Unit 1: Introduction to computerised accounting
Workshop on Computerised Accounting notes · PTU syllabus (BCOMSEC 401-18)
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Unit summary
Almost every business in India now keeps its accounts on software. This unit covers the meaning, features, advantages and limitations of computerised accounting, a comparison of manual and computerised accounting systems, special aspects of computerised accounting and how such systems developed.
After this unit you can
- Define computerised accounting and explain its features
- Explain the advantages and limitations of computerised accounting
- Compare manual and computerised accounting systems
- Explain the special aspects and development of computerised accounting systems
PTU syllabus topics
- Meaning
- features
- advantages and limitations of computerised accounting
- manual vs. computerised accounting systems
- special aspects and development of computerised accounting systems
Speed
Slow
Fast
Accuracy
Prone to calculation errors
Automatic calculations
Reports
Prepared by hand
Generated instantly
Risk
Physical loss of books
Data loss without backups
Topic 1
Meaning and features of computerised accounting
Computerised accounting is the use of computers and accounting software to record, store, process and report financial transactions. Data is entered once (vouchers); the software automatically posts it to ledgers and produces books and reports.
Online input and storage
Data stored in a database
Automatic posting
Vouchers post to ledgers instantly
Instant reports
Trial balance, P&L, balance sheet at any time
Accuracy
No arithmetical errors in totalling and balancing
Security
Passwords, user rights, audit trail
Scalability
Handles large volumes
Integration
Inventory, payroll, GST, banking in one system
Topic 2
Advantages and limitations
| Advantages | Limitations |
|---|---|
| Speed — thousands of entries processed quickly | Initial cost of hardware, software and training |
| Accuracy — automatic calculations | Errors in data entry are still possible (GIGO) |
| Up-to-date information and MIS reports | Risk of data loss due to virus, hardware failure |
| Easy storage and retrieval | Security breaches and unauthorised access |
| Scalability and reliability | Dependence on power and trained staff |
| Real-time GST, TDS and payroll compliance | Software may need updates with changing laws |
| Audit trail and security controls | Resistance to change by staff |
Exam tip
The Companies (Accounts) Rules require software with an audit trail (edit log) feature from 1 April 2023 — a useful current point to mention.
Topic 3
Manual vs computerised accounting
Recording
Journal written by hand
Vouchers entered in software
Posting
Manually to ledger
Automatic
Trial balance and final accounts
Prepared at period end, time-consuming
Available instantly
Errors
Totalling and posting errors common
Arithmetical errors eliminated
Speed
Slow
Fast
Storage
Bulky books
Electronic, compact, back-up
Reports
Limited
Many reports, customisable
Cost
Low set-up, high running cost
High set-up, low running cost
Topic 4
Special aspects and development of computerised accounting
Special aspects
- Grouping of accounts: every ledger is placed under a predefined group (assets, liabilities, income, expenses) that maps to the final accounts.
- Coding of accounts: numeric or alphanumeric codes for quick entry and sorting (sequential, block, mnemonic codes).
- Masters and transactions: masters (ledgers, groups, stock items) are created once; transactions (vouchers) are entered daily.
- Data validation: checks at entry — dates, balanced debits and credits.
- Security and audit trail: user names, passwords, access rights, logs of changes.
- Back-up and restore to protect data.
Development of computerised accounting
- 1
Manual books (ledgers, journals)
- 2
Mechanical aids
Calculators, accounting machines
- 3
Spreadsheets
Lotus 1-2-3, MS Excel
- 4
Accounting packages
Tally, Busy, Marg, QuickBooks
- 5
ERP systems
SAP, Oracle, Microsoft Dynamics — integrate all functions
- 6
Cloud and AI-based accounting
Zoho Books, TallyPrime with cloud access, automated reconciliation
- Types of accounting software: ready-made (Tally), customised (modified for a firm's needs), tailor-made (developed for a specific organisation).
- Database concept: data stored in tables with relationships; DBMS ensures integrity and quick retrieval.
Key terms
- Computerised accounting
- Recording and processing transactions using accounting software
- Voucher
- Document used to enter a transaction in software
- Audit trail
- Log of all changes made to accounting data
- Grouping
- Placing ledgers under predefined account groups
- ERP
- Enterprise resource planning software integrating all business functions
Quick revision
- Features: automatic posting, instant reports, accuracy, security, integration.
- Limitations: cost, data-entry errors, security risks, training.
- Manual vs computerised: speed, accuracy, storage, reports.
- Special aspects: grouping, coding, masters, validation, audit trail, back-up.
- Development: manual → spreadsheets → packages → ERP → cloud.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Define computerised accounting.
- Q2.State four advantages of computerised accounting.
- Q3.What is meant by grouping of accounts?
- Q4.What is an audit trail?
- Q5.Distinguish ready-made and tailor-made accounting software.
- Q6.What is ERP?
Long-answer questions
- Q1.Explain the features, advantages and limitations of computerised accounting.
- Q2.Distinguish between manual and computerised accounting systems.
- Q3.Explain the special aspects of computerised accounting.
- Q4.Trace the development of computerised accounting systems.
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