Acca f3 Financial Accounting (int) Study Text

Part G  Miscellaneous topics

  24:  Information technology

413

(a) Date 

(b) Description 

(c) Amount 

(d) 

Account codes (sometimes called distinction codes) 

2.3.2 Outputs from the nominal ledger 

The main outputs apart from listings of individual nominal ledger accounts are: 

(a) trial 

balance; 

(b) financial 

statements. 

3 Databases 

A database is  a file of data structured in such a way that it can serve a number of applications without its 

structure being dictated by any particular function. 

A database may be described as a 'pool' of data, which can be used by any number of applications. Its use 

is not restricted to the accounts department. A stricter definition is provided in the Computing

Terminology of the Chartered Institute of Management Accountants (CIMA). 

'Frequently a much abused term. In its strict sense a 

database is a file of data structured in such a way 

that it may serve a number of applications without its structure being dictated by any one of those 

applications, the concept being that programs are written around the database rather than files being 

structured to meet the needs of specific programs. The term is also rather loosely applied to simple file 

management software.' 

3.1 Objectives of a database 

The main virtues of a database are as follow. 

(a) There 

is 

common data for all users to share. 

(b) 

The extra effort of keeping 

duplicate files in different departments is avoided. 

(c) 

Conflicts between departments who use 

inconsistent data are avoided.

A database should have four major objectives.

(a) 

It should be 

shared. Different users should be able to access the same data in the database for 

their own processing applications (and at the same time in some systems) thus removing the need 

for duplicating data on different files. 

(b) The 

integrity of the database must be preserved. This means that one user should not be allowed 

to alter the data on file so as to spoil the database records for other users. However, users must be 

able to update the data on file, and so make valid alterations to the data. 

(c) 

The database system should provide for the needs of different users, who each have their own 

processing requirements and data access methods. In other words, the database should provide 

for the 

operational requirements of all its users.

(d) 

The database should be capable of 

evolving, both in the short term (it must be kept updated) and 

in the longer term (it must be able to meet the future data processing needs of users, not just their 

current needs). 

3.2 Example: Non-current assets and databases 

An organisation, especially a large one, may possess a large quantity of non-current assets. Before 

computerisation these would have been kept in a manual non-current asset register. A database enables 

this non-current asset register to be stored in an electronic form. A database file for non-current assets 

might contain most or all of the following categories of information. 

Key term 

FAST FORWARD

---

414

24: Information technology   Part G  Miscellaneous topics 

(a) 

Code number to give the asset a unique identification in the database 

(b) 

Type of asset (motor car, leasehold premises), for published accounts purposes 

(c) 

More detailed description of the asset (serial number, car registration number, make) 

(d) 

Physical location of the asset (address) 

(e) 

Organisational location of the asset (accounts department) 

(f) 

Person responsible for the asset (in the case of a company-owned car, the person who uses it) 

(g) 

Original cost of the asset 

(h) 

Date of purchase 

(i) 

Depreciation rate and method applied to the asset 

(j) 

Accumulated depreciation to date 

(k) 

Net book value of the asset 

(l) 

Estimated residual value 

(m)  Date when the physical existence of the asset was last verified 

(n) Supplier 

Obviously, the details kept about the asset would depend on the type of asset it is. 

Any kind of computerised non-current asset record will improve efficiency in accounting for non-current 

assets because of the ease and speed with which any necessary calculations can be made. Most obvious 

is the calculation of the depreciation provision which can be an extremely onerous task if it is done 

monthly and there are frequent acquisitions and disposals and many different depreciation rates in use. 

The particular advantage of using a database for the non-current asset function is its flexibility in 

generating reports for different purposes. Aside from basic cost and net book value information, a 

database with fields such as those listed above in the record of each asset could compile reports analysing 

assets according to location, or by manufacturer. This information could be used to help compare the 

performance of different divisions, perhaps, or to assess the useful life of assets supplied by different 

manufacturers. There may be as many more possibilities as there are permutations of the individual pieces 

of data. 

4 Practical experience 

Reading about computer systems and packages is no substitute for using them, and you should make 

every effort to gain experience in using an accounting package. 

Chapter Roundup 

 

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. 

 

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. 

 

An accountancy package consists of a number of 

modules which perform all the tasks needed to

maintain a normal accounting function like payables ledger or payroll. In modern systems the modules

are usually integrated with each other. 

 

A database is  a file of data structured in such a way that it can serve a number of applications without its 

structure being dictated by any particular function. 

---