Comprehensive theory, key formulas, diagrams, and memory aids for Chapter 13: Computerised Accounting System (CAS).
A Computerised Accounting System (CAS) is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Every CAS is based on the concept of a Database.
In CAS, it is crucial to group accounts properly (also known as creating a Chart of Accounts). Accounts are classified into major groups (Assets, Liabilities, Income, Expense) and sub-groups (Fixed Assets, Current Assets, Direct Expenses, etc.). - Proper grouping ensures that the software automatically places the account balance in the correct financial statement (Trading, P&L, or Balance Sheet). - Example: If a 'Wages' account is wrongly grouped under 'Indirect Expenses' instead of 'Direct Expenses', it will appear in the P&L Account instead of the Trading Account.
To make data entry faster and prevent naming errors, accounts are often assigned unique codes (numbers or alphanumeric characters). - Sequential Codes: Numbers are assigned consecutively (e.g., 101, 102, 103). - Block Codes: Specific blocks of numbers are reserved for specific groups (e.g., 1000-1999 for Assets, 2000-2999 for Liabilities). - Mnemonic Codes: Using abbreviations that are easy to remember (e.g., DLH for Delhi branch, HDFC for HDFC Bank).
An organization can acquire accounting software in three main ways: 1. Ready-to-use (Off-the-shelf): Pre-packaged software available in the market (e.g., Tally, Busy). - Pros: Cheap, easily available, minimal training required. - Cons: May not meet specific/complex business needs, hard to modify. 2. Customised Software: Ready-to-use software that is modified/customized to meet the specific needs of the user. - Pros: Better fit for the organization's unique requirements. - Cons: Higher cost and setup time than ready-to-use. 3. Tailor-made Software: Software developed entirely from scratch for a large organization. - Pros: Perfect fit for large, complex, multi-locational businesses (e.g., custom ERPs). - Cons: Extremely expensive, requires long development time and dedicated IT support.
Maintaining the integrity and secrecy of financial data is vital in CAS. - Passwords: To restrict unauthorized access. - Data Encryption: Converting data into a secret code during transmission. - Audit Trails: A feature that tracks who made an entry, when it was made, and if any alterations were done.