Use of Computers in Accounting

Most accounting packages will provide the basis for daybooks, ledger accounts, (double entry), trial balance and final accounts.

• Daybooks –are used for listing sales, purchases and returned goods. Computer programs often use the batch system, which is a listing of the items with an overall total to check against computer input. It is common to find batches for sales, purches, returns, cheques received, cheques issued.

• Ledgers accounts (Nominal ledger or General ledger) – all the other accounts- expenses, income, assets (items owned) and liabilities (items owed) – this is also referred as the ‘main’ ledger

• Trial Balance – If the business has been operating a computer accounting program such as Sage, the task of producing a trial balance would have been very simple. The computer would automatically keep a running balance of each ledger account and would transfer the balances (including the control accounts for debtors and creditors) to a trial balance report on the click of a mouse. The convince of using a computer accounting program cannot be underestimated.

• The final accounts (or finical statements) of a sole trader comprise:

• A trading and profit loss account, which shows the profit or loss of the business.

• A balance sheet, which shows the assets and liabilities of the business together with the owner’s capital.

Theses final accounts can be produced more often then once a year in order to give information to the owner on how the business is progressing.

Advantages of a computer accounting program compared to manual accounting program

Computer accounting programs are popular because they offer a number of distinct advantages over paper-based systems. They

• Save time

• Save money

• Tend to be more accurate because they rely on single entry input (one amount per transaction) rather than double entry bookkeeping.

• Provide the mangers of the organisation with a clear and up-to-date picture of what is happening.

Disadvantages of a computer accounting program compared to manual accounting program

• On a computer the date can be lost therefore a backup copy is needed.
• Also the computer might not work therefore there will be no access to the data.

Why us computerized accounting programs like SAGE

Facilities:

A typical computer accounting program will offer a number of facilities:

• On-screen input and printout of sales invoices and credit notes
• Automatic updating of customer accounts with sales transactions
• Recording of suppliers invoices
• Automatic updating of supplier accounts with details of purchases
• Recording of money paid into the bank
• Recording of payments to suppliers and for expenses

Payroll can also be computerised – normally using a separate programme.

Management reports:

A computer accounting program can provide instant reports for management, for example:

• An aged debtors summary – showing who owes you what and for what periods of time.
• Activity reports on customer and supplier accounts
• Activity reports on expenses accounts.
• VAT return.

• To conclude I will I will tell my employer what a computer in business can do. It producing invoices – working out the costs of products sold, calculating and adding VAT and producing sales total. Working out budgets for future expenditure. Working out sales figures for different products or areas.

• Advantages of a computer are save time, save money. Tend to be more accurate because they rely on single entry input (one amount per transaction) rather than double entry bookkeeping. Provide the mangers of the organisation with a clear and up-to-date picture of what is happening.

• Disadvantages of a computer are: On a computer the date can be lost therefore a backup copy is needed. Also the computer might not work therefore there will be no access to the data.