What is a computerised accounting system?
A computerised accounting system (CAS) is a way of keeping accounts where transactions are recorded, stored and processed on a computer using accounting software. It is built on the idea of a database: all data is stored in one organised place, and every report (ledger, trial balance, statements) is taken from it.
The accounting rules are the same as manual accounting: double entry, debit = credit, the accounting equation. Only the tool changes.
Features of CAS
- Simple and integrated: one entry updates all related books.
- Speed: thousands of entries posted and totalled in seconds.
- Accuracy: the computer does not make adding mistakes; it also refuses entries where debit is not equal to credit.
- Real-time reports: trial balance, profit and loss and balance sheet at any moment.
- Scalability: it can handle more data as the business grows.
- Security: passwords and user rights control who sees what.
- Legibility and storage: clean printouts, data kept in small space, easy backup.
- MIS reports: useful reports for managers, e.g. overdue debtors.
Limitations
- High cost of hardware, software and training.
- Staff may resist change.
- System failure, virus or hacking can harm data.
- It cannot find errors of principle or wrong amounts typed by people (garbage in, garbage out).
- Health issues from long screen use.
Structure and components of CAS
A CAS has six components:
- Hardware โ computers, printers, servers, storage.
- Software โ the operating system and the accounting software.
- People โ accountants, operators, managers who use it.
- Procedure โ the fixed steps for collecting, entering and checking data.
- Data โ the facts: vouchers, accounts, amounts.
- Connectivity โ the network that lets many computers share the same data (LAN, internet, cloud).
Structure: input โ process โ output
Input: source documents turned into vouchers. Process: the software stores data in tables, posts to accounts, totals and balances. Output: day book, ledger, trial balance, profit and loss, balance sheet and other reports.
Types of accounting software
1. Ready-made (generic) software
Made for many businesses at once and sold in a box or online. Low cost, quick to start, easy training, vendor support. But few changes are possible and data security is lower. Good for small businesses.
2. Customised (specific) software
Standard software changed to meet some special needs of a user, e.g. adding a sales-by-region report. Medium cost; installation and training take longer. Good for medium businesses.
3. Tailored software
Built from scratch for one large organisation with many users and its own rules. High cost, needs special training, gives full fit and higher secrecy. Good for large firms and government bodies.
How to choose
Look at: flexibility and needs, cost of installation and maintenance, size of the organisation, ease of use and training, expected volume of data, and data security.
Key formulas and definitions
- CAS = Hardware + Software + People + Procedure + Data + Connectivity
- Flow: Input (vouchers) โ Process (database) โ Output (reports)
- Ready-made: low cost, low flexibility โ small firms
- Customised: medium cost, some flexibility โ medium firms
- Tailored: high cost, full flexibility and secrecy โ large firms
Worked examples
1. A tea stall owner wants simple billing and daily cash totals. Which software should he choose and why?
Ready-made software. His needs are simple, his budget is small, and he can start quickly with little training.
2. A school's accountant types โน6,000 for rent on the debit side and โน6,500 on the credit side. What will a CAS do?
It will not save the voucher because debit is not equal to credit. This is one way CAS improves accuracy.
3. Name the CAS component in each case: (a) the LAN cable; (b) the rule that every bill is checked before entry; (c) the clerk; (d) the bill amount.
(a) Connectivity, (b) procedure, (c) people, (d) data.
4. A national bank with 5,000 branches wants its own rules and top secrecy. Which software type?
Tailored software, built only for the bank, because it has many users, special rules and needs high security. Cost is high but the size justifies it.
Common mistakes
- Thinking CAS changes accounting rules. Double entry and debit = credit stay exactly the same.
- Thinking the computer catches every mistake. It cannot catch a wrong account chosen or a wrong amount typed on both sides.
- Mixing up customised and tailored. Customised = standard software changed a bit; tailored = built fresh for one user.
- Forgetting 'procedure' and 'connectivity' when listing the components of CAS.