Computers in Education - Assignment

COMPUTERS IN FINANCIAL ACCOUNTING

Meaning of Financial Accounting

The main purpose of accounting is to ascertain profit or loss during a specified period, to show financial condition of the business on a particular date and to have control over the firm's property. Such accounting records are required to be maintained to measure the income of the business and communicate the information so that it may be used by managers, owners and other interested parties. Accounting is a discipline which records, classifies, summarizes and interprets financial information about the activities of a concern so that intelligent decisions can be made about the concern.

Objectives of Financial Accounting

The following are the main objectives of accounting:

1. To keep systematic records: Accounting is done to keep a systematic record of financial transactions of the school.

]2. To protect school properties: Accounting provides protection to school properties from unjustified and unwarranted use.

3. To ascertain the operational profit or loss: Accounting helps in ascertaining the net profit earned or loss suffered. This is done by keeping a proper record of revenues and expense of a particular period.

4. To ascertain the financial position of the school: It is essential that the school should know about his financial position

5. To facilitate rational decision making: Accounting these days has taken upon itself the task of collection, analysis and reporting of information at the required points of time to the required levels of authority in order to facilitate rational decision-making.

6. Information System: Accounting functions as an information system for collecting and communicating economic information about the school enterprise.

Old Methods and Machines Used In Accounting

The most common method of keeping the financial records of a school was manually. A bookkeeper kept the journals, the accounts receivable, the accounts payable and the ledgers in his best possible penmanship. In later years, an accounting machine, which was capable of performing normal bookkeeping functions, such as tabulating in vertical columns, performing arithmetic functions, and typing horizontal rows was used. The billing machine, which was designed to typewrite names, addresses, and descriptions, to multiply and extend, to compute discounts, and to add net total, posting the requisite data to the proper accounts, and so to prepare a customers bill automatically once the operator has entered the necessary information, was used. Early accounting machines were marvels of mechanical complexity, often combining a typewriter and various kinds of calculator elements. The refinements in speed and capacity made possible by advances in electronics and operating complexity of these machines. Many of the newer generations of accounting machines are operated by a computer to which they are permanently connected.

Use of Computers in Accounting

Because of the minute by minute change in finances, accurate record keeping is critical. Computerizing a school general ledger, payroll, and other accounting tasks increases office efficiency. With a computer, you can request and receive an in house balance sheet, an income statement, or other accounting reports at a moments notice. While keeping your checkbook on a computer may not be practical, computers are great for handling complex home financial records. You can get statements on net worth and years tax deductible expenses within minutes.

A. Spreadsheets        

Electronic spreadsheets allow you to do anything that you would normally do with a calculator, pencil and columnar scratch pad. Spreadsheets were primarily designed for managers who in the process of planning must do what if calculations. Due to their flexibility, electronic spreadsheets have found their way into small businesses and, to a lesser extent to homes. A typical integrated double entry accounting system will contain some or all of the following components: accounts receivable, accounts payable, general ledger, inventory, order entry, payroll, time, and billing.

A new generation of computer software for business began with integrated spreadsheet programs, which can be used to prepare spreadsheets, create graphs, and manage data. In such programs, for example, it is easy to display spreadsheet data in the form of a graph or to transfer data from a data base to a spreadsheet.

B. General Ledger

General Ledger is a labor saving device for the preparation of financial statements and for establishing multiple income and cost entries.

C. Accounts Receivable

Accounts receivable, when computerized, can get your bills out the same day you have performed a service. An accounts receivable module prepares invoices and customer accounts, adds credit charges where appropriate, handles incoming payments, flags your attention to customers that are delinquent, and produces dunning notices. It allows you to have daily cash control. You get out the bills on time, yet you avoid errors such as billing a customer twice for the same item. The further advantage is that debits and credits are posted automatically to the general ledger, order entry, and in some instances inventory, once they are entered in accounts receivable.

D. Accounts Payable

Accounts payable, when computerized, will provide for purchase order control, invoice processing, payment selection and handling, check writing and control, cash-requirements, forecasting, and Form 109 preparation. It will also double-check the accuracy of the sellers invoice, and some software systems will cross-check it against the purchase order and the inventory module.

E. Purchasing and Receiving

Purchasing and receiving module can represent an invaluable addition. It can generate purchase orders and track their fulfillment. You can find out which vendors are delivering on time and saving you the expense of having to follow up on partial and incomplete orders.

H. Time and Billing Module

Time and billing module reduces manual and clerical work, simplifies the billing process, prompts you and your partners to bill on time, reduces unbilled work-in progress, minimizes unreported time, reduces unbilled time, measures and analyzes nonchargeable time and provides criteria to analyze staff performance. Because a computerized accounting system is basically a computerized data management system, the disposition of labor is almost the same. One staff member must serve as a data-base manager and be in charge of setting up the chart of accounts, establishing the interrelationships among the files and establishing and maintaining an audit trail.

ADVANTAGES OF USING THE COMPUTER IN ACCOUNTING

The most important advantage of using the computer is the speed with which we can get accounting done. In addition, we find that it is very easy to do accounting functions. Posting to the ledger, a tedious task of double entry, when done directly from the general ledger module, can be largely automated when done through special purpose modules like accounts payable or accounts receivable. With an accounts receivable module, you just need to enter the actual cash totals of items purchased and the software distributes these amounts to the general ledger so they become credits to corresponding revenue accounts. At the same time, an offsetting entry is made automatically to the accounts receivable account. With a computer, one can receive a balance sheet, income statement or other accounting reports at a moments notice. We also find that some day to day data entry can be turned over to relatively unskilled workers.

DISADVANTAGES OF USING THE COMPUTER IN ACCOUNTING

When you use a computer, it is possible that data can be lost because of hardware or software damage. Since the computer has no judgement of its own, it does not pick up on errors as a human being does. There can be loss of data due to accidents like fire etc.. There can be loss of data or change of data due to fraud or embezzlement. There can be loss or unavailability of data due to loss of staff. Inaccurate data may be due to clerical error or mistakes in programming. Total security is economically unachievable and some failures must be expected. The right level of expenditure on security measures will minimize the sum of the cost of the measures and the expected loss. There will always be some risks that are best shared through insurance, rather than prevented or avoided.

Fraud and embezzlement are usually achieved on a computer system by altering data or programs. There are numerous techniques, varying from additions and deletions to input data, through changing the standing information files, modifying the behavior of programs, to duplicating or suppressing output. Although most frauds that have been reported had gone on for some time, it could be that one shot frauds have been more frequent but more often escape detection.