Theoretical Aspects Of Computerization Accounting Essay

Accounting is a major agencies of assisting directors of an organisation, possible equity investors of an organisation, creditors, bond holders, givers, providers and clients of an organisation and other interest holders to take determinations.

Accounting provides information for three major intents: External coverage, everyday internal coverage, and Non Routine internal coverage. These studies are used by directors of the company for their internal determinations, support undertakings, investors, creditors, authorities governments and stakeholders.

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While studies are prepared in different formats and basic information is manipulated or summarized in assorted ways to ease determination devising, there is one information base maintained by the accounting system that contains informations in the signifier of debits and credits to assorted histories maintained in the accounting system. Accountants combine these informations points in assorted ways to supply information to internal and external users that are used to find the present and future economic stableness of the organisation. It has been proven that the companies that use good accounting patterns have a competitory advantage over their oppositions.

Not merely is accounting really of import in the concern universe it is besides good for ordinary people to cognize every bit good, when doing fiscal investing determinations.

Accounting can be divided into three major divisions viz. Financial Accounting, Cost Accounting and Management Accounting


The chief aim of this paper is to analyze the jobs, chances and success of cybernation of accounting map.


The group distributed questionnaires to 10 little, medium and big companies which were punctually responded to and filled in. The group besides gathered some stuffs from the cyberspace, books, diaries and lector ‘s category presentation on Financial Accounting.


By analysing the questionnaires ‘ responses, mention books, cyberspace browse and talk notes the group members have come to the decision that computerisation of accounting map in today ‘s universe of engineering with refering jobs, challenges, chances and successes can non be ignored and are discussed in inside informations in this undertaking.


In simple footings, Accounting is the systematic recording, coverage, analysing and interpretation of fiscal minutess of a concern. In earlier yearss, Accounting maps were performed manually whereby a batch of paperwork had to be done with accretion of registries. This was the pattern until after the debut of computing machines, hardware and package with their associated applications whereby accounting maps are put into an electronic signifier utilizing databases. However, some organisations are yet to computerise while others have partly computerized their accounting maps.

Theoretical Aspects of cybernation

A successful computerisation exercising needs senior direction support by taking ownership of the undertaking, so sensitise the importance of the undertaking to all stakeholders. Thereafter a program will be required which should hold the undermentioned compulsory inputs: –

Fiscal ability budgeted for the exercising ( financess )

Computer package including the accounting bundle, hardware and connectivity between computing machines ( web ) depending on the size of the administration.

Skilled squad comprises of forces in the field of ICT and Finance

Awareness to affected parties as staff, providers, and stakeholders.

Continuous betterments and preparation.

Push to travel abreast with engineering.

The administration might make up one’s mind to accommodate best pattern methodological analysiss to pull off the undertaking as Project in a Controlled Environment ( PRINCE2 ) , The Project Management Body of Knowledge ( PMBoK ) or Project Management Methodology ( PMM ) .

Benefits and Disadvantages of Computerisation

Computers have become an built-in portion of the modern society. Technology has managed to transform all manual work into electronic signifier utilizing databases and applications. An illustration of computerisation are in the countries of instruction, industries, banking sector, medical specialties, transit, insurance, infinite engineering and clime, in fixing wage axial rotations, and communications.

Advantages of computerisation: –

With larger decreases in the cost of hardware, package and handiness of user-friendly accounting package bundle, it allows for cybernation of accounting system.

A computerized system is more accurate, seasonably, faster, efficient and cheaper in processing of information and maintaining, as a consequence it promotes unity and transparence.

Instant and / or Automatic coevals of accounting paperss like bills, checks and statement of history ;

No more manual processing of the data- all automatically been posted to the assorted ledgers/accounts and

Many types of utile studies, readings and analysis can be done and generated for direction and determination shapers.

Disadvantages: –

Power failure, computing machine viruses and hackers are the built-in jobs of utilizing computerized systems.

Once informations been input into the system, automatically the end product are obtained therefore the informations being input demands to be validated for truth and completeness, the GIGO ( Garbage In ( Input ) Garbage out ( Output ) construct should be observed at all times.

Accounting system non decently set up to run into the demand of the concern due to severely programmed or inappropriate package or hardware or forces jobs can do more mayhem.

Danger of computing machine fraud if proper degree of control and security whether internal and /or external are non decently instituted.

Computerization of Accounting Functions

Businesss big and little, public and private, for net income and not-for-profit are driven by Numberss. Whether it ‘s tracking gross revenues, pull offing stock list or doing paysheet. Smart directors know that maintaining checks on those Numberss is important, but without a solid accounting map, that undertaking can go an organisational incubus. Organizations seeking a all-around accounting map demand to see several facets of accounting maps beyond merely simple debits and credits.

The common maps of accounting are as follows:


This is the basic map of accounting. It is basically concerned with non merely guaranting that all concern minutess of fiscal character are in fact recorded but besides that they are recorded in an orderly mode. Recording is done in the book of accounting known as Journal.


Categorization is concerned with the systematic analysis of the recorded informations, with a position to group minutess or entries of one nature at one topographic point. The work of categorization is done in the book termed as “ Ledger ” .


This involves showing the classified information in a mode which is apprehensible and utile to the internal every bit good as external end-users of accounting statements. This procedure leads to the readying of the undermentioned statements: ( 1 ) Trial Balance, ( 2 ) Income statement and ( 3 ) Balance sheet.

Analysis and Interpretation:

This is the concluding map of accounting. The recorded fiscal information is analyzed and interpreted in a mode that the end-users can do a meaningful judgement about the fiscal status and profitableness of the concern operations. The information is besides used for fixing the hereafter program and framing of policies for put to deathing such programs.


The accounting information after being meaningfully analyzed and interpreted has to be communicated in a proper signifier and mode to the proper individual. This is done through readying and distribution of accounting studies, which include besides the usual income statement and the balance sheet, extra information in the signifier of accounting ratios, graphs, diagrams, financess flow statements, IFRS etc.

Protect Business Property:

The other usage of accounting map is to protect the belongings of concern from undue and unwanted usage. The accountant therefore has to plan such a system of accounting which protects its assets from an undue and unwanted usage.

Legal Requirement Function:

Furthermore, accounting map has to invent a system that will run into legal demands. Under the proviso of jurisprudence, a concern adult male has to register assorted statements e.g. , income revenue enhancement returns, returns for value added revenue enhancement intent etc. Accounting system aims at carry throughing the demands of jurisprudence. Accounting is a base, with the aid of which assorted returns, paperss, statements etc. , are prepared.

When the above maps are computerized, a concern stands a better opportunity to execute better with accurate studies and manage clip consequently.

Deciding factors for cybernation

Accounting is a necessary map for any concern, all concerns must maintain records of their income and disbursals, and the records should be every bit detailed as possible. The two biggest advantages of a computerized accounting system are speed and truth. A company with a computerized accounting map has better opportunities and ability for increased efficiency, productiveness, public presentation, truth and salvage clip as compared to a company with non-computerized accounting maps.

The factors that determine Computerisation of accounting maps are many, but the most appropriate to any circumstance, and for the intent of giving a true and just position to the administration are listed below: –

Time spent and complexness in readying of books of histories

Mistakes found in making the boring occupation

Number of employees required in histories section

Accuracy of accounting records, and dependability of studies

Improve working environment ( accretion of documents and manual registries )

Improve / enhance monitoring and control of fiscal records including sensing and disincentive of fraud activities.

Appreciation to available engineering with its benefits

Critical Issues on cybernation of accounting maps

In the procedure of computerizing the accounting maps of any organisation, there are critical issues that should be considered before the exercising, during the exercising and after the exercising for a successful and uninterrupted betterment of computerisation result. Some of these issues are: –

Policy and Legal Frameworks

There is a authorities board which proctors and provides guidelines on operations and readyings of accounting maps for organisations in Tanzania ; this board is National Board of Accountants and Auditors ( NBAA ) . Before computerizing accounting maps of the organisation, NBAA should be consulted for any legal and policy issues that govern accounting operations. Globally, accounting policies should adhere to accounting criterions issued by the International Accounting Standard Board ( IASB )

Besides, Organization policy sing accounting maps should be examined before computerisation to set up any demand and / or spread that needs to be addressed for successful consequences. An illustration of policy and legal models issues that should be considered for cybernation of accounting maps are: –

Tax Tax returns: – there is a clip restriction for entry of all revenue enhancement returns e.g. PAYE, Skills and Development levy, VAT, Withholding Tax returns. All these should be considered during customization / computerisation procedure.

Digital signature: – whether the state jurisprudence and the administration policy accept digital signature and how it should be implemented in the customization / computerisation procedure.

Approval procedure: – how blessings will be inserted as an input for the accounting procedure to be effectual and efficient.

Link to Bankss and retail mercantile establishments: – in-case of automatic and timely update of bank balances and who deposited or retreat from certain concern histories, this should be considered in the computerisation procedure.


Another critical issue in the computerisation of accounting maps is financing. Any administration with sustainable programs for growing is really sensitive with financess. In financing the computerisation undertaking, the followers will be considered: –

Tax return on Investment ( R.O.I )

Computerisation of accounting maps budget against the available financess

Senior Management / Business proprietors willingness to computerise and take ownership

Continuous care of the system and proficient support.

Computer Hardware and Software

After confidence of financess, so the handiness of dependable computing machine hardware and package will follow. The cardinal issues here will be: –

Available specification in the market against demands and budget

Security issues for unauthorised entree to the system from within the administration and external stakeholders

Maintainability and sustainability of the system to be customized and suit any future demands as per statute law, legal, operations and /or process alteration.

Skilled ICT support staff and comptrollers ( staffing ) : –

Once the engineering assures support to the undertaking, forces become the issue. Below are factors to be considered: –

Handiness of skilled ICT staff to back up the system during concern operation hours.

Handiness of skilled system users ( Accountants, tellers, etc. )

Handiness of uninterrupted accomplishments upgrade and preparation for both ICT and system users.

Challenges and Prospect: –

The Challenges for computerisation of accounting maps could be: –

Security issues involved in a computerized system

Enough budget to fund the computerisation to the full

Skilled labour to back up the system

Budget to fund uninterrupted betterment as a consequence of uninterrupted ascent of engineering and alteration or alteration of user demands.

Fear of the unknown.

Prospects of a computerisation of accounting maps are: –

Enhance efficiency, transparence and truth of accounting information

Increase production, staff motive and unity

Minimize operations cost and salvage clip.

Instant and automatizing programmable studies

Conform to legal, policies and regulative governments directives

Apply available engineering in computerisation to overhaul operations.

Actual determination on Selected Companies in Dar-es-salaam

Project Questionnaire sum-up



Government Institution

Private Company


Do you hold an independent finance dept.




Number of Finance Dept. staff




Number of staff in the administration

Above 400

Below 100


When did the org. computerise accounting map

5 – 10 old ages ago

5 -10 old ages ago


What prompted cybernation of accounting maps

Enhance efficiency

Become up to day of the month

Minimize operations cost

Enhance efficiency

Minimize operations cost


challenges encountered during computerisation procedure

All of the above replies

Technical and skilled staff in ICT

Availability of required hardware and package


Did the org. achieved expected aims

Yes, really much

Yes, to some extent


What are initial chances taking to computerisation

To conform with regulative authorization direction

To increase efficiency, production, and cut down cost

To go a modern company

To conform to company staff demands

To increase efficiency, production, and cut down cost


Did the org. satisfied with computerisation

Very satisfied



What are org. current chances?

To better current engineering investing in computerisation of the company accounting maps.

To computerise the whole company activities

To increase efficiency, production and cut down cost?

To computerise the whole company activities

Make your company / concern have any success narrative to portion every bit far as computerisation of accounting maps is concerned?

Having a batch of fiscal minutess, cybernation has become the solution for fast processing of fiscal minutess every bit good as fiscal studies. The system is accurate, fast and efficient.

Award from NBAA on ”the best presented Fiscal Statements ” to Govt. Agencies.

Speed and truth in treating providers ‘ payment ( from the client feedback / response cards )

Annual Histories are now finalized on clip, non as before cybernation of accounting systems.

Company manages to cut down clip and complexness of readying of one-year studies and other required studies

helps to command our plus that means it gives the room of cost centres and hence at any clip you can be able to see the public presentation of every assets

Controls of debitors, creditors are all really much easier with computing machine system.

Transparency of minutess all the manner to HQ. Speedy blessings of purchase orders. Real clip capableness to track outgo vs. budgets. Timely information for monitoring efficiencies, timely production of studies.

the histories staffs are rather happy with cybernation because it does off with manual poster of fiscal informations ; it has helped them to larn more about the characteristics available in the accounting bundle

Instantaneous entree to accounting information. Because each entered dealing is automatically posted to its several history, all history information is ever up-to-date.

Easy papers entree and production of Purchase orders, debit memos, gross revenues grosss, gross revenues bills, stock list lists and others can be printed in few seconds.

Legibility. Computerized accounting package eliminates the demand to decode hapless or uneven script, extinguishing much of the possibility of mistake due to misreading a hand-written line point.

Ability for revenue enhancements to be computed automatically. This makes paying quarterly or one-year revenue enhancements easier since the computerized system will maintain a running sum of all revenue enhancements owed. Help in readying of VAT returns and rapprochements against turnover hence cut down the opportunities of doing mistakes during make fulling the returns manually.

Any other remarks in add-on?

Detection and disincentive of fraud activities and hence sweetening of choice fiscal study which are more dependable than it used to be before cybernation

Use of ICT is one of the best methods to better efficiency and do an organisation going cost effectual administration

Computerizations need the sensitisation of the employees before the company initial readyings and take ownership of the package to be used.

A computerized accounting system has many benefits including staff motive, decrease of incidents of larceny and fraud and decrease of waste.

ICT Support non seasonably as: –

Power instability and Network infrastructure/failures

Computer accomplishments to staff every bit far as ICT is concerned and

Staff attitude to alter.

Analysis of the replies from questionnaire

Regardless of which establishment among those listed in figure 1, all have answered YES in figure 2 therefore inquiry figure 3 did n’t acquire any response.

Majority of the authorities bureaus have employees 8-12 in their histories section while private companies have 4-7 employees in their histories sections.


Computerisation of accounting maps is non a manner. It is a compulsory demand for a concern to accomplish its aims on clip and maintain sustainable growing in the hereafter.


It is recommended that, all accounting maps of the administration should be computerized to rend the virtues of engineering and increase net income. Continuous betterments to the computerized system should be sustainable together with preparation and consciousness.


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