Loading....
Coupon Accepted Successfully!

 

Question-1

What do you understand by Grouping of Accounts?

Solution:
A credible financial statement can be prepared if the accounting concepts and principles are followed. It necessarily means capital expenditure and capital income or receipts be transferred to Balance Sheet while revenue expenditure and revenue incomes be transferred to Trading, Profit and Loss Account. The process by which this objective is achieved is known as "Grouping of Accounts".

Question-2

What do you understand by Readymade or Off – the – Shelf software?

Solution:
Readymade softwares are the softwares that are developed not for any specific user but for the users in general. Since, the readymade softwares are for general user, it is not necessary that all the modules of such softwares are of use for every user.

Question-3

What are the advantages of Ready made Software? (Two points).

Solution:
Readymade softwares are economical
 
Readymade Softwares are developed by a group of experienced professionals

Question-4

What do you understand by Customized Software?

Solution:
The term ‘ Customized Software’ means making changes in the readymade software to suit the specific requirements of the user, i.e., making it user – specific. The software available off-the-shelf is modified to suit the requirements of the user.

Question-5

What do you understand by Tailor made Software?

Solution:
The term ‘Tailor – made software’ refers to designing and developing user – specific software

Question-6

What are the advantages of Tailor – Made Software?

Solution:
  1. Well – trained users use the software and therefore they can maximize software utilization.

     

    The software being tailor-made, the enterprise may have to engage a software engineer to maintain it. In other words, the problems faced can be countered immediately.

 

Question-7

What are the advantages of Computer Accounting?

Solution:

Scalability: A computerized accounting system is scalable to handle the growing transactions.

Security: The accounting data under the computerized environment is safer than the accounting data under the manual system. The data can be kept secure by using a password, i.e., allowing only authorized users to access the data.

Timely Reporting: Availability of reports on time enables the management to take quick decisions, which is an important element for the success of an enterprise. A computerized accounting system makes these reports available as and when required.

Lower Cost: The cost of maintaining books of accounts under the computerized process is lower than in the manual process.

Less Paper Work: Under the computerized process, there is less paper work as compared to the paper work in the manual process.

Accurate: Computer statements are far more accurate in comparison to manual statements.

Updating: Updating and treatment of wrong transactions are easily done.

 

Question-8

What considerations should be borne in mind for designing Accounting reports?

Solution:
Following should be kept in mind:

 

Controls: If adequate controls are not built and, where built, are not followed, it can lead to loss of data. It is important to take back-ups at regular intervals to avoid such a situation.

Data Corruption: The data can get corrupted through viruses that may come in through the internet or the use of external input devices without scanning them for viruses.

Trained Computer Operators: Untrained computer operators can lead to loss of data.

Limitations of Software: The software is developed on the basis of the experiences of the team of developers. As such, it may not be able to deal with a specific problem that may arise.

 

Question-9

Write a detailed comparison between manual accounting and computerized accounting?

Solution:
Accounting is a process of identifying, recording, classifying and summarizing financial transactions to produce financial statements. Let us discuss the processes under the two accounting processes i.e., manual process and computerized process, for the purpose of comparison.

Identifying Financial Transactions: Identifying financial Transactions and recording them in the books of accounts by applying the principle of accounting is a manual process carried out by an authorized person or on the basis of the accounting manual. This process is, thus, common under both the processes.

Recording: the process of recording transaction in the books of original entry, posting them in the ledger accounts, performing mathematical functions, i.e., adding, subtraction and totaling, are carried out manually under the manual process. In the computerized process, transactions are recorded in the books of accounts and the remaining functions are performed without any further process or command being carried out manually.

Classification: in the manual process, the transactions are recorded in the books of original entry and are posted into the ledger accounts. It means that, after recording the transaction, another process of posting is performed. In computerized accounting, the posting process is carried out by internal sorting of data, i.e., with the help of utility or application software, without any further process.

Summarizing: in the manual system of accounting, the data under each ledger is summarized and a balance of each account is ascertained to prepare a Trial Balance. As a result, preparing ledger accounts is essential to prepare a Trial Balance. In the computerized process, a transaction or event, once recorded, is stored in the database and can be processed to produce a Trial Balance directly.

Adjustments Entries: Adjustment entries are passed to rectify an error or to follow the matching concept of accounting i.e., matching the cost with revenue. The process of passing adjustment entries can be equated with the recording process. These entries are identified and recorded in the books of accounts. The remaining process is the same as discussed above.

Grouping Accounts: One of the basics of correct accounting is determining whether a transaction is capital or revenue in nature and accordingly, which account head is to be debited or credited. Once this decision is taken, the account is grouped as an asset, a liability, an income or an expense at the time of preparing the financial statements. The above process is followed when the manual system of accounting is adopted. However, in computerized accounting, whether an account head is an asset, a liability, an income or an expense, is decided at the time of the transaction takes place, as in the case of manual accounting. It is also defined whether the particular head of account shall be shown as an asset or liability, or an income or expense.

Financial Statements: In the manual process, availability of the Trial Balance is essential to prepare the financial statements. In the computerized process, financial statements are generated from the system itself and hence, there is no need to have a Trial Balance.

Question-10

Write down five advantages of computerized accounting system over the manual system of accounting.

Solution:

Scalability: A computerized accounting system is scalable to handle the growing transactions.

Security: The accounting data under the computerized environment is safer than the accounting data under the manual system. The data can be kept secure by using a password, i.e., allowing only authorized users to access the data.

Timely Reporting: Availability of reports on time enables the management to take quick decisions, which is an important element for the success of an enterprise. A computerized accounting system makes these reports available as and when required.

Lower Cost: The cost of maintaining books of accounts under the computerized process is lower than in the manual process.

Less Paper Work: Under the computerized process, there is less paper work as compared to the paper work in the manual process.

 





Test Your Skills Now!
Take a Quiz now
Reviewer Name