical relationship between groups and its components.In order to maintain this
hierarchical relationship proper codification is required. Coding requires development of structure.
Coding structure must be compatible with the inherent structure of the element to be coded.

Example : Account Head coding requires a hierarchical structure to summarize the accounting
information as per the requirements of Balance Sheet and Profit and Loss Account.

The accounting packages are classified into the following categories :

(a) Ready to use : Ready-to-Use accounting software is suited to organisations running small/
conventional businesswhere the frequency or volume of accounting transactions is very low.
This is because the cost of installation is generally low and number of users is limited. Ready-to-
use software is relatively easier to learn and people (accountant) adaptability is very high. These
software offer little scope of linking to other information systems.
(b) Customised : Accounting software may be customised to meet the special requirement of the
user. Standardised accounting software available in the market may not suit or fulfil the user
requirements.
For example when the user requires that inventory status to be updated immediately upon
entry of sales voucher and report be printed, the software needs to be customised. Customised
software is suited for large and medium businesses and can be linked to the other information
systems. The cost of installation and maintenance is relatively high. . Secrecy of data and
software can be better maintained in customised software. Since the need to train the software
users is important, the training costs are therefore high.
(c) Tailored: The accounting software is generally tailored in large business organisations with multi
users and geographically scattered locations. The secrecy and authenticity checks are robust in
such softwares and they offer high flexibility in terms of number of users. These software
requires specialised training to the users.

Generic Considerations before Sourcing an Accounting Software: