Acca f3 Financial Accounting (int) Study Text

406

24: Information technology   Part G  Miscellaneous topics 

Study guide 

Intellectual level

C3 

Accounting systems and the impact of information technology on 

financial reporting 

(b) 

Understand the basic function and form of accounting records in a typical 

computerised system 

1

(c) 

Compare manual and computerised accounts systems 

1

(d) 

Identify advantages and disadvantages of computerised accounts systems 

1 

(e) 

Understand the uses of integrated accounting system packages 

1

Exam guide 

You should be prepared for questions comparing computer systems with manual systems. Do not neglect 

this chapter. You need to study the 

full range of the syllabus. 

1 Accounting packages 

Computer software used in accounting may be divided into two types. 

 

Dedicated accounting packages. 

 

General software, such as spreadsheets, which can be used for accounting. 

The syllabus for this paper requires you to know about the use of computers in financial accounting practice. 

Questions will not be set on the technical aspects of how computers work. A typical question might be to 

give advantages and disadvantages of computerised accounting systems over manual systems. 

We shall assume, therefore, that you know that a modern computer generally consists of a keyboard, a 

television-like screen, a box-like disk drive which contains all the necessary electronic components for 

data processing, and a printer. This is the computer hardware. 

The computer hardware described above is also known as a personal computer (PC), but the technical 

name is a 

micro-computer.

Computer programs are the instructions that tell the electronics how to process data. The general term 

used for these is software. 

Software is what we are concerned with in this text, and in particular 'applications software', that is 

packages of computer programs that carry out specific tasks. 

(a) 

Some applications are devoted specifically to an accounting task, for example a payroll package, a 

non-current asset register or an inventory control package. 

(b) 

Other applications have many uses in business, including their use for accounting purposes. 

Packages of this sort that we shall describe are databases. 

1.1 Accounting packages 

One of the most important facts to remember about computerised accounting is that 

in principle, it is 

exactly the same as manual accounting. However, it has certain advantages. 

Accounting functions retain the same names in computerised systems as in more traditional written 

records. Computerised accounting still uses the familiar ideas of day books, ledger accounts, double 

Exam focus 

point

Key term 

FAST FORWARD

FAST FORWARD

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Part G  Miscellaneous topics

  24:  Information technology

407

entry, trial balance and financial statements. The principles of working with computerised sales, purchase 

and nominal ledgers are exactly what would be expected in the manual methods they replace. 

The only difference is that these various books of account have become invisible. Ledgers are now 

computer files which are held in a computer-sensible form, ready to be called upon. 

1.1.1 Advantages 

However, the advantages of accounting packages compared with a manual system are as follows. 

(a) 

The packages can be used by 

non-specialists.

(b) A 

large 

amount 

of 

data can be processed very quickly.

(c) 

Computerised systems are 

more accurate than manual systems. 

(d) 

A computer is capable of handling and processing 

large volumes of data. 

(e) 

Once the data has been input, computerised systems can 

analyse data rapidly to present useful 

control information for managers such as a trial balance or a trade accounts receivable schedule. 

1.1.2 Disadvantages 

The advantages of computerised accounting system far outweigh the disadvantages, particularly for large 

businesses. However, the following may be identified as possible disadvantages. 

(a) The 

initial 

time and costs involved in installing the system, training personnel and so on. 

(b) 

The need for 

security checks to make sure that unauthorised personnel do not gain access to data 

files.

(c) 

The necessity to develop a 

system of coding (see below) and checking. 

(d)

Lack of 'audit trail'. It is not always easy to see where a mistake has been made. 

(e) Possible 

resistance on the part of staff to the introduction of the system. 

1.2 Coding 

Computers are used more efficiently if vital information is expressed in the form of codes. For example, 

nominal ledger accounts will be coded individually, perhaps by means of a two-digit code: eg 

00 

Ordinary share capital 

01 Share 

premium 

05 

Income and expenses account 

15 Purchases 

22 

Receivables ledger control account 

41 

Payables ledger control account 

42 Interest 

43 Dividends 

etc 

In the same way, individual accounts must be given a unique code number in the receivables ledger and 

payables ledger. 

1.3 Example: Coding 

When an invoice is received from a supplier (code 1234) for $3,000 for the purchase of raw materials, the 

transaction might be coded for input to the computer as: 

 Nominal 

ledger 

 

Inventory 

Supplier Code 

Debit 

Credit 

 

Value 

Code 

Quantity 

1234 15 

41

$3,000

56742

150

Code 15 might represent purchases and code 41 the payables control account. This single input could be 

used to update the purchase ledger, the nominal ledger, and the inventory ledger. The inventory code may 

enable further analysis to be carried out, perhaps allocating the cost to a particular department or product. 

Thus the needs of both financial accounting and cost accounting can be fulfilled at once. 

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