Concept and types of computerised accounting

The essentials

A computerised accounting system (CAS) records, processes and reports accounting transactions using computer hardware and accounting software working on a database. Data entered once, such as a voucher, automatically updates journals, ledgers, the trial balance and financial statements, so reports can be produced instantly.

Key points

• Types of accounting software: ready-to-use (standard packages, low cost, suited to small firms with simple needs), customised (a standard package modified to fit the user's needs), tailored (developed specially for a large or complex organisation, high cost and high secrecy).
• Features: simple and integrated, transparency and control, accuracy and speed, scalability, reliability.
• Advantages: speed, accuracy, reliability, up-to-date information, real-time user interface, automated document production, scalability, legibility, efficiency, quality reports, storage and retrieval, and support for management information.
• Limitations: cost of training, staff opposition, disruption during changeover, system failure, inability to check errors that were not anticipated, breaches of security, and ill effects on health from long use.

Exam tips

Match each type of software to the kind of organisation it suits. Case questions often describe a small shop or a large bank and ask which type is best.

Common mistakes

• Assuming a computer can detect every error. It cannot catch an error of principle or a wrong but valid amount entered by the user.
• Confusing customised software with tailored software.