Meaning and Need for a Computerised Accounting System

Every accounting system exists to do three things — record business transactions, classify and summarise them, and present them as useful information such as a Trial Balance, Trading and Profit and Loss Account, and a Balance Sheet. For centuries this was done entirely by hand, in bound account books, using the double-entry principles this Maharashtra HSC (MSBSHSE) Std XII Book-Keeping and Accountancy syllabus has already covered chapter by chapter. As the volume and speed of business transactions increased, purely manual record-keeping became slow, repetitive and increasingly prone to error — the very same transaction had to be written out separately in the Journal, again in the Ledger, and yet again while preparing the Trial Balance and Final Accounts.

A Computerised Accounting System (CAS) is an accounting system that uses a computer and accounting software to record, classify, summarise and report financial transactions, instead of doing all of this by hand. Its central idea is sometimes called 'record once, use many times' — a transaction is entered into the computer only once, as a voucher, and the software itself automatically posts it to every ledger account it affects, updates the Trial Balance, and makes it available for as many different reports (Ledger, Trial Balance, Trading Account, Profit and Loss Account, Balance Sheet, stock statements, tax returns, and so on) as management needs — all drawn from that single entry.

Why a CAS is needed today: the sheer growth in the number and value of transactions that even a small business now handles; the need for speed and up-to-date information for quick decision-making; the requirement of accurate, standardised statutory returns (tax filings and similar regulatory reports) that are far easier to generate from a structured database than from paper books; growing competition and globalisation, which reward businesses that can produce reliable financial information fast; and the reduction of repetitive clerical work and human error that manual double and triple entry of the same figures inevitably causes.

What this chapter covers, in order: the main components that together make up a Computerised Accounting System; how a manual accounting system differs from a computerised one, along with the genuine advantages and limitations of computerisation; the features a good accounting software package should have; how accounts are grouped and vouchers are used inside a computerised system; the different kinds of accounting packages available — readymade, customised and tailor-made; and finally, the precautions that keep a computerised system's data safe and secure.