Computers in Accounting H.S. 1ST YEAR ACCOUNTANCY NOTES AHSEC ASSAM Higher Secondary UNIT-9


Unit – 9

Computers in Accounting


Q1. What is computer? What are its characteristics?

Ans. The term computer is derived from the word compute which means to calculate. So a computer is normally considered to be a calculating device that can perform arithmetic operations at enormous speed.

Following are the characteristics of computer:

a. Speed: A computer is a very fast device, it may perform in a few seconds, the amount of work that a human being can do in a year. The speed of computer is closely related to the amount of data it processes.

b. Accuracy: The accuracy of a computer is consistently high and the degree of accuracy of a particular computer depends upon its design.

c. Diligence: A computer is free from monotony, tiredness, lack of concentration etc. and hence can work for hours together, without causing any errors and without grumbling.

d. Memory: A computer can store and recall any amount of information because of its secondary storage capability. Every piece of information can be retained as long as desired by a user and can be recalled as and when required.

e. Reliability: Computer systems are widely accepted due to their exceptional reliability. Unlike human beings they are capable of operating under the most adverse conditions for extended periods of time without showing any sign of fatigue.

f. Consistency: As compared to human being, the computers are most consistent as they can do the repetitive work as many times you want to do.


Q2. What are the components of computer?

Ans.  Following are the components of computer:

a. Inputting: The process of entering data and instructions into the computer system.

b. Storing: Storing data and instructions so that they are available for initial or for additional processing as and when required.

c. Processing: Performing arithmetic operations or logical operations on data in order to convert them into useful information.

d. Controlling: Directing the manner and sequence in which all of above operations are performed.

e. Outputting: The process of producing useful information or results for the users, such as printed report or visual display.


Q3. What is accounting information system?

Ans. Accounting information systems are the most widely used information systems in the business. Accounting information system can be defined as the system that gathers data describing the firm’s activities transforms the data information and makes the information available to users both inside and outside the firm.

Q4. Give two features of accounting information system.

Ans.  Following are the features of accounting information system:

a. It adheres to relatively standardized procedures.

b. The data gathered has a primarily historical focus.

Q5. What is computerized accounting? What are the features of a computerized accounting system?

Ans. The term computerized accounting implies that when various stages of accounting process, recording, classification and summarizing are done with the help of computers, it is known as computerized accounting.

Following are the features of a computerized accounting system:

a. Economical: A computerized accounting system helps in producing the financial reports at a comparatively lower cost than manual systems of accounting.

b. Accuracy: The information content of reports and queries churned out by computerized accounting systems are accurate and therefore reliable for decision making.

c. Lesser paper work: In computerized accounting system the quest of reducing paper work and dispensing of large volumes of books of accounts can be easily achieved.

d. Scientific research: With the help of computerized accounting systems, millions of calculations can be done within few minutes. Therefore the computerized accounting has given a big boost to scientific research.

e. Flexible reporting: In a computerized accounting system, the scope of reporting is flexible compared to the manual accounting system. The computerized accounting system is capable of reporting as and when required as compared to manual accounting.

Q6. What are the differences between manual accounting system and computerized accounting system?

Ans. Following are the differences between manual accounting system and computerized accounting system:

Manual Accounting

Computerized Accounting System

a. Manual accounting is a system of accounting that uses physical registers and account books, for keeping financial records.

a. computerized accounting  is an accounting system that uses an accounting software, for recording financial transactions electronically.

b. Recording is possible through book of original entry.

b. Data content is recorded in customized database.

c. All the calculation is performed manually.

c. Only data input is required, the calculations are performed by computer system.

d. It is made for rectification of errors.

d. It cannot be made for rectification of errors.

e. Cost of preparing reports other than the basic financial statements is high.

e. Cost of preparing specialized management reports in computerized system usually quite low.


Q7. What are the advantages and disadvantages of Computerized accounting system?

Ans. Following are the advantages of Computerized accounting system:

a. Better quality work: The accounts prepared with the use of computers are usually uniform, neat, accurate and more legible than manual job.

b. Lower operating cost: Computer is a labor and time saving device. It reduces the operating cost.

c. Greater accuracy: Computerized accounting ensures accuracy in accounting records and statements. It prevents clerical errors and omissions.

d. Improved efficiency: Computers bring speed and accuracy in preparing the records and accounts, thus increases the efficiency of employees.

e. Storage capability: A business needs to store different types of data for future reference. A computer can store and recall any information regarding debtors, creditors; assets, liabilities, expenses, incomes, working capital etc. as and when required and can be retained as long as desired by the user.


Following are the disadvantages of Computerized accounting system:

a. Costly: The computerized accounting is a costly system as it requires number of facilities and attachments to set up the system.

b. Loss of data: When a computer is used it is possible that data can be lost because of hardware or software damage.

c. Fraud and embezzlement: Fraud and embezzlement are usually achieved on a computer system by altering data or programmes.

d. Obsolescence: Obsolescence is a major problem in computer industry. Upgrading the computers with latest hardware software is a costly affair. This limits the role of computers in accounting.

e. Require special skills: Computer system calls for highly specialized operators.