a computerised accounting system is a software

solution that supports enterprises to maintain

significant fiscal transactions, data, financial
statements, and records with extraordinary
performance & agility including safer efficiency. The
speed and accuracy are the two prime
factors that make the computerised
accounting system a need of the hour.

In the field of financial accounting, the roles of

computers involve:

a) Preparation of sales ledger e.g., Debtors’

accounts.
b) Preparation of purchases ledger, i.e.,
accounts of suppliers.
c) Preparation of general ledger e.g., accounts
of income and expenses, cash account etc.
d) Processing and maintaining pay rolls.
e) Maintenance of stock records.
f) Classification of business transactions
through sorting, merging and updating.
g) Preparation of trial balance.
h) Preparation of trading and profit and loss
accounts and the balance sheet.
 In the field of management and cost accounting,
computer applications enables:

(i) Costing calculations and

costing records.
(ii) Forecasting/budgeting.
(iii) Estimating job costs.
(iv) Project appraisal.
(v) Credit controls.
Difference between manual and computerized

Manual accounting is the

Computerised procedure where the
Accounting is software- financial accounts are
based operations done recorded manually using
by specific account physical registers,
software which has an ledgers, and subsidiary
Meaning automatic framework. books.

The process of
accounting is much
faster, more reliable and It is a time taking process
easy. All data is and the records are
maintained maintained manually using
systematically and paper based account
accurate using the books, and sometimes it is
Time Taken software. not accurate.
 The accounting through
software is automated,
and has very less chance Since the accounting is
of error and the done manually, so there is
Margin of transactions are a chance of human error in
Error precisely recorded. calculations and accuracy.

Although it is not much

It is very reliable to store easy to store the physical
the information on the accounting books
computer in the form of everywhere, as it can be
format documents like misplaced or get damaged
PDF, Microsoft Excel etc. easily and cannot be sent
and can be sent digitally anywhere easily as
anywhere in a fraction of compared to
Reliability seconds. Computerised accounting.

As a computer is a It is exempted from such

machine so technical maintenance as this
problems, like software process does not require a
freezing, system not computer and the data is
responding, data crash, always available to access
etc., can be occurred and use as every record is
once in a while if proper done physically and stored
Technology maintenance is not done. safely.

It is mostly used by large It is used by small

companies and businesses and old-
businesses where the fashioned traders as they
number of transactions have less number of
Used By of transactions are more. transactions.
Features of a Computerized Accounting System:

1.Data Security: A computerized accounting system

allows users to store their data in a central location.
In this way, if any piece of paper that contains
valuable information is lost, no one is at risk of
having their information stolen. All the data is hence
stored at a central location.
2. Improved Reporting: In Accounting software,
various things are automated, and very less things
are recorded manually. This helps in improving
reporting of transactions and statements.
3.Accuracy and Speed: The automation of accounting
processes with the help of various accounting
software ensures that accounting work is done fast
and accurately.
4. Scalability: Computerized Accounting system is so
flexible as to accommodate the changing business
volume.
5. Quick Decision Making: Since a computerized
accounting system generates real-time information,
managers are quick to come up with instant
decisions or solutions to a particular problem.
6. Advanced Features: While some accounting
software is designed for sole proprietors and small
business owners, others are tailored for larger
enterprises. If the business is operated at a large
scale, you may want to consider a computerized
accounting system that comes with features like
inventory management and multiple user access.
7. Reliability: A computerized Accounting system
produces standard and accurate accounting
information consistently.
Advantages of Computerized Accounting System:

1. Accuracy: Accounting errors are one of the biggest problems that

businesses face in their accounting process. Accounting software is designed to
anticipate common errors and correct them before they are added to the
company’s records. It is more accurate than most manual systems.
2. Simplicity: Regardless of the size of a company, accounting software is
designed to be straightforward and easy to use. This means that even new
employees can quickly understand how to use the system and record their
financial activities.
3. Financial Report Accuracy: Accounting software is designed to be
completely accurate. Companies can be assured that their financial reports
have no errors. This means that managers can quickly make decisions based
on the accounting data.
4. Standardized Financial Reporting: The use of accounting software in a
business ensures the production of standard financial statements over the
years. These reports are very vital when comparing a company’s financial
performance over the years, or when comparing different businesses that are
similar in operation.
5.Integration: Most Accounting systems are usually integrated with other vital
accounting systems, such as online banking. This means that important
business processes are performed together and with speed.

Disadvantages of Computerized Accounting System:

1. Cost: Although accounting software is designed to simplify bookkeeping and

reduce the cost of accounting services, it can also be costly to set up and
maintain. Many businesses decide to use computerized accounting systems
once they have reached a certain level of growth.
2. Lack of Expertise: Many business owners like to keep their accounting in-
house. This means that they may not want to rely on an outside service to
handle their bookkeeping. In this case, they may choose to use manual
systems until they have the resources to implement computerized accounting
tools.
3. Heavy Installation and Training Costs: The cost of Accounting software
depends on its use. Some software goes at very high prices that are
unaffordable to the business. Besides acquisition costs, installation and training
costs can also be so high and beyond the company’s reach.
4. Disruption of Work: As newer versions of both the hardware and the
software are introduced in the market, there is a need for businesses to update
them regularly. Employees must be retrained for efficient use of such new tools.
Re-installation and retraining result in a disruption of work.
5. Loss of Employment Security: The adoption of computerized accounting
software means a lot of work is done by fewer employees. Such a move at
times leads to lay-offs. Where lay-offs have not been done, employees live in
fear of anticipated job loss.
6. Compromised Accuracy: The accuracy of financial records is as good as
the data fed to the accounting software, thus the saying,’garbage-in, garbage-
out.’ If the accuracy of the data entered is compromised, the software is bound
to produce faulty or misleading accounting information.
7. Potential Fraud: Since most of the financial/accounting data is stored in the
cloud, professional hackers may gain access to a company’s records. Such
actions may expose the assets of a business to greater risks.
8. Technical Failures:The accounting software may be rendered useless,
when the premises where a business is housing are affected by technical
glitches, such as regular power outages and computer virus attacks.

Types of Accounting Software

Spreadsheets to Manage Financial Data
To help with bookkeeping, small businesses often use
spreadsheet programs such as Microsoft Excel, Google Sheets
or OpenOffice. You can adapt a spreadsheet to almost any basic
accounting need. For example, you can use spreadsheet
programs to list expenses, sales or other relevant financial data,
and even to handle more advanced accounting functions.

Commercial Accounting Software

Commercial accounting software such as QuickBooks, TurboCash or FreshBooks can
handle most, if not all, of a small- to mid-size business's accounting needs.
Accounting software work with almost any business, and allow you to create
customized functions to fit your specific needs. Commercial accounting software often
includes graphs that summarize data, as well as reports that provide a picture of a
business's health and the forms needed for taxes.
Enterprise Accounting Software
Larger companies may have enormously complex operations,
and enterprise accounting software helps in managing this
complexity. Accounting software for larger enterprises often
integrates accounting with other services provided by the
software, such as workflow management, business intelligence
and project planning.

Common accounting software for enterprises include Oracle,

SAP or Microsoft Dynamics GP.

Custom Accounting Software

Sometimes, a business creates its own accounting software.
This often happens almost by accident: as the business grows,
knowledgeable staff may be asked to write software to handle
various accounting situations until, after a time, the business
may find it has created its own custom accounting software. In
other situations, a business creates custom software because
there are no commercial accounting programs that meet its
needs.
Accounting Principles Definition
Accounting principles are uniform practices that entities
follow to record, prepare and present financial statements.
An entity must prepare its financial statements as per
acceptable accounting principles in order to present a true
and fair view of the state of affairs of the entity.
How Does IFRS Differ from GAAP?
IFRS is a standards-based approach that is used
internationally, while GAAP is a rules-based system
used primarily in the U.S. The IFRS is seen as a more
dynamic platform that is regularly being revised in
response to an ever-changing financial environment,
while GAAP is more static.
Several methodological differences exist between the
two systems. For instance, GAAP allows companies
to use either the First in, First out (FIFO) or Last in,
First out (LIFO) as an inventory cost method. LIFO,
however, is banned under IFRS.8
 Accounting Concepts
Accounting concepts are theoretical ideas,
components and terms that make up the subjects
accounting, finance and economics. These terms help
individuals, businesses or organisations
systematically record their financial information and
transactions. Accountants use these concepts as
guidelines to prepare financial reports and other
documents for individuals and businesses.
Companies tend to follow accounting standards,
principles and accounting laws of the countries they
operate in. These principles include concepts and
conventions that help those companies report
transactions accurately.

The main difference between

Accounting Concepts and Accounting
Principles is; Accounting concepts are
the assumptions, guidelines, and
postulates with which the accounting
data is recorded whereas Accounting
principles are the rules to be followed
while reporting financial data.
1. Accounting Entity: An entity has a separate existence from its owner. According to
this principle, business is treated as an entity, which is separate and distinct from its
owner. Therefore transactions are recorded; analyzed and financial statements are
prepared from the business point of view and not of the owner.
The owner is treated as a creditor (Internal liability) for his investment in the business, as
if the firm has borrowed from its owner instead of the outside parties. Interest on capital
is treated as expense like any other business expense. His private expenses are treated
as drawings leadings to reduction in capital.

2.Money Measurement Principle: According to this principle, only those transactions that are
measured in money or can be expressed in term of money are recorded in the books of
accounts of the enterprises. Non- monetary events like death of any employee/Manager, strikes,
disputes etc., are not recorded at all, even though these also affect the business operations
significantly.

3.Accounting Period Principle: According to this principle, the whole indefinite life of
an enterprise is divided into parts, known as accounting period.
Accounting period is defined as interval of time, at the end of which the profit and loss
account and balance sheet are prepared, so that the performance is measured at regular
intervals and decision can be taken at the appropriate time. Accounting period is usually
a period of one year and that year may be financial year or calendar year.

4. Full Disclosure Principle: According to this principle, apart from legal requirements all
significant and material information relating to the economic affairs of the entity should be
completely disclosed in its financial statements and accompanying notes to accounts.

E.g., footnotes such as :

1.Contingent liabilities in respect to a claim of a very big amount against the business
are pending in a Court of Law.

2.Change in the method of providing depreciation.

3.Market value of investment.

5. Materiality Principle: Disclosure of all material facts is compulsory but it does not
imply that even those figures which are irrelevant are to be included in financial
statements. According to this principle, only those items or information should be
disclosed that have material effect and relevant to the users. So, item having an
insignificant effect or being irrelevant to user need not be disclosed separately, these
may be merged with other item.
If the knowledge of any information may affect the user’s decision, it is termed as
material information.

It should be noted that an item material for one enterprise may not be material for
another enterprise, e.g., an item of expenses Rs. 50,000 is immaterial for an enterprise
having turnover of Rs. 100 crore.

6. Prudence Principle: According to this principle, profit in anticipation should not be

recorded but loss in anticipation should immediately be recorded. The objective of this
principle is not to overstate the profit of the enterprise in any case. When different
equally acceptable alternative methods are available, the method which having least
favorable immediate effect on profit should be adopted, e.g.,
(1) Valuation of stock at cost or realizable values, whichever is lower.

(2) Provision for doubtful debts and provision for discount on debtors is made.

7. Cost Principle: According to this Principle, an asset is recorded in the books of

accounts at its original cost comprising cost of acquisition and all expenditure incurred
for making the assets ready to use.
This cost becomes the basis of all subsequent accounting transactions for the asset,
since the acquisition cost relates to the past, it is referred to as Historical cost. Example:
Machinery purchased for Rs. 1,50,000 in cash and Rs. 20,000 was spent on installation of
machine then Rs. 1,70,000 be recorded as cost of machine in the books and
depreciation will be charged on this cost. If market value of machine due to inflation has
gone up to Rs. 2,00,000 then the increased value will not be recorded. This cost is
systematically reduced from year after year by charging depreciation and the assets are
shown in the balance sheet at book value (cost – depreciation).

8. Matching Principle: According to this principle, all expenses incurred by any

enterprises during an accounting period are matched with the revenue recognized
during the same period.
The matching principle facilitates to ascertain the amount of profit or loss incurred in a
particular period by deducting the related expenses from the revenue recognized that
period.

The following treatment of expenses and revenue are done due to matching principle:

(1) Ascertainment of Prepaid Expenses!

(2) Ascertainment of Income received in advance.

(3) Accounting of closing stock.

(4) Depreciation charged on fixed assets.

9. Dual Aspect Principle: According to this principle, every business transaction has
two aspects-a debit and a credit of equal amount. In other words, for every debit there
is a credit of equal amount in one or more accounts and vice-versa.
The system of recording transaction based on this principle is called as “Double

Entry System”.

Due to this principle, the two sides of Balance Sheet are always equal and the following
accounting equation will always hold good at any point of time.

Assets = Liabilities + Capital

Example : Ram started business with cash Rs. 1,00,000. It increases cash in assets side
and capital in liabilities- side by Rs. 1,00,000.

Assets Rs. 1,00,000 = Liabilities + Capital Rs. 1,00,000

How to create a company

 Go to Gateway of Tally > Alt + F3 > Create Company

 Enter the basic information, i.e., name, mailing name
and address of the company, currency symbol etc.
 In the ‘maintain field’, select Accounts Only or
Accounts with Inventory as per the company
requirements.
 In the Financial Year from, the first day of the current
financial year for e.g., 1-4-2017 will be displayed by
default, which can be changed as per requirement.
 Enter the Tally Vault Password if required.
 Press Y or Enter to accept and save.

Enabling GST features in Tally

1. Go to Gateway of Tally > F11: Features > F3: Statutory & Taxation

2. On the screen you will find the following option :

3. Enable goods and service tax (GST): Yes

4. Set/alter GST Details: Yes.

 This will display another screen where you can set GST details of the
company such as the state in which the company is registered,
registration type, GSTIN number etc.

 Press Y or Enter to accept and save.