Explain the role of computers in accounting 1
Answers
Role of Computers in Accounting:
The manual system of recording accounting transactions requires maintaining books of accounts such as journal, cash book, special purpose books, and ledger and so on. From these books summary of transactions and financial statements are prepared manually.
The advanced technology involves various machines, which can perform different accounting functions, for example a billing machine. This machine is capable of computing discount, adding net total and posting the requisite data to the relevant accounts.
With substantial increase in the number of transactions, a new machine was developed to store and process accounting data with greater speed and accuracy. A computer, to which it was connected, operated this machine.
As a result, the maintenance of accounting data on a real-time basis became almost essential. Now maintaining accounting records become more convenient with the computerized accounting.
Objects of Introduction of Computers in Accounting:
Labor Saving:
Labor saving is the main aim of introduction of computers in accounting. It refers to annual savings in labor cost or increase in the volume of work handled by the existing staff.
Time Saving:
Savings in time is another object of computerization. Computers should be used whenever it is important to save time. It is important that jobs should be completed in a specified time such as the preparation of pay rolls and statement of accounts. Time so saved by using computers may be used for other jobs.
Accuracy in accounting statements and books of accounts is the most important in business. This can be done without any errors or mistakes with the help of computers. It also helps to locate the errors and frauds very easily.
Minimization of Frauds:
Computer is mainly installed to minimize the chances of frauds committed by the employees, especially in maintaining the books of accounts and handling cash.
Effect on Personnel:
Computer relieves the manual drudgery, reduces the hardness of work and fatigue, and to that extent improves the morale of the employees.
Meaning of Computer Accounting:
Accounting is the language of the business. Different parties such as shareholders, stakeholders, tax authorities, stock exchanges, etc. are interested in the accounting information for their varied needs.
A full disclosure is insisted by Securities Exchange Board of India [SEBI] and therefore, full information and its neat, simple, and quick presentation has become very essential. Manually maintained accounting system may not be able to provide all these facilities.
In recent times, computers are being used to maintain the accounting records and for the preparation, analysis, and interpretation of accounting statements. Hence, the system operated through computers is called as computerized accounting or simply, accounting in computerized environment.