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Introduction to Computerized Accounting.

Extracts from this essay...

Introduction

Introduction to Computerized Accounting Over the past two decades the way accounting data is entered, stored and processed has changed considerably. This is due to the introduction of computerized accounting packages. It is no longer necessary for large companies to have huge store rooms full of ledgers and records. Instead all information can be stored in computer hard disks. Accounting packages give many advantages over manual systems, for example entries do not have to be recorded in multiple ledgers. A single entry is made and the package will update all the appropriate accounts automatically. Computerized accounting packages also make it possible for people in other departments, not just accounting to enter data. It does not require a vast amount of accounting knowledge for a pay role clerk to enter wages details into the accounts. Just a basic understanding of how to use the package is needed. Furthermore these packages simplify the use of the double entry system greatly. In a manual accounting system, as well as creating an audit trail to record all transactions, a trail balance, profit and loss account and a balance sheet would have to be manually drawn up. Computerized accounting packages have the ability to do all this from just having the companies transactions entered into the relevant spreadsheets.

Middle

As with the examples above, without effective controls, it is likely that fraud or mistakes will go unrealized until it is too late. 3A survey conducted by KPMG found that internal control is the most effective way of detecting fraudulent activities above all other means. The majority of internal controls can be classed as either preventive or detective. A preventative control for example would be not having the same person who collects payments bank the checks. This would have prevented 4Able & Co loosing over $2,000,000 to a fraudulent ledger accountant. Also by having a second trader to check transaction and documents, Bearings Bank would have been able to monitor and prevent the activities of Nick Leeson. Other examples of preventative controls are - Having a computer program to check validity, preventing entry's of invalid account numbers. - Having a manager check and approve purchases prevents any inappropriate expenditure - Segregating responsibilities cuts the risk of theft. Obviously it is always more important to prevent the deed, than for it to happen and be detected later. But no matter how efficient and numerous a companies controls are some mistakes and crimes are always going to slip the net. When this happens it is necessary to have detective controls in place.

Conclusion

This will stop payment being made twice by mistake. Sage can help detect if duplicate payment to a supplier is suspected by showing I the audit trail the date of payment, the supplier and the amount. Mistakes can always be made so invoices should always be reviewed for their accuracy. If they are not payments which should not be made may occur. As well as this all incomplete deliveries of supplies, equipment or produce etc should be always followed up. This is so your suppliers do not end up charging you for goods you have not received or an employee is not helping themselves to the delivery. It can be imputed into sage whether a delivery has been completed or not, so it is possible to tell if the company is receiving the right amount of supplies. If any purchases are returned for whatever reason it must be ensured that the refund is received. By looking at the audit trail in sage it is possible to see where any refunds have been received. It is also important to make sure any discounts that are allowed to us by suppliers have been deducted from payments. Sage records supplier information and it is possible to log any discounts the company gets. If there are any past due balances, they must be reviewed and followed up on. Sage will also show if there is any past due balances in its supplier info.

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