Meaning and Need for a Computerised Accounting System

For a TS Inter II year Accountancy student, the shift from a manual cash book and ledger to a computer-based system is one of the most practical topics in the whole syllabus, because almost every business today — from a small trader to a large company — keeps its books on a computer rather than on paper.

A Computerised Accounting System (CAS) is a system of maintaining accounts, from the recording of a transaction in the books of original entry right up to the preparation of the final accounts, with the help of a computer and an accounting software package instead of manual registers. The underlying accounting principles — the double entry system, the rules of debit and credit, the distinction between capital and revenue items — do not change at all. What changes is the medium and the method of recording, classifying, summarising and reporting: a voucher is entered once into the computer, and the software itself carries the entry through to the ledger, trial balance, trading and profit and loss account, and balance sheet automatically.

CAS therefore works on the basic accounting equation and follows the same accounting concepts and conventions (going concern, consistency, matching, materiality, and so on) that a manual system follows — it is a change in the technology of bookkeeping, not in the science of accounting.

Why a Computerised Accounting System is needed

A business feels the need for computerisation of accounts for several genuine, practical reasons:

1. Volume of transactions. As a business grows, the number of transactions per day multiplies. A manual system that copies the same figure from the journal to the ledger to the trial balance, by hand, at every stage, simply cannot keep pace without a very large clerical staff.
2. Need for speed and timely information. Owners, managers, banks and tax authorities all need up-to-date figures — outstanding debtors, current stock value, bank balance — quickly. A computer can produce these instantly from data already entered once, whereas a manual system needs fresh manual compilation each time.
3. Accuracy. Manual posting and manual totalling are repetitive human tasks and are naturally prone to casting errors, transposition of figures, and errors of omission. A computer, once programmed correctly, posts and totals with complete arithmetical accuracy every single time.
4. Multiple, ready reports from one entry. A single voucher entry can automatically update the cash book, the ledger accounts of the parties concerned, the stock records, and the various subsidiary books, all at once — something a manual system can only do through repeated, separate manual postings.
5. Compliance and statutory requirements. Modern tax and regulatory compliance (returns, statements, reconciliations) is far easier to prepare, store and revise when the underlying accounting data is already in an organised, searchable, digital form.
6. Cost of manual labour and storage. Employing a large number of clerks for repetitive postings, and physically storing years of bulky manual ledgers and vouchers, is expensive; a computerised system reduces both the manpower needed for routine posting and the physical storage space needed for records.

These are exactly the pressures that have made a Computerised Accounting System the normal, everyday way of keeping books for most Telangana Intermediate commerce students to understand as a foundation before studying the later topics of this unit — features, components, and the comparison with manual accounting.