Accountancy Test - 8

The correct answer is Data, People, Procedure, Hardware, Software;

Key Points Computerised accounting System:

• Computerised Accounting System refers to the processing of accounting transaction through the use of hardware and software in order to produce accounting records and reports. 

Important Points Components of Computerised Accounting System:

• Procedure: A logical sequence of actions to perform a task.
• Data: The raw fact (as input) for any business application.
• People: Users
• Hardware: Computer, associated peripherals, and their network.
• Software:  System software and Application software.

The correct answer is Processing of accounting transaction through computer and produce records and reports

Key Points

Computerised accounting System:

• Computerised Accounting System refers to the processing of accounting transaction using a computer through the use of hardware and software in order to produce accounting records and reports. 

 Important Points Components of Computerised Accounting System:

• Procedure: A logical sequence of actions to perform a task.
• Data: The raw fact (as input) for any business application.
• People: Users
• Hardware: Computer, associated peripherals, and their network.
• Software:  System software and Application software.

The correct answer is Asset, capital, liabilities, revenue and expenses

Key Points

Computerised accounting System:

• Computerised Accounting System refers to the processing of accounting transaction through the use of hardware and software in order to produce accounting records and reports. 

Important Points Grouping Of Accounts:

The increase in the number of transaction changes the volume and size of the business. Therefore it becomes necessary to have proper classification of data. The basic classifications of different accounts embodied in a transaction are resorted through accounting equation. 

Accounting Equation:

The modern accounting is based on double-entry system, which implies equality of assets and equities (liabilities and capital), i.e. 

            A = E

Where E = L + C

Now    A = L + C

Where A = Assets; E = Equities; C = Capital; L = Liabilities

Hence, Assets = Liabilities + Capital

• In the above equation, the Liabilities means claims on the firm by creditors and the Capital means claims of owners.
• The claims of owners keep on changing due to success (profit) or failure (loss) of the firm.
• This is reflected by the income statement, which provides the summary of income and expenses of business for a given accounting period.
• Keeping this in view, the above equation can be re-written as:

Assets = Liabilities + Capital + (Revenues – Expenses)

The correct answer is Hierarchical relationship between groups and components.

Key PointsCodification of Accounts:

• According to the Concise Oxford Dictionary, the term code means “a system of letter or figure with arbitrary meaning for brevity and for machine processing of information”. Thus, code is an identification mark.
• There is a hierarchical relationship between the groups and its components. In order to maintain the hierarchical relationships between a group and its sub-groups, proper codification is required to ensure neatness of classification.

Important Points Method of Codification

  1. Sequential Codes

• In Sequential Code, numbers and/or letters are assigned in consecutive order.
• These codes are applied primarily to source documents such as cheques, invoices, etc.
• A sequential code can facilitate document searches.
• This process enables in either identification of missing codes (numbers) relating to a particular document or a relevant document can be traced on the basis of code

Example: 

  2.  Block Codes

• In a block code, a range of numbers is partitioned into a desired number of sub-ranges and each sub-range is allotted to a specific group.
• In most of the uses of block codes, numbers within a sub-range follow sequential coding scheme, i.e. the numbers increase consecutively.

As an example, dealer codes for a trading firm could be as follows:

• A mnemonic code consists of alphabets or abbreviations as symbols to codify a piece of information.
• SJ for “Sales Journals”, HQ for “Head Quarters” are examples of mnemonic codes.
• Another common example is the use of alphabetic codes in Railways in identifying railway stations such as DLH for Delhi, NDLS for New Delhi, BRC for Baroda, etc

The correct answer is The Encryption of data

Key Points Codification:

According to Concise Oxford Dictionary, the term code means “a system of letter or figure with arbitrary meaning for brevity and for machine processing of information”. Thus, code is an identification mark. 

Important Points Encryption:

Encryption essentially scrambles the information so as to make its interpretation extremely difficult (almost impossible). Thus, Encryption ensures security of data even if it lands in wrong hands, because the receiver of data will not be able to decode and interpret it.

The correct answer is Collect data, organise and process data, and communicate information

Key Points Information Processing Model:

The Information Processing Model is a framework used by cognitive psychologists to explain and describe mental processes. The model likens the thinking process to how a computer works.

Important Points The brain, like a computer, is thought to operate in a predetermined order. "Receives input, processes the information, and gives an output," is the sequence.

The correct answer is Generally Accepted Accounting principles (GAAP)

Key Points A computerised accounting system is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Every accounting system, manual or computerised, has two aspects.

Important Points

Generally Accepted Accounting Principles (GAAP)

• The details, complexity, and legality of commercial and corporate accounting are covered by generally accepted accounting principles, or GAAP.
• GAAP is the foundation for the Financial Accounting Standards Board's (FASB) complete collection of accepted accounting procedures and practises.

The correct answer is Cash payment journal

Key Points Accounting Information System:

• Accounting Information System (AIS) and its various sub-systems may be implemented through Computerised Accounting System
• There are total of 12 sub-sytems into which Computerised Accounting System is divided.

Important Points Cash And Bank Sub-System: It deals with the receipt and payment of cash, both physical cash and electronic fund transfer. Electronic fund transfer takes place without having the physical entry or exit of cash by using the credit cards or electronic banking. Firm’s payment to a supplier for merchandise inventory recorded in Cash payment journal maintained under this subsystem.

Additional InformationSales And Accounts Receivable Sub-System: It deals with recording of sales, maintaining of sales ledger and receivables. It generates periodic reports about sales, collections made, overdue accounts and receivables position as also ageing schedule of receivables/debtors.

Inventory Sub-System: It deals with the recording of different items purchased and issued, specifying the price, quantity and date. It generates the inventory position and valuation report.

Purchase and Accounts Receivable Sub-system: It deals with the purchase and payments to creditors. It provides for ordering of goods, sorting of purchase expenses and payment to the creditors. It also generates periodic reports about the performance of suppliers, payment schedule and position of the creditors.

Payroll Accounting Subsystem: It deals with payment of wages and salary to employees. A typical wage report details information about basic pay, dearness allowance, and other allowances and deductions from salary and wages on account of provident fund, taxes, loans, advances and other charges. The system generates reports about wage bill, overtime payment and payment on account of leave encashment, etc.

Fixed Assets Accounting Subsystem: It deals with the recording of purchases, additions, deletions, usage of fixed assets such as land and buildings, machinery and equipments, etc. it also generates reports about the cost, depreciation, and book value of different assets.

Expenses accounting Sub-System: This sub-system records expenses under broad groups such as manufacturing administrative, financial, selling and distributions and others.

Tax Accounting System: This sub-system deals with compliance requirement value-added tax (VAT), excise, customs and income tax. This sub-system used in large size organisation.

Final accounts Subsystem:This subsystem deals with the preparation of Profit and Loss accounts, Balance Sheet and cash flow statements for reporting purposes.

Costing Subsystem: It deals with the ascertainment of cost of goods produced. It has linkages with other accounting sub-systems for obtaining the necessary information about cost of material, labour, and other expenses. This system generates information about changes in the cost that takes place during the period under review

Budget Subsystem: It deals with the preparation of budget for the coming financial year as well as comparison with the current budget of the actual performances.

Management Information Sub-system: Management Information System (MIS) deals with generation and processing of reports that are vital for management decision-making. The Information system should be so flexible as to provide customized reports to support various managerial functions such as planning, organizing, staffing, oversight, control and decision-making including operational, functional and strategic nature.

The correct answer is Accounts receivable subsidiary ledger

Key Points

 Accounting Information System:

• Accounting Information System (AIS) and its various sub-systems may be implemented through Computerised Accounting System
• There are total of 12 sub-sytems into which Computerised Accounting System is divided.

Important PointsPurchase and Accounts Receivable Sub-system: It deals with the purchase and payments to creditors. It provides for ordering of goods, sorting of purchase expenses and payment to the creditors. It also generates periodic reports about the performance of suppliers, payment schedule and position of the creditors. Amounts owed by customers for credit purchases found in Accounts receivable subsidiary ledger maintained under this subsystem

Additional Information

Sales And Accounts Receivable Sub-System: It deals with recording of sales, maintaining of sales ledger and receivables. It generates periodic reports about sales, collections made, overdue accounts and receivables position as also ageing schedule of receivables/debtors.

Inventory Sub-System: It deals with the recording of different items purchased and issued, specifying the price, quantity and date. It generates the inventory position and valuation report.

Cash And Bank Sub-System: It deals with the receipt and payment of cash, both physical cash and electronic fund transfer. Electronic fund transfer takes place without having the physical entry or exit of cash by using the credit cards or electronic banking.

Payroll Accounting Subsystem: It deals with payment of wages and salary to employees. A typical wage report details information about basic pay, dearness allowance, and other allowances and deductions from salary and wages on account of provident fund, taxes, loans, advances and other charges. The system generates reports about wage bill, overtime payment and payment on account of leave encashment, etc.

Fixed Assets Accounting Subsystem: It deals with the recording of purchases, additions, deletions, usage of fixed assets such as land and buildings, machinery and equipments, etc. it also generates reports about the cost, depreciation, and book value of different assets.

Expenses accounting Sub-System: This sub-system records expenses under broad groups such as manufacturing administrative, financial, selling and distributions and others.

Tax Accounting System: This sub-system deals with compliance requirement value-added tax (VAT), excise, customs and income tax. This sub-system used in large size organisation.

Final accounts Subsystem:This subsystem deals with the preparation of Profit and Loss accounts, Balance Sheet and cash flow statements for reporting purposes.

Costing Subsystem: It deals with the ascertainment of cost of goods produced. It has linkages with other accounting sub-systems for obtaining the necessary information about cost of material, labour, and other expenses. This system generates information about changes in the cost that takes place during the period under review

Budget Subsystem: It deals with the preparation of budget for the coming financial year as well as comparison with the current budget of the actual performances.

Management Information Sub-system: Management Information System (MIS) deals with generation and processing of reports that are vital for management decision-making. The Information system should be so flexible as to provide customized reports to support various managerial functions such as planning, organizing, staffing, oversight, control and decision-making including operational, functional and strategic nature.

The correct answer is All of the above

Key PointsSecurity Features Of CAS Software 

Every accounting software ensures data security, safety and confidentiality. Therefore, every, the software provides the following:

• Password Security
• Data Audit
• Data Vault

Important Points Password Security: Password is a mechanism, which enables a user to access a system including data. The system facilitates defining user rights according to organisation policy. Consequently, a person in an organisation may be given access to a particular set of a data while he may be denied access to another set of data. 

Data Audit: This feature enables one to know as to who and what changes have been made in the original data thereby helping and fixing the responsibility of the person who has manipulated the data and also ensures data integrity. Basically, this feature is similar to Audit Trail.

Data Vault: Software provides additional security through data encryption. Encryption essentially scrambles the information so as to make its interpretation extremely difficult (almost impossible). Thus, Encryption ensures security of data even if it lands in wrong hands, because the receiver of data will not be able to decode and interpret it.