Computer Application in Accounting

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Computer Application in Accounting

Computer Application in Accounting is technological know-how and its utilization have registered an enormous improvement during the closing three decades. Historically, computer systems are used efficiently in science and science to remedy complicated computational and logical problems. They have additionally been used for completing financial planning and forecasting processes.

Recently, modern-day day computers have made their presence felt within the enterprise and industry. The most essential influence of computer systems has been on how facts are saved and processed inside an organisation. Although guide facts processing for Management Information System (MIS) has been pretty common in the past, contemporary MIS would be almost not possible barring the use of laptop systems. In this chapter, we shall mention the want for the utilization of computer systems in accounting, the character of accounting records machine and therefore the sorts of accounting associated with MIS reviews.

Meaning and elements of Computer System

A computer is a digital device, which is capable of performing a range of operations as directed by a set of instructions. This set of guidelines is called a laptop programme. A computer machine is a combination of six elements:

  • Hardware:-Hardware of the computer consists of bodily components such as a keyboard, mouse, display and processor. These are digital and electromechanical components.
  • Software:-A set(s) of programmes, which is used to work with such hardware is called its software. A coded set of guidelines saved in the shape of circuits is called firmware. There are six sorts of software program as follows:
    1. Operating System:-An built-in set of specialised programmes that are supposed to manipulate the sources of a laptop and additionally facilitate its operation is referred to as a working system. It creates a quintessential interface that is an interactive link, between the person and the computer hardware.
    2. Utility Programmes:-These are a set of computer programmes, which are designed to function positive assisting operations: such as a programme to format a disk, duplicate ca a disk, physically reorganise saved facts and programmes.
    3. Application Software:- These are user-oriented programmes designed and developed for performing certain specified tasks: such as payroll accounting, inventory accounting, financial accounting, etc.
    4. Language Processors:-These are the software, which checks for language syntax and eventually translate (or interpret) the source programme (that is a programme written in a computer language) into machine language (that is the language which the computer understands). 
    5. System Software:-These are a set of programmes that control such internal functions as reading data from input devices, transmitting processed data to output devices and also checking the system to ensure that its components are functioning properly.
    6. Connectivity Software:-These are a set of programmes that create and control a connection between a computer and a server so that the computer can communicate and share the resources of the server and other connected computers.
  • People:-People interacting with the computer systems are additionally known as live-ware of the computer system. They represent the most essential section of the laptop machine :
    • System Analysts are the people who design data processing systems.
    • Programmers are the people who write programmes to implement the data processing system design.
    • Operators are the people who participate in operating computers. People who respond to the procedures instituted for executing computer programmes are also a part of live-ware.
  • Procedures:-The process capability a sequence of operations in a positive order or manner to achieve preferred results. There are three sorts of processes that constitute part of the computer system: hardware-oriented, software-oriented and internal procedure. Hardware–oriented system furnish small print about components and their approach of operation. The software-oriented method gives a set of directions required for the usage of the software program of the computer system. The internal procedure is instituted to make certain clean drift of statistics to computer systems by sequencing the operation of every sub-system of a basic computer system.
  • Data:-These are facts and may consist of numbers, text, etc. These are gathered and entered into a computer system. The computer system in turn stores retrieves, classifies, organises and synthesises the data to produce information according to a pre-determined set of instructions. The data is, therefore, processed and organised to create information that is relevant and can be used for decisionmaking.
  • Connectivity:-It is being acknowledged as a sixth element of the computer system. How a particular computer system is connected to others say through telephone lines, microwave transmission, satellite link, etc. is the element of connectivity.

Capabilities of Computer System

A computer system possesses some characteristics, which, in comparison to human beings, turn out to be its capabilities. These are as follows ;

Speed: It refers to the number of time computers takes in accomplishing a task or completes an operation. Computers require far less time than citizenry in performing a task. Normally, citizenry takes under consideration a second or minute because of the unit of your time. But computers have such a quick performance capability that the relevant unit of your time may be a fraction of a second. Most modern computers are capable of performing 100 million calculations per second and that is why the industry has developed Million Instructions per Second (MIPS) as the criterion to classify different computers according to speed.

Accuracy: It refers to the degree of exactness with which computations are made and operations are performed. One might spend years detecting errors in computer calculations or updating the incorrect record. Most of the errors in Computer-Based Information System (CBIS) occur because of bad programming, erroneous data and deviation from procedures. These errors are caused by human beings. Errors due to hardware are normally detected and corrected by the pc system itself. Computers rarely commit errors and perform all kinds of complex operations accurately.

Reliability: It refers to the power with which the computers remain functional to serve the user. Computers systems are well-adapted to performing repetitive operations. They are immune to tiredness, boredom or fatigue. Therefore, they are more reliable than human beings. Yet there are often failures of the pc system thanks to internal and external reasons. Any failure of the pc during a highly automated industry is unacceptable. Therefore, the businesses in such situations provide for a back-up facility to swiftly take over operations without loss of your time.

Versatility: It refers to the ability of computers to perform a variety of tasks: simple as well as complex. Computers are usually versatile unless designed for a specific application. A general-purpose computer is capable of being used in any area of application: business, industry, scientific, statistical, technological, communications and so on. A general-purpose computer, when installed in an organisation, can take over the jobs of several specialists because of its versatility. computer system when installed can take over the jobs of all these specialists because of being highly versatile. This further ensures fuller utilisation of its capability.

Storage: It refers to the quantity of knowledge a computing system can store and access. The computer systems, besides having instant access to data, have an enormous capacity to store such data during a very small physical space. A CD-ROM with 4.7” of diameter is capable of storing an outsized number of books, each containing thousands of pages and yet leave enough space for storing more such material. A typical mainframe system is capable of storing and providing online billion of characters and thousands of graphic images. It is clear from the above discussion that computer capabilities outperform human capabilities. As a result, a computer, when used properly, will improve the efficiency of an organisation.

Limitations of a Computer System

In spite of possessing all the above capabilities, computers suffer from the following limitations :

  • Lack of Commonsense:-Computer systems as of date do not possess any common sense because no full-proof algorithm has been designed to programme common sense. Since computers work according to a stored programme(s), they simply lack commonsense.
  • Zero IQ:-Computers are dumb devices with zero Intelligence Quotient (IQ). They cannot visualise and think about what exactly to do under a particular situation unless they have been programmed to tackle that situation. Computers must be directed to perform each and every action, however, the minute it may be.
  • Lack of Decision-making:Decision-making may be a complex process involving information, knowledge, intelligence, wisdom and therefore the ability to gauge. Computers cannot take decisions on their own because they do not possess all the essentials of decision-making. They can be programmed to take such decisions, which are purely procedure-oriented. If a computer has not been programmed for a particular decision situation, it will not take the decision due to a lack of wisdom and evaluating faculties. Human beings, on the opposite hand, possess this world power of decision-making.

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