Accountingin any firm play an important role in maintaining finance and making financialreports. Maintaining, preparation and presentation of accounts is crucial forbusiness success as well as organization for effective decision making whetherit is a nonprofit making organization or profit making because they have toreport to the stakeholders of the organization through financial reports.
Anyloss of material, records and information in accounting leads to faults andproblems in financial reporting and create complications and problems. Thisreport describe computerize accounting importance, its advantages anddisadvantages of computerized accounting system and demonstrates its effect onfinancial reporting and managing accounts and records. 1.1: ComputerizedAccounting:”Computerized Accounting involves making use of computersand accounting software to record, store and analyze financial data. Acomputerized accounting system brings with it many advantages that areunavailable to analog accounting systems.
” The more complicated the financial activities of yourbusiness are, the more likely it is that the company need a computerizedaccounting system to ensure effective financial reporting. Computerized accounting systems are software programsthat are stored on a company’s computer, network server, or remotely accessedvia the Internet.A computerized accounting in any firm involves the computerization ofaccounting information systems which is established in order to facilitatedecision making. These are associated with a numbers of benefits like speed ofcarrying out routine transactions, timeliness, quick analysis, accuracy andreporting.
1.1.1:Background:Beforethe introduction of computerized system of accounting, the manual systems wereinaccurate and inconsistent for many organization needs especially reporting offinancial information. There were many errors when the data was collected,analyzed, journalized and a trial balance and balance sheet prepared from it. Earlyaccounting information systems were designed for payroll functions in 1970s.And at that time the computerized system was too expensive.As the time passes and thehuge enterprises were formed it was too difficult to handle huge accounts andmaintain their records in a sequence, the technology was improved. The new upto date software was introducing of all that time to facilitate as much as theycan.
And know there are manycomputerized accounting and finance handling software from high standardcompanies to the medium one for the purpose of ease and time management.1.1.2:Significance:Computerizeaccounting has a great significance in this century. It make the work easier,efficient and saves the time and cost. It helps businesses by making their staffefficient, productive and also save their valuable time. It helps to maintainbusiness and all financial information for the business is well-organized.Some significance of computerize accounting in a firmare:1) Time and cost savings: Using a computerized accounting system saves companies time and money.
The useof computer makes inputting accounting information simple. Businesstransactions are entered into the system and the system posts transactionsaccordingly. 2) Organization: Acomputerized accounting system help business to stay organized.
When informationis entered into the system, it makes finding the information easy. 3) Storage: Storing information is very important to a business. In Computerized Systemdata can be stored quickly. After information is entered into the system theinformation is stored indefinitely. Companies perform backups on the systemregularly to avoid losing any information.
4) Distribution: Computerized accountingsystems allow companies to distribute financial information easily. Financialstatements are printed directly from the system and are distributed internallyand externally to those needing the information. 5) Financial Reports: Data within the computerized accounting system is accurate and up-to-date. Managementcan request online report in real-time and that makes management decisions morereliable and timely. 1.2: Scope:Computerizedaccounting has a huge scope, the new advance software are establishing for easeand time saving. Thelarge multinationals companies which has huge platforms all over the world needa fast, advance, direct information sending and recording source.
Andthis field had expended so far and will expand in future as the technology anddemands are increasing.1.3: Assumptions:The computerized accounting system in anorganization has huge advantages but also has some disadvantages andinconveniences.
It is assumed that this system is best in managing,recording and summarizing financial data of a company but also has complexityissues and need a train staff to manage but it is the most advance system inany firm to be efficient in managing financial data.And the purpose of study is to demonstrate theimportant of computerized accounting in this modern era. And label itsadvantages and disadvantages.1. Computerized Accounting System:Computerized accounting system is software programsthat are stored on a company’s computer, network server, or remotely accessedvia the internet.· Computerizedaccounting system allow you to set up income and expense accounts, such asrental or sales income, salaries, advertising expenses, and material costs.
· They can be usedto manage bank account, pay bills, and prepare budgets. Depending on theprogram, some accounting system also allows you to prepare tax documents,handle payroll, and manage project costing. · You cangenerally customize the software to meet the needs of your business. It’simportant to make sure that your stuff are trained and understand how to usethe system correctly so that your company can successfully use your accountingprogram.
· Howevercomputerized accounting system involves the use of computers to handle largevolume of data with speed, efficiency and accuracy. 2.1:Computerized Accounting Software:Thereare many advance software which has invented so far. The top computerizedaccounting software are:1. Quick Books2. Dynamics3. Deltek Vision4.
Accounting bywave.5. Audit Dashboards6. AccountMate SQLSoftware7. Working dayfinancial management8. Freshbooks9.
Sage Intacct.10. Xero11. Zoho Books12. AvaTax2.2: Widely usedComputerized Accounting Software:Althoughtechnology keeps advancing, businesses still have the same basic needs fromtheir software. While the software’s functionally has evolved, the deliveryplatform has gone through a quantum change. Applications that used to bedelivered as standard applications run on desktop and notebook computers are new frequently delivered the web browseror run on traditional computing devices such as tablets and smart phones.
Thereare different types of business software:.Office suits:Officesuits like Microsoft office, apple iWork, word perfect office, Google docs oropen office combine multiple business software programs into a single package. Communication software:Softwareto facilitate communication is also crucial. Many communication application,such as many online meeting services and web based email services, run throughthe browser.Business intelligence andenterprise software:Manybusinesses also used special software packages to help manage their accountingand operations.
Some use entry level programs such as QuickBooksthat perform basic accounting functions. More powerful enterprise resourceplanning and business intelligence packages of a comprehensive view of your business.While buying a license can be expensive, cloud-based versions of these programsare affordable for much small business.2.3: Componentsof Computerized Accounting Software Accounting software’s are used to implementcomputerized accounting system. The computerized accounting is based on theconcept of database; it is basic software which allows access to the datacontained in the database. The following are the components of computerizedaccounting software. 1.
Preparationof accounting documents Computers help in preparing accounting documentslike cash memo, bills, invoices and accounting vouchers. Here computerizedaccounting systems have user defined templates which will provide faster,accurate entry of transaction and therefore all documentation and reports canbe generated automatically. 2. Recordingof transactions Everyday business transactions are recorded with thehelp of computer software. Every account and transactions is assigned a uniquecode where the grouping of account is done at the first stage.
This processsimplifies the work of recording the transaction. 3. Preparation of financial statements.
After recording of transactions, the data istransferred into ledger accounts automatically by the computer. Trial balanceis prepared by the computer to check accuracy of records, with the help oftrial balance; the computer can be programmed to prepare the statement ofcomprehensive income and the statement of financial position.2.
Advantages of Computerized Accounting:Thereare many advantages of computerized accounting, some of them are as follows:; Reduce Error: The biggest and common advantages ofcomputerized accounting are that it reduces human error because every entry ismanaged and arrange by computers.The computer does most steps automatically,many errors resulting from human intervention in amanual system, such as errors in posting or preparation of financialstatements, are eliminated. Reduce Expenses: This is verycost-effective, and many software companies offer a variety of accountingpackages with a very reasonable price. A computerized way a person can processan enterprise account for several hours. But in manual mode a person needs afull day to do this work; he will need to pay more salaries. Auto Report Generation: Accounting software can generate areport very quickly according to your demand.
On the other hand, a human cantake many hours even some days to make a report. Accuracy: Human can make mistakes while interpretingthe date. On the other hand, a computer does not make a mistake. So, incomputerized accounting system accuracy is the most important advantages ofcomputerized accounting. Automation: All of the accounting software are automatedyou don’t to calculate anything just entry the number. And it is very easyrather than solving and arranging the huge data. Reliability: Any types of report or data processed byaccounting software are more reliable than manual accounting process ratherthan manual. Quick Processing Time: It provides data up to the minutes to theusers.
As for example in large multinational they need time to time informationand information is the most important thing in an organization. User-Friendly: It can wonderfully user-friendly and veryconvenient to the users. Now the complexity has reduce to very much as beforethis system was little complex but now user friendly softwares are introduced. Security of Data: You can loseyour credential account in various ways, such as burning, loss, cascading andcan be destroyed in a few years.
But the software never loses data, because ithas a different backup. Even after many years you can find your data.10.
Speed:Using accounting software, the whole process of preparing accounts becomes faster. In addition, data and reports can be instantly created with a single click of a button. Managers do not have to wait a few hours or even days to get an important report.
3. Disadvantages of Computerized Accounting: 1. Expense:Accounting systems are expensive not only for purchase, but also for maintenance. Software Changes There may be new versions for purchase.
Operating systems also change and can be expensive, especially for small businesses. If your computer stops working, it should be fixed, incurred costs and delays in processing accounting information. 2. Training:When getting a new accounting system, there isalways time and energy spent in training. After a system is bought, then aboutevery year new versions are released with changes that may need some extratraining getting used to. 3. Dependency on software:Computerized accounting depends on the operation of othermachines and software. Quite often, if there is one wrong thing with thecomputer, then there is no access to the program, and the work cannot beperformed.
Then share the time and costs when running each system and software.Other disadvantages are: Power failure, computer viruses and hackers are the inherent problems of using computerized systems, Once data been input into the system, automatically the output are obtained hence the data being input needs to be validated for accuracy and completeness. Accounting system not properly set up to meet the requirement of the business due to badly programmed or inappropriate software or hardware or personnel problems can cause more problems. Danger of computer fraud if proper level of control and security whether internal and external are not properly been instituted.
4. Influence of Computerized Accounting on FinancialReports:The impact of computerized accounting systems on financial statements was due to the benefits of using computer systems during financial reporting. Scheduled reports can be viewed, simplified and customized at regular intervals with ease. With the help of applied calculations, financial reporting will be easy when information can be easily created and updated in a timely manner.
With the substantialincrease in the number of transactions and increase in the need for real timeinformation, maintenance of accounting data on a real time basis has becomeessential. This is achievable using computerized systems hence promoting thequality of financial reporting.The influence ofcomputerized accounting systems depends on the end users satisfaction.
A computerized accountingsystem is a delivery system of accounting information for purposes such asproviding reliable accounting information to users, protecting the organizationfrom possible risks arising as a result of abuse of accounting data and systemamong others. 5.1: Quality offinancial reports and analysis:Financialreporting as the process of presenting financial information or data about acompany’s financial position, operating performance and its flow of funds foran accounting period.Accountinginformation is very necessary if decisions are to be made accurately andrationally by the various interested parties or users of financial information.
Theseare broadly classified into external and internal users. Where internal usersinclude management and employees while the external users include donors,shareholders, creditors, government, competitors and general public. Reliability,information is said to be reliable if it is free from material errors and biasand represents faithfully. Comparability is another characteristic of qualityinformation.5.
Different types of Computerized Accounting:Generallythe least expensive computerized options are pre-developed, off the-shelf accounting software packages.These are software packages that topically offer common functions that apply tomost business, and usually have some flexibility to customize certain featureto meet the needs of a company. Most business, however, will find they may needto adapt their process to match how the software works. 6. Benefits of Computerized Accounting System in Firm:Computerized packages can quickly generateall types of reports needed by management for instance budget analysis andvariance analysis. Data processing and analysis are faster and more accuratewhich meets the managers need for accurate and timely information for decisionmaking.· Computerized accounting system allows managers to easilyidentify and solve problems instantly.
· The improvement in business performance as a resultcomputerization of the accounting systems as it is a highly integratedapplication that transforms the business processes with the performanceenhancing features which encompass accounting, inventory control, reporting andstatutory processes. · Computerized accounting systems ease auditing and havebetter access to required information such as cheque numbers, payments, andother transactions which help to reduce the time needed to provide this type ofinformation and documentation during auditing. There are many other advantages and benefitsof this system in a firm like minimize manual errors, simple posting oftransactions, improvement in business reports etc. 7. Conclusion:The study revealed that computerized accountingsystem actually have an influence on the quality of financial reports, bettermanagement of records, best arrangement of accounts and time to time updates.
· The computerizedaccounting in any firm saves time. · It leads to easyauditing in the firm.· There is no needto have huge paper documentations as in manual systems.· Financialreports can be generated quickly.Overall computerized accounting is very beneficialfor company to do efficient finance work and timely financial reports. 8. Recommendations:With increased improvements and versions ofaccounting packages, staff needs constant and continuous training by theauthorized dealers of the packages so that they remain well acquainted with theknowledge and experience of the package.
it is important to constantly appraise the staff tocheck which staff is failing the system as regards reporting unbiased financialinformation.The computerized accounting system is prone to fraudin cases where physical cash is involved. Without internal audit reviews, theremay arise cases of teaming and lading fraud that may pass unnoticed. 9. Future Outlook:Computerized Accounting system is expending all overthe world and in large multiplatform companies it is innovated so far. As theneed for more advance, more organized and systematic computerized accountingsystem is required to handle the large company information and daily base dataentries, this system is rapidly innovating and require more technology.
As the daypassing, new advance software are launching and it has a large scope in futureto be more innovative.