Computerised Accounting Systems (Cambridge International AS Accounting)

Digital technology in accounting

Spec point — the use of computerised accounting systems in recording financial transactions the advantages and disadvantages of introducing a computerised accounting system Note: Knowledge of specific applications or software is not required.

Digital technology in accounting

What systems can be used for bookkeeping and accounting?

• Businesses can choose to use a manual accounting system

• Manual accounting systems are common in very small businesses, or in those which have operated at a modest level for a long time

• These systems include:

  • Physical journals
  • Physical ledgers

• Alternatively, a digital accounting system may be used, such as:

  • Accounting software (Sage, Xero, Quickbooks, etc) can be used for:

    • Sales ledger accounts
    • Purchases ledger accounts
    • General ledger accounts
    • Cash books

  • Spreadsheets, such as Microsoft Excel or Google Sheets, can be used for:

    • Financial statements
    • Cash flow statements
    • Forecasts
    • Budgets

Exam Hint You do not need to know any specific accounting software packages or programs.

What are the advantages of introducing a digital system?

What are the disadvantages of introducing a digital system?

• Computers or laptops are needed

  • This is a cost to the business

• Accounting software costs money

  • There might be an initial installation cost
  • There might be subscription costs

• Staff need to be trained to use the software

  • This will contribute to expenses

• There are security issues

  • Data can be hacked just as physical documents can be stolen

• The business is reliant on the digital tool

  • If the tool is unavailable, then the business might be unable to access the information

Exam Hint If you are asked to advise a business whether they should use a digital system, give a balanced view. You should state and describe an advantage and a disadvantage, and then give an overall conclusion.

Worked Example Khalid keeps physical records of his accounting information. He is considering whether he should change to a computerised system of bookkeeping.

Evaluate whether Khalid should change from his manual system to a computerised system.

Answer:

State and describe an advantage.

Final answer: Using a computerised system means that Khalid will be able to process the accounting information quickly. This means that he will spend less time on bookkeeping and have more time for other tasks.

State and describe a disadvantage.

Final answer: There will be costs involved when using a computerised system such as installation and training costs. This means that the profits will be lower due to these costs.

Give an overall conclusion.

Final answer: Overall, Khalid would benefit from changing to a computerised system.

Security issues

Spec point — the ways in which the security of data can be ensured within a computerised accounting system

Why does a business need to store data securely?

• If data is not stored securely, then

  • data could be lost

    • The information could be accidentally deleted
    • The user might forget to save after entering the information
    • There might be a technical issue while data is being entered

  • confidential information might be shared

    • The user might access the information on their own personal devices
    • The information might be seen by other users of those devices
    • The information might be sent to the wrong person via email

  • data might be accessed by others

    • Passwords might be guessed by others
    • Data could be hacked

How can a business store data more securely?

• Install firewalls and antivirus programs
• Use secure passwords
• Back the data up either on an external hard drive or on a cloud storage
• Password protect or encrypt the data
• Lock computer screens when away
• Wipe data from computers before disposing