Accounting Packages

Computer programs are the instructions that tell the electronics how to process data. The general term used for these is software.

Some application software is devoted specifically to an accounting task, for example a payroll package, a fixed asset register or a stock control package.

Other applications have many uses in business, including their use for accounting purposes. Packages of this sort that we shall describe are databases and spreadsheets.
One of the important facts to remember about computerized accounting is that in principle, it is exactly the same as manual accounting.

Accounting functions retain the same names in computerized system as in more traditional written records. Computerized accounting still uses the familiar ideas of day books, ledger accounts, double entry, trial balance and financial statements. The principles of working with computerized sales purchase and nominal ledgers are exactly that would be expected in the manual methods they replace.

The only difference is that these various books of account have become invisible. Ledgers are now computer files which are held in a computer-sensible form, ready to call upon.

Advantages and Disadvantages of Accounting Packages

Advantages
Advantages of accounting packages compared with a manual system are as follows.
�The packages can be used by not-specialists.
�A large amount of data can be processed very quickly.
�Computerized systems are more accurate than manual systems.
�A computer is capable of handling and processing large volumes of data.
�Once the data has been input, computerized system can analyze of data rapidly to present useful control information for managers such as a trial balance or a debtors schedule.

Disadvantages
The advantages of computerized accounting system far outweigh the disadvantages, particularly for large business. However, the following may be identified as possible advantages.
�The initial time and costs involved in installing the system, training personnel and so on.
�The need for security checks to make sure that unauthorized personnel do not gain access to data files.
�The necessity to develop a system of coding (see below) and checking.
�Lack of 'audit trail' it is not always easy to see where a mistake has been made.
�Possible resistance on the part of staff to the introduction of the system

Coding
Computers are used more efficiently if vital information is expressed in the form of codes. For example nominal ledger accounts will be coded individually, perhaps by means of a two-digit code: example
�00 - Ordinary share capital
�01 - Share premium
�05 - Profit and loss account
�22 - Purchases
�30 - Debtors ledger control account
�40 - Creditors ledger control account
�55 - Interest
�56 - Dividends etc

In the same way, individual accounts must be given a unique code number in the sales ledger and purchase ledger.

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