Role Of Computers In Accounting

One of the earliest applications of the computer in accounting was for the purpose of processing of a pay roll in the U.S.A. Later on, computer application extended to sales transactions which involve the invoicing, billing and updating of customers accounts. Posting to customer’s ledger for transactions taking place frequently is done by computers at the touch of a button. Computers play an important role in maintaining up to date inventory records so that management can take quick decisions to get suppliers without obstructing the productions process or supply to its customers. The preparation of the trail balance and then financial statements – balance sheet and income statement – requires the processing of innumerable business transactions. The business transactions are recorded, analyzed and summarized through computers with speed and without error. The only requirement is that data and instructions are fed to the computer by knowledgeable person.

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.

Computer application in accounting is more widespread than in any other business activity. Accounting is primarily concerned with procedures of recording, classifying, summarizing and interpreting business transactions in money terms. In one sense, it is concerned with the storage, processing and reproduction of accounting information when required. Computers perform these functions and thus are correctly termed as Accounting Machines. Accounting cycle beings with the recording of business transactions pertaining to purchases and sales of good, receiving and making of payments in cash, incurring of expenses to maintaining the business and so on. The increase in the volume of business transactions would make the maintenance of books of accounts manually not only difficult but might make them inaccurate because of basic limitations of human factor. The computers can record all business transactions with speed and post them to their respective ledger accounts with accuracy. Computers have proved very economical in maintaining customers’ accounts. The customers get complete information about their unpaid amounts with complete details of their transactions with the enterprise. This procedure helps the business entity in recovering the amounts due on time. The computer can provide correct calculations with all the required details to the satisfaction of employers and employees.

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