1. Meaning of Computerised Accounting System (CAS)
A Computerised Accounting System (CAS) is an information system that uses computer software to record, process, store, and communicate financial transactions and produce financial statements and other management reports automatically.
Environment of CAS:
- Accounting Framework: Double Entry System, GAAP, Accounting Standards.
- Codification & Grouping: Each account is assigned a code and grouped logically.
- Data Entry: Voucher-based entry replacing manual journal entry.
- Data Processing: Automatic posting, balancing, report generation.
2. Architecture of a CAS
A CAS typically follows this structure:
- Input Layer: Voucher entry, import of bank transactions.
- Processing Layer: Application software (accounting engine) — posts transactions, balances accounts, calculates taxes.
- Storage Layer: Database (stores Chart of Accounts, transactions, master data).
- Output Layer: Reports — Trial Balance, P&L Account, Balance Sheet, MIS Reports, Tax Reports.
3. Codification of Accounts
Codification is the process of assigning a unique code/number to each account in the Chart of Accounts. It enables:
- Quick identification and retrieval of accounts.
- Efficient grouping and sorting of accounts.
- Reporting at different levels (account level, group level, consolidated).
Types of Codification Systems
| Code Type | Description | Example |
|---|---|---|
| Numerical Codes | Simple numbers assigned to accounts | 1001 = Cash, 2001 = Sales |
| Alphabetical Codes | Letters used as codes | CA = Current Assets, CL = Current Liabilities |
| Alphanumeric Codes | Combination of letters and numbers | CA001 = Cash, CA002 = Bank, FA001 = Machinery |
| Hierarchical / Mnemonic Codes | Codes that reflect the structure/group hierarchy | 1.1.1 = Bank, 1.1.2 = Cash (under 1.1 = Current Assets) |
4. Chart of Accounts and Account Groups
The Chart of Accounts (COA) is a structured list of all accounts used by a business in its CAS. Accounts are organised into groups and sub-groups:
- Group 1 — Capital Account: Owner's Capital, Reserves and Surplus.
- Group 2 — Loans (Liabilities): Long-term Loans, Bank Overdraft.
- Group 3 — Current Liabilities: Sundry Creditors, Bills Payable, Outstanding Expenses.
- Group 4 — Fixed Assets: Land, Building, Machinery, Furniture.
- Group 5 — Investments: Long-term and short-term investments.
- Group 6 — Current Assets: Stock, Sundry Debtors, Cash, Bank.
- Group 7 — Purchase Accounts: Purchases of goods.
- Group 8 — Sales Accounts: Sales of goods/services.
- Group 9 — Direct Income/Expenses: Goes into Trading Account.
- Group 10 — Indirect Income/Expenses: Goes into P&L Account.
In Tally ERP: Accounts are organised into pre-defined Groups → Sub-Groups →
Ledgers. A Ledger cannot be created without assigning it to a Group.
5. Voucher-Based Entry in CAS
In a CAS, transactions are entered through vouchers (not journals). Types of vouchers:
| Voucher Type | Used For |
|---|---|
| Receipt Voucher | Cash or cheque received (e.g., cash sales, debtor payment) |
| Payment Voucher | Cash or cheque paid (e.g., salary, rent, creditor payment) |
| Sales Voucher (Invoice) | Credit sales of goods/services |
| Purchase Voucher | Credit purchases of goods/services |
| Journal Voucher | Non-cash adjustments (depreciation, provisions, corrections) |
| Contra Voucher | Cash and bank transactions (deposit/withdrawal) |
| Credit Note Voucher | Sales return (goods returned by customer) |
| Debit Note Voucher | Purchase return (goods returned to supplier) |
6. Reports Generated by CAS
- Books of Original Entry: Purchase Register, Sales Register, Cash/Bank Book.
- Ledger Reports: Individual account ledger history with running balance.
- Trial Balance: Generated automatically.
- Financial Statements: Trading A/c, P&L A/c, Balance Sheet — automatic.
- Tax Reports: GST returns (GSTR-1, GSTR-3B), TDS summary.
- MIS Reports: Debtor ageing, creditor ageing, stock summary, budget variance.
7. Advantages and Limitations of CAS
| Advantages | Limitations |
|---|---|
| Automatic posting and balancing | High implementation cost initially |
| Real-time financial reports | Data security risks (hacking, data loss) |
| Reduced manual errors | GIGO — errors in input cause errors in output |
| Efficient tax compliance (GST, TDS) | Requires trained staff and IT support |
| Scalable and adaptable | Dependency on power and technology |
| Easy audit trail | Software updates and maintenance costs |