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Computerised Accounts - What are the advantages and limitations of using accounting software and how can businesses overcome the illustrations.

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Introduction

E6 and C3 - Computerised Accounts - What are the advantages and limitations of using accounting software and how can businesses overcome the illustrations A computer accounting system can replace the manual handwritten accounting records, the ledgers and day books. Written records are normally the traditional form for recording information, particularly for businesses that have just started up. Many businesses now use computerised information accounts because they find them beneficial in terms of cost and the information they provide. For many businesses, and particularly smaller businesses, computerising the accounts can be a marginal proposition. For example, a sole trader isn't going to have a computerised account system as they are not big enough. As they do not operate in large markets and the system will be too expensive. With the advent of the PC and the user-friendly accounting packages, even the smallest of businesses may use a computer to record all their financial transactions. Below are two opposing points of view about the computerisation of accounts: Quote 1: "Owners of the business sometimes think that if they computerise their accounts, they will automatically save time, money and effort. Tempted by advertising hype they will rush out and buy the latest and cheapest system, which they probably don't understand and will seldom use. They believe that technology equates with progress". The quotation above is likely to relate to larger organisations as they are more likely to be in the position to rush out and buy a new system. ...read more.

Middle

Modular systems: These are suitable if the business does not need the full range of facilities offered. It may select individual functions, for example the Sales Ledger and Invoicing, which may be purchases separately. This benefits, many organisations which may not be able to purchase the full package all at once as they are unable to afford it. It is also an opportunity to train staff to their specialist ledger, so they are fully equipped to any problem which may arouse. When separate ledgers are purchased, as a result the organisation will run more smoothly and efficiently. It is also useful because a business can purchase extra modules, for example, Purchase Ledger and General/Nominal Ledger, as the need arises. Each model added is completely compatible with other modules from the same software house. A larger business which employs many accounts staff may consider networking a number of computer terminals in different parts of the office, linking them to a central storage system or printer. This can be a cost-effective solution, but professional advice must be taken for its implementation, when connecting PC's to the standard of the computer accounting systems. The benefits of a Computer Accounting System: The main benefits of the accounting system is its ability to handle a high volume of transactions, its simplification of double-entry, its improved credit control, instant VAT reports and rapid access to management information. Volume Transactions: Although the system may take time to set up, and may have problems for staff in understanding how to use the ...read more.

Conclusion

* Computer Accounting Systems can either be simple cash trader programmes or a full ledger system in an integrated or modular form: This can benefit many of the larger organisations such as PLC's or LTD's. This is because they are therefore able to find an accounting system which is suited to their needs. It is a more in depth system which means the company will be more efficient and accurate. * Computer Accounting Systems, by providing management information, can assist the business owner in making decisions: This can show the profitability of either a small or large organisation. This may also be able to predict the future cash flow of the company. For example, if you are a larger company like a PLC you know where you stand if you are looking to invest; solvency of the organisation. * Computer Accounting Systems cannot work miracles; they should only be introduced after a thorough understanding and full staff training: For many small organisations like partnerships or sole traders, this can question the need for a computer accounting system. If companies say yes to a computing accounting system, and they are able to run it, it is useless to them if they can't properly use it, as it will just waste time and make the company inefficient. * Professional advice should be sought when introducing an accounting system: Companies may question whether the system does what it intends to do. It may be a time consuming project which may prevent the efficiency of the running of the company. This may also question whether it is being used properly. ...read more.

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