Computerized Accounting (ACP-411)

L1 : Introduction to Computerized
Accounting
By Francis Ganya
(+265) 882370345 / ganyaf@gmail.com

Computing and Information Technology Department

MUBAS
Objectives
By the end of this lesson, students should be able to;

– Define computerized accounting system.

– Discuss the benefits and drawbacks of a
computerised accounting system.
– Discuss the major differences between manual
accounting and computerised accounting.
– Discuss basic requirements of a computerized
accounting system.
Introduction
• We are living in a digital age.
• Businesses adopting usage of computers to enhence
productivity and efficiency.
• Accounting is a core part of every business.
• Increased transactions - Traditional book keeping (Manual)
found to be unmanageable over time.
• With more adoption of computers, manual accouting being
replaced with computerised accounting systems.
Transaction Processing Systems (TPS)
• A transaction => An elementary activity conducted during
business operations.

• A transaction processing system (TPS) processes an entity’s

business transactions and thus support the operations of the
enterprise.
Transaction Processing Systems ....
• A TPS involves the following:
– Data Entry
– Data Validation
– Processing
– Storage
– Information retrieval and reporting

• A CAS is a specialized TPS for handling accounting data

Computerized Accounting
• A computerized accounting refers to the use of computers and
computer based systems to record, organize and analyze
accounting transactions as well as communicate financial
position/performance of an entity.

• A computerized accounting system is an accounting

information system that processes financial transactions and
events as per GAAP to produce reports as per user
requirements..
Why GAAP
• Any accounting system , whether manual or computerized
must has two aspects:

1. Accounting principles : well defined concepts under which it

must operate.

2. User defined framework : which dictates the maintenance of

records and generation of reports.
Basic Requirements of a CAS
1. Accounting Framework - This refers to a set of principles,
coding and grouping structure of accounting.

2. Operating Procedure - This refers to well defined operating

procedures blended together with the operating environment
of the entity.
The software
• The accounting software is at the heart of every computerized
accounting system.
• Implemented using the concept of a database.
• Currently available on the market :
– Sage Accounting ,
– Intuit QuickBooks
– Easy Books,
– Fresh Books,
Benefits of a CAS
• Efficiency
• Accuracy
• Scalability
• Instant and Quality Reports
• Flexible Reporting
• Security
Limitations of a CAS
• Costly
• Inability to check for unanticipated errors
• Security breaches
• Ill Health
• System Failure
Manual vs CAS
• Five key areas:
– Recording
– Classification
– Summarizing
– Adjusting Entries
– Financial Statements
Recording
Manual Computerised
• Transactions recorded in • Transactions recorded in a
books of original entries. well designed database.
Classification
Manual Computerised
• Transactions in books of • Stored data processed to
original entry, further make data appear
classified by posting to classified.
various ledger accounts.
• No duplicity.
• This results in data duplicity
Summarizing
Manual
• Transactions are
summarized to produce
trial balance by ascertaining
the balances of various
accounts. This necessitaes
prepation of ledger
accounts.
Computerised
• The generation of ledger
accounts is not necessary
condition for trial balance.
• Original transactions are
processed to churn out
balances.
Adjusting Entries
Manual
• Adjusting entries are made
to adhere to the principle
of matching.
Computerised
• There is nothing like making
adjusting entries for errors
and rectifications.
Financial Statements
Manual
• The preparation of financial
statements assumes the
availability of trial balance
Computerised
• The preparation of financial
statements is independent
of producing the trial
balance
Reading Assignment
• Explore the following
i. What are the main considerations when selecting the
accounting software for a business?
ii. Explore different types of accounting software available on
the market. Which are the top 5?
iii. What are the differences between different types of
accounting software?
The End / La Fin