Big picture
This chapter covers the Computerised Accounting option of Part B, which schools offer as an alternative to Analysis of Financial Statements. The accounting rules do not change when a computer keeps the books; what changes is how data is entered, stored, processed and reported.
A computerised accounting system (CAS) records each transaction once, through a voucher. From that single entry the software posts the ledger, and it produces the trial balance, profit and loss account and balance sheet automatically. Your job is to design the accounts and codes correctly, enter vouchers accurately, and use spreadsheets and databases to turn accounting data into information.
Learning goals
Explain the features, components, advantages and limitations of a computerised accounting system.
Distinguish ready-to-use, customised and tailored accounting software.
Apply sequential, block and mnemonic codes and the grouping of accounts.
Choose the correct voucher type for a transaction and name the reports a CAS generates.
Use spreadsheet functions for depreciation, loan schedules, payroll and ratios, with relative and absolute references.
Choose a suitable chart for accounting data.
Explain database concepts used in accounting: tables, keys, queries, forms and reports.
Core ideas
1. Computerised accounting system: features and components
A CAS is an accounting information system that processes financial transactions with computers, following the same double-entry principles as a manual system.
Components
Component | What it is |
|---|---|
Procedure | The logical sequence of actions for entering, processing and reporting data |
Data | The transactions and master details (ledgers, items, parties) |
People | Users: accountants, managers, data-entry operators |
Hardware | Computer, server, printer, storage and network devices |
Software | The accounting package, operating system and database |
Connectivity | The network that links users and locations |
Features: online input and storage, accurate and fast processing, information in real time, scalability, secure access through user passwords, and automatic generation of reports.
Manual and computerised accounting compared
Point | Manual | Computerised |
|---|---|---|
Recording | Journal written by hand | Voucher entered once |
Posting and balancing | Done separately by the accountant | Done automatically |
Trial balance and final accounts | Prepared at period end, by hand | Available at any moment |
Errors | Arithmetical and posting errors common | Arithmetic is automatic; data-entry errors remain |
Alteration | Visible cuttings in books | Edits may leave no trace unless an audit trail is kept |
Advantages: speed, accuracy, reliability, up-to-date information, real-time reports, easy storage and retrieval, scalability, and less paperwork.
Limitations: cost of installation and training, staff resistance to change, system failure or data loss without backups, inability to check wrong input ("garbage in, garbage out"), breaches of security, and health issues from long screen use.
2. Kinds of accounting software
Kind | Suits | Example situation | Cost and flexibility |
|---|---|---|---|
Ready-to-use (generic) | Small businesses with standard needs | A neighbourhood shop buys an off-the-shelf package | Low cost, easy to install, little flexibility |
Customised | Medium businesses | A packaged program modified for a firm's special billing rules | Moderate cost and flexibility |
Tailored (specific) | Large organisations with complex, multi-user needs | Software written for a railway or a large bank | High cost, fully matched to needs, needs trained users |
Factors in choosing software: flexibility (data entry and report formats), cost of installation and maintenance, size of the organisation, ease of use and training, expected volume of transactions, security features, and the vendor's support.
3. Coding and grouping of accounts
Software identifies accounts by codes, which save time and make data entry accurate.
Coding method | How it works | Example |
|---|---|---|
Sequential | Consecutive numbers in the order items are created | Vouchers 0001, 0002, 0003 |
Block | A range of numbers is reserved for each group | 100–199 assets, 200–299 liabilities, 300–399 income, 400–499 expenses; so rent paid could be 410 |
Mnemonic | Letters that are easy to remember | SAL for salaries, CSH for cash, DEB for debtors |
Grouping. Every ledger account belongs to a group, and groups roll up into four basic categories that decide where the account appears in the final accounts:
Basic category | Example groups | Example ledgers |
|---|---|---|
Assets | Fixed assets, current assets, investments | Machinery, debtors, bank |
Liabilities | Capital, loans, current liabilities | Share capital, bank loan, creditors |
Income | Sales, indirect income | Sales, commission received |
Expenses | Purchases, direct expenses, indirect expenses | Purchases, wages, rent |
Because each ledger is linked to a group, the software knows to put "Rent" in the profit and loss account and "Machinery" in the balance sheet without being told again.
4. Vouchers and reports
In accounting software, a transaction is entered through the right voucher type.
Voucher | Used for | Example |
|---|---|---|
Contra | Transfers between cash and bank accounts only | Cash deposited into the bank; cash withdrawn from the bank |
Payment | All payments by cash or bank | Rent paid by cheque |
Receipt | All receipts by cash or bank | Cash received from a debtor |
Journal | Adjustments and non-cash transactions | Depreciation; outstanding salary |
Sales | Sale of goods (cash or credit) | Goods sold on credit to Mehta Traders |
Purchase | Purchase of goods (cash or credit) | Goods bought on credit from Sharma & Co. |
Debit Note | Purchase returns | Defective goods returned to a supplier |
Credit Note | Sales returns | Goods returned by a customer |
Steps in using a CAS: create the company (name, address, financial year, books beginning date) → create groups and ledgers with opening balances → enter vouchers → generate reports.
Reports generated automatically: day book, ledger accounts, cash book and bank book, trial balance, profit and loss account, balance sheet, and, where inventory is maintained, stock summary.
5. Electronic spreadsheets for accounting
A spreadsheet is a grid of cells identified by column letter and row number (B4). A cell holds text, a number or a formula beginning with =.
Cell references
Relative (B2): changes when the formula is copied.
=B2*10%copied down one row becomes=B3*10%.Absolute ($B$2): stays fixed when copied. If the tax rate is in B1, use
=C5*$B$1so every row refers to the same rate.Mixed ($B2 or B$2): fixes only the column or only the row.
Functions you should know
Function | Purpose | Example | Result |
|---|---|---|---|
| Adds a range |
| Total of the column |
| Chooses a value by a condition |
| 6,000 |
| Straight-line depreciation per year |
| 18,000 |
| Double-declining (written-down) depreciation |
| 40,000 |
| Equal instalment (EMI) for a loan |
| 8,884.88 |
| Finds a value in a table | Look up an employee's basic pay by code | Matching pay |
| Rounds a value |
| 8,884.88 |
Where spreadsheets help in accounting
Depreciation schedule: each row a year, using SLN or DDB, with accumulated depreciation as a running total.
Loan repayment schedule: EMI from PMT; interest each month = opening balance × monthly rate; principal = EMI − interest; closing balance = opening − principal.
Payroll: basic pay, DA and HRA by formula (for example
=IF(B2>=30000, B2*20%, B2*10%)for an allowance), gross pay, deductions such as provident fund, and net pay.Bank reconciliation: list the cash book balance and add or subtract each reconciling item with a formula.
Ratio analysis: enter the statements once, then formulas such as
=B5/B9for the current ratio update automatically when figures change.
Worked example: one row of a loan schedule. A loan of ₹1,00,000 at 12% p.a. is repaid in 12 monthly EMIs. The monthly rate is 1%, and =PMT(1%,12,-100000) gives an EMI of ₹8,884.88. In month 1, interest = 1,00,000 × 1% = ₹1,000; principal repaid = 8,884.88 − 1,000 = ₹7,884.88; closing balance = ₹92,115.12. Copying the row down produces the whole schedule.
6. Presenting data with charts
Chart | Best for | Accounting example |
|---|---|---|
Column or bar chart | Comparing values across categories or years | Sales of five branches |
Line chart | Showing a trend over time | Monthly cash balance for a year |
Pie chart | Showing parts of a whole | Break-up of total expenses |
Scatter chart | Relationship between two variables | Advertising spend against sales |
A good chart has a title, labelled axes, units (₹ in lakh) and a legend when more than one series is shown.
7. Database management systems for accounting
A database is an organised collection of related data; a database management system (DBMS) is the software that stores, retrieves and protects it. Accounting software stores its data in a database.
Element | Meaning | Accounting example |
|---|---|---|
Table | Data arranged in rows (records) and columns (fields) | A Ledger table with code, name and group |
Record | One row, about one item | One ledger account |
Field | One column, one attribute | Ledger name |
Primary key | A field whose value is unique for every record | Ledger code |
Foreign key | A field that refers to the primary key of another table | Ledger code inside the Vouchers table |
Query | A question asked of the data | All payments above ₹50,000 in March |
Form | A screen for entering or viewing data | Voucher entry screen |
Report | Formatted output of data | Trial balance, debtors' list |
In a relational database, tables are linked through keys. The Vouchers table does not repeat a ledger's name and group every time; it stores only the ledger code, and the DBMS finds the rest through the link. This avoids duplication and keeps data consistent.
Data and information. Data are raw facts (a voucher for ₹5,000); information is processed, meaningful data (total rent for the year). A CAS turns data into information through processing and reports.
A reliable problem-solving routine
For a software question, identify the business size and complexity before choosing ready-to-use, customised or tailored software.
For a voucher question, ask: does it only move money between cash and bank (Contra)? Is cash or bank paid (Payment) or received (Receipt)? Is it a sale, purchase or return? Otherwise use Journal.
For a coding question, match the code to the method: consecutive numbers, reserved ranges, or memorable letters.
For a spreadsheet question, write the function with its arguments in the right order, then work out the value by hand.
For a chart question, ask whether the data shows comparison, trend, composition or relationship.
Connections that matter
Class 11 accounting process (journal, ledger, trial balance) is exactly what the software automates.
Depreciation and bank reconciliation from Class 11 become spreadsheet schedules here.
Financial statement analysis ratios can be calculated and charted in a spreadsheet.
Common mistakes
Using a Payment voucher for cash deposited in the bank. Movements between cash and bank use a Contra voucher.
Thinking a computer removes all errors. Arithmetic is automatic, but wrong data entered gives wrong reports.
Getting SLN's arguments in the wrong order. It is cost, salvage, life.
Forgetting the minus sign or monthly rate in PMT. An annual rate of 12% with monthly instalments uses 1% and the number of months.
Using a relative reference for a fixed rate and getting wrong results when the formula is copied.
Using a pie chart for a trend. Trends need a line chart.
Revision checklist
I can list the components, advantages and limitations of a CAS.
I can distinguish ready-to-use, customised and tailored software.
I can give examples of sequential, block and mnemonic codes.
I can choose the right voucher for a transaction and name CAS reports.
I can use SUM, IF, SLN, DDB, PMT and VLOOKUP, with relative and absolute references.
I can pick a suitable chart and explain tables, keys, queries, forms and reports.