Class 12 Book Keeping and Accountancy Chapter 10: Computer in Accounting

Key concepts: Computer in Accounting

Computerised Accounting System (CAS)

Accounting software that records, stores and processes accounting data on computers, networks or through the Internet, and produces reports as per Generally Accepted Accounting Principles (GAAP).

Components of CAS

Hardware (computers, printers, network), software (programs that accept, edit and store data and give reports) and company personnel (people who operate the system).

Input, processing and output

Input is data from source documents such as receipts and deposit slips; the software processes it; output is reports like trial balance, income statement and balance sheet.

Grouping of accounts

In CAS ledger accounts are placed under groups such as Assets, Liabilities, Income and Expenditure, which can be divided further into sub-groups as needed.

Ready-to-use software

Low-cost, easy-to-learn package for small businesses with few transactions and users; low secrecy, prone to data frauds and hard to link with other systems.

Customized software

Standard software modified to meet a user's special needs; suits medium and large firms, can link with other systems, keeps data secret better but costs more.

Tailored software

Software designed for the specific needs of large organisations with many users at scattered locations; part of the MIS, with strong security and specialised training.

Legal, demo and pirated software

Legal software is fully functional and can be updated for changes like GST; demo software has a few restrictions; pirated software is cracked, illegal and risky for data.

Quick revision: important points

• Three components of CAS: Hardware, Software and Company Personnel.
• Accounting packages: Ready-to-use, Customized, Tailored, and Free and Open Source (e.g. GNU Khata).
• Tally vouchers: F4 Contra, F5 Payment, F6 Receipt, F7 Journal, F8 Sales, F9 Purchase.
• Create a company: Gateway of Tally, then Company Info, then Create Company.
• Examples of accounting software: Tally ERP9, Miracle, Busy, Focus and Wings.

Practice MCQs with answers

1. Under a computerised accounting system, a firm prepares its reports as per

   1. Generally Accepted Accounting Principles (GAAP)
   2. Management Information System rules only
   3. The Indian Contract Act
   4. Income tax slab rates
   Show answer

   Answer: A. Generally Accepted Accounting Principles (GAAP)
   CAS produces reports and statements that follow Generally Accepted Accounting Principles.

2. In a computerised accounting system, ledger accounts are normally grouped under

   1. Cash, Bank, Petty Cash and Contra
   2. Assets, Liabilities, Income and Expenditure
   3. Hardware, Software and Personnel
   4. Input, Processing and Output
   Show answer

   Answer: B. Assets, Liabilities, Income and Expenditure
   Grouping of accounts places ledgers under Assets, Liabilities, Income and Expenditure, with sub-groups if needed.

3. In a large company, several operators enter data on different computers at the same time. Which benefit of CAS does this show?

   1. Compactness
   2. Huge storage capacity
   3. Multi-user facility
   4. Transferability
   Show answer

   Answer: C. Multi-user facility
   The multi-user facility lets many operators work on the accounts simultaneously, in or outside the office.

4. Because records are entered only once in the system, a firm can manage with fewer accounting staff. This benefit is

   1. Reduction in cost
   2. Transparency
   3. Security
   4. Grouping of accounts
   Show answer

   Answer: A. Reduction in cost
   Single entry of data saves the accountant's time, so fewer personnel are needed and costs fall.

5. Sharing financial data with interested parties through a pen drive or the Internet shows which benefit of CAS?

   1. Grouping of accounts
   2. Accuracy
   3. Transferability or sharing of information
   4. Reduction in cost
   Show answer

   Answer: C. Transferability or sharing of information
   CAS allows information to be shared as printouts or soft copies through pen drives or the Internet.

All Class 12 Book Keeping and Accountancy chapters

• Chapter 1: Introduction to Partnership and Partnership Final Accounts
• Chapter 2: Accounts of Not for Profit Concerns
• Chapter 3: Reconstitution of Partnership (Admission of Partner)
• Chapter 4: Reconstitution of Partnership (Retirement of Partner)
• Chapter 5: Reconstitution of Partnership (Death of Partner)
• Chapter 6: Dissolution of Partnership Firm
• Chapter 7: Bills of Exchange
• Chapter 8: Company Accounts - Issue of Shares
• Chapter 9: Analysis of Financial Statements
• Chapter 10: Computer in Accounting

Class 12 Book Keeping and Accountancy notes: all chapters