Accounting Software / Computerised Accounting

• Know the role of computers in accounting.
• Compare manual accounting with computerised accounting.
• Understand the Computerised Accounting System (CAS), its need, important features and requirements.
• Know the need and features of accounting.
• Understand the application of Tally for creation of company, group formation, ledger generation, trial balance, Profit & Loss Account, Balance Sheet and vouchers.
• Understand preparation of cash-flow and fund-flow statements using Tally.

In the early days, accountants used manual records and physical tools. The basic accounting work was the same, but it took more time and effort.

Computers and accounting software allow accountants to use electronic spreadsheets and reduce dependence on adding machines, calculators, pencils and paper ledgers.

Computerised accounting makes it much easier to keep track of business information on a current basis instead of waiting for records to be manually updated.

Fewer manual mistakes can improve efficiency and accountability. The chapter then studies the role of computers, CAS and accounting software.

A basic function of accounting is to record all financial transactions taking place in a business unit.

• Transactions should be recorded accurately and regularly so management has up-to-date accounting information.
• In manual accounting, the same transaction may require several postings and mistakes can occur.
• In a computerised system, once the original transaction is entered correctly, related records can be updated automatically.
• Management can obtain current information for decision-making.
• Ledger accounts can remain up to date and the balance of an account can be checked at any time without manually reprocessing all transactions.
• Computers can also print cheques and reduce the amount of repetitive clerical work.
• Manual ledger work often duplicates records and therefore takes more time.

Every business needs to keep records of wages and salaries paid to workers and employees.

• Payroll records may be maintained for each department.
• A permanent payroll record is maintained for each employee.
• These records help in the timely distribution of wages and salaries.
• Manual payroll calculations can take a long time and errors may occur.
• Errors can lead to incorrect or delayed payment.
• Computers process wages and salaries more quickly and accurately and help ensure prompt payment.

Inventory control means managing materials and stock so the business has the correct quantity and quality when needed.

• Computers generate inventory reports quickly and accurately.
• Reports can show whether material is out of stock and needs to be reordered.
• They can show whether too much or too little stock is being held.
• They can show whether consumption has increased or decreased.
• Information can be made available to different departments quickly.
• Through ERP systems, information can also be extended to suppliers, reducing delays and helping with restocking.

Early computerised systems used by large businesses included Transaction Processing Systems. A TPS records, processes, validates and stores transactions occurring in different functional areas of a business so they can later be retrieved and used.

A Computerised Accounting System is one type of TPS. It is mainly concerned with processing financial transactions.

Only transactions that can be expressed in money terms are processed as accounting transactions. The PDF connects this idea with the Money Measurement Principle.

When business volume increases, the organisation needs highly accurate and up-to-date accounting records.

The chapter specifically mentions speed, accuracy and lower costs as important advantages.

A computerised system can simplify, integrate and examine business processes more cost-effectively than maintaining large quantities of data manually.

A CAS should follow accounting principles and use a proper grouping and coding structure. These are basic requirements of a computerised accounting system.

The organisation needs a well-designed operating procedure so users know how to work with the computerised accounting system.

A computerised accounting system is a database-oriented application. Transaction data is stored in a well-organised database. Users operate the database through a suitable interface and obtain reports by transforming stored data.

The front end is the link or bridge between the user and the database-oriented software. Through it, users such as administrators, accountants and operators communicate with the back-end database.

The back end is the data-storage system. It is normally hidden from users and responds to requests only to the extent that the user is authorised to access the data.

Data processing is the sequence of actions performed on data so that it is converted into useful information for decision-making.

The reporting system is an integrated set of report objects. A good reporting system should be well designed, flexible and capable of displaying required reports on the monitor.

The PDF concludes that a CAS should be well designed and organised so that it can operate smoothly without unnecessary problems or hindrances.

Some packages have more functions than others. The package should match the actual needs of the business.

Some packages provide more reports or more complete reports than others. The organisation should check whether the required reports are available.

Some packages may provide more detailed information but may also be more difficult to operate. Ease of use should therefore be considered.

Budget is an important factor. A package with many features may not be suitable if the cost is too high compared with the expected benefit.

Vendor support is important. A stable vendor with a good reputation and track record is preferred.

Law and business requirements can change. A vendor that provides regular software updates is preferable.

Accounting software is used for recording transactions related to receipts, payments, purchases, sales, inventory and other business activities.

The chapter mentions standard financial-accounting packages such as EX, WINCA, DacEasy and Tally.

Accounting software records and processes transactions within functional modules such as accounts payable, accounts receivable and payroll.

The accounts-receivable module deals with accounting transactions involving receipts from customers who owe money to the organisation for goods or services supplied on credit.

The payroll module covers calculations such as salaries due, salaries paid and leaves taken.

Businesses are becoming more complex. A standard package may not cover the special needs or peculiarities of a specific business, and customisation may not always be possible.

Many pre-packaged systems cover only the main financial areas and basic reports. For example, the production process may not be covered. Modern businesses may need additional management reports that are not available in a standard package.

A person with a common access password may be able to view data of several companies. The PDF notes that different access levels are often missing in pre-packaged systems.

Software bugs may be common, especially in the early years of a product. The organisation may need to wait for the vendor to correct them.

The ERP package that matches most of the organisation's requirements is preferred.

The organisation should identify its reporting requirements and choose a vendor whose package can provide those reports.

The vendor's service record and delivery record are important when choosing an ERP package.

The organisation's budget and available funds often become the deciding factor when selecting a package.

The PDF describes Tally as one of the most popular and widely accepted accounting-software packages because of its simplicity, flexibility and speed.

Tally developed from being mainly an accounting tool into a more powerful business solution.

The chapter mentions Tally 5, Tally 7.2, Tally 9 and Tally ERP 9.

Tally ERP 9 is described as an improved version that supports a multi-user environment and allows integration of data at different geographical locations. It provides integrated business functions and a simple user interface and is easy to install.

Single-user Tally can be operated only on one computer.

Multi-user Tally can work through a LAN. Retail chains can use it at different retail units and control operations from one place. It allows a business to collaborate and work at multiple locations and can simplify business processes and improve service to customers.

The computer must have Tally installed. The PDF says you can start it by double-clicking the Tally icon on the desktop or by using Start → My Programs → Tally.

The first screen that appears is the Gateway of Tally. The PDF calls it the centre of control of the software.

This section displays the Tally version, edition, licence details and configuration. The example shown in the PDF includes Tally ERP 9, Series A, Silver, user/licence information and serial-number details. The figure also labels version information and the software vendor.

The Work Area has two parts:

• Left-hand side: Current Period, Current Date and List of Selected Companies.
• Right-hand side: main menus and options such as Company Information.

The right-hand menu includes:

1. Masters — defining ledger, group, sub-group and inventory.
2. Transactions / Vouchers — recording transactions.
3. Reports — viewing Balance Sheet, Profit & Loss Account and other reports.

Hot keys are indicated by specially displayed letters in menu options. Pressing the relevant letter can take the user directly to a particular screen. The PDF gives examples such as typing A to open Accounts Info and V to open Accounting Vouchers.

Press Ctrl + N to activate calculator functionality. It is used for calculations and quick answers while working in Tally.

The Button Bar makes working in Tally easier and more efficient. Buttons vary from one screen to another. Only the buttons relevant to the current screen are active. Active buttons are shown differently from inactive buttons. Buttons can be used by clicking them or by using their shortcut keys such as F1, F2 and others.

If a character or function key is underlined, the PDF says to press that key together with Shift.

If a character or function key is double underlined, press that key together with Ctrl.

• F1 — select a company.
• Shift + F1 — shut a company.
• Ctrl + F8 — select the Credit Note voucher.

Ctrl + M gives access to the Gateway of Tally and Ctrl + N gives access to the Calculator / ODBC Server frame.

Select Quit or press Esc at the Tally Main Menu. Tally asks for confirmation. Press Y or click Yes to exit.

The visible company-creation instruction says that after entering the total information, Tally asks Accept? Yes or No. Click Yes to save the information. The company is then created and appears under the List of Selected Companies.

This loads an existing company. A company can be selected only if it already exists.

1. Choose Select Company by pressing S.
2. Highlight the required company using the arrow keys in the List of Companies.
3. Press Enter.

Shutting means unloading a company from the current session. The company can be loaded again later.

1. Choose Shut Company by pressing H.
2. Highlight the company to be shut down.
3. Press Enter.

The Company Information menu also contains Create Company, which is used to create a new company.

Alter is used to modify information relating to an existing company.

1. Press A to select Alter from the Company Info menu.
2. Highlight the required company from the List of Companies.
3. Press Enter to reach the Company Alteration screen.

A well-structured and informative accounting database requires accounts to be classified. Classification affects the accounting system's ability to store and retrieve transaction data.

Classifying means grouping or categorising accounts on a common basis. Similar accounting information is placed together.

Grouping is used to create a hierarchy of ledger accounts so that the accounting system has a logical framework.

A Ledger of Trade Debtors can contain separate customer accounts. A Ledger of Trade Creditors can contain separate supplier accounts. These are examples of subsidiary ledgers.

The PDF says the Main Ledger is the default ledger that contains accounts that are not specifically classified in a system of accounting.

The purpose of control accounts is to control subsidiary ledgers, provide quick information and speed up reporting.

The main ledger containing the control accounts is called the General Ledger.

A subsidiary ledger that corresponds to a control account is called a Specialised Ledger.

Each control account in the General Ledger receives aggregate postings for the transactions relating to the specialised ledger it represents. The final balance of the control account should equal the total balances of the individual accounts in that specialised ledger.

Tally follows the modern Single Ledger concept. This is different from traditional subsidiary-ledger accounting. Financial entries are made through ledgers or account heads, which identify transactions.

The concept removes the need to separately maintain sub-ledgers and corresponding control accounts in the traditional manner. Tally identifies and classifies ledger accounts according to the nature of transactions and groups them for summarised reporting.

At the highest level, accounts are classified into capital or revenue categories, and more specifically into assets, liabilities, income and expenditure.

Based on mercantile accounting principles, Tally provides a set of reserved groups and also allows the user to modify names or create sub-groups.

Groups have a hierarchical organisation. At the top are Primary Groups. These main groups determine the accounting treatment and whether a ledger affects the Profit & Loss Account or appears in the Balance Sheet as a capital item.

To form more groups in the selected company, highlight Accounts Info. on the Tally Main Screen and press Enter, or press the hot key A.

The path shown is Gateway of Tally → Accounts Info → Groups. The PDF says you may double-click Groups, press G, or select Groups with the arrow keys and press Enter.

The screen allows the user to Create, Display or Alter a Single Group or Multiple Groups, and also Quit.

The Single Group option is useful when you want to work on one group at a time.

The Multiple Groups option is used when work is to be done on many sub-groups at the same time. The PDF describes it as a time- and labour-saving option in list format.

Gateway of Tally → Accounts Info → Groups → Single Create.

F3: Company allows the user to work with a different company. In creation mode, groups can be created in another company. In alteration mode, information can be copied by accepting the screen using Enter or Ctrl + A; the old company's information remains.