Computers and accounting systems

Miss Townsend
September 2021
Today, computers are used widely to operate accounting

systems. Sophisticated technology is now available in

computer hardware and software at a reasonable cost.

Large to medium-sized companies concerns have used

specially written packages for a number of years but

smaller enterprises were initially discouraged from setting

up their own systems by the cost of such packages.

 Functions of computerised accounting
packages
A computerised accounting packages offers all the

functions that a manual system provides but in addition

it provides useful reports and management information.

The main functions of a computerised accounting

package are:
 Sales
Preparation and printing of sales invoices, credit
notes and month-end statements. Data from the
above documents is entered, processed and
recorded in:
⚫ the customer accounts in the sales ledger

⚫ automatic update of the inventory records.

 Purchases
Data from the purchase invoice and debit notes is
entered, processed and recorded in:
⚫ The supplier accounts in the purchase ledger.

⚫ Automatic update of the inventory records

⚫ Print out of remittance advices

 Bank account
⚫ Recording data such as customer receipts, supplier

payments, other payments and receipts.

⚫ Many banks offer online banking facilities which have the

added advantage of the organisation’s bank account being

completely up-to-date.
⚫ All receipts and payments are linked to the personal

accounts of the accounts receivable (debtor) and accounts

payable (creditor) and the system provides for such
transactions to automatically update these accounts.

General (nominal) ledger

⚫ Automatic updating of the general (nominal) ledger.
 Wages/Salaries
Organisations have the option of using a
combined computerised accounting and
wages/salaries package, alternatively, they may
use a separate ‘payroll package’. Such packages
perform all the necessary payroll functions.
 Inventory control
The functions relating ‘sales and purchases’, are linked to the

inventory records. This means that inventory records are

automatically updated after each sales and purchases invoice is

entered into the system, so providing an accurate figure of

inventory held at any particular point in time.

 Management reports
One of the main features of computerised
accounting system is the facility to provide the
owners of the business and/or management with
useful financial data and reports. These are:
⚫ day books for customers and suppliers
⚫ Financial statements including the trial balance, trading

and profit and loss accounts (income statement) and

statement of financial position.

⚫ Analysis reports for aged accounts receivable and

accounts payable.

⚫ General (nominal) ledger and bank account transactions

⚫ An audit trail

⚫ Activity reports on all ledger transactions

 Other useful functions
⚫ Spread sheets- this can be used to provide financial
budgets , or cash-flow budgets, non-current asset
register, calculation of loan interest payments and so on.

⚫ Internet- This can provide access for internet banking,

payment of suppliers and other payments such as

wages/salaries.
 Data backup
It is important that data held on the computer is saved
regularly. The regularity has to be determined by the
business relative to the type of operation and could
mean every few minutes, after a specified computer
task or after a longer timescale, say, every hour.
 Security
All organisations regard their financial information as

sensitive and as such it should remain confidential

except where legislation demands certain information be

made available to external bodies.

 Advantages of computerised accounting
systems
⚫ Data is input and processed very rapidly, far faster than in a

manual system.

⚫ Documents such as invoices, credit notes, statements and

remittance advices can be produced automatically.

⚫ Management information can quickly be made available in

report form, that is, aged accounts receivable (debtor) and

accounts payable (creditor) analysis reports.
⚫ A system connected to the internet can make
financial transactions electronically.

⚫ Resources are used more efficiently so an

organisation may not need as many accounting

staff.
 Disadvantages of computerised
accounting systems
⚫ Cost of installation can be considerable together with the

on-going costs of maintenance and updates.

⚫ System downtime can be very disruptive.

⚫ Data backup is essential at regular intervals

⚫ Fraudulent access can seriously affect the business operation

and its profitability.

⚫ Security measures are vital, for e.g. passwords for staff and

protection against viruses and hacking.

Computerised packages
⚫ For small companies:

- Sage 50 commonly known as Peachtree (used in

the services and retail industries)

- QuickBooks (used in the service and retail

industries)
 For medium-sized companies:
⚫ Infor Sunsystems (used in the hotel, insurance
and oil and gas industries)
⚫ Microsoft Dynamics GP (used in the retail and
manufacturing industries)

For large companies:

- SAP (different industries)
- PeopleSoft (different industries)