CHAPTER13 APPLICATIONS OF INFORMATION TECHNOLOGY 1 A TYPICAL MANUAL ACCOUNTING SYSTEM A typical manual system consists of: -Separate books of prime entry (not part of the double entry) -Subsidiary accounts receivable ledger and accounts payable ledger (not part of the double entry) -General ledger (the double entry system), containing accounts receivable and accounts payable control accounts -Separate cash book (part of the double entry) Usually the general ledger is a loose-leaf book with a page for each ledger account ,while the subsidiary ledger have running totals of amounts owing instead of ledger accounts. Sales ledger Customer :J Bloggs Date Dr Cr Balance 1 Mar Brought forward 3978.45 19Mar Invoice 2354 1549 5527.45 23Mar Cash Receipt 3978.45 1549.00 Book 2 A TYPICAL COMPUTERUSED ACCOUNTING SYSTEM This operates under the same principles as a manual system except that all the records will be stored I none place, e.g. the hard disk of the computer. The system will be broken down into sections in the same way as the manual system, so few people have access to the complete system. Instead of the general ledger being a collection of ‘T’ accounts,it will probably appear as a listing of debits and credits. 3 ADVANTAGES OF COMPUTERS Speed :High volumes if work and rapid turn-round and response means faster processing, reduced data processing costs and increased throughput. Stored programs: Once the programs have been written and tested, there are minimal labor costs beyond the cost of data imputting, which may itself be automated. Decision-making :The computer can be programmed to undertake complicated decision making processes using a wider range of quantitative techniques. File storage and processing. Large files of data can be stored on magnetic media which require very little space. Files can be reviewed and updated at high speeds, and information can be retrieved from them very quickly. This leads to improved control and better communication. Accuracy and reliability leading to quality cost savings and less reliance on staff. 4 DISADVANTAGES OF COMPUTERS Lack of intelligence. The computer is a machine, Errors that would be detected by clerks in a manual system may go unnoticed in a computer-based system. To catch every potential problem, system development is often both prolonged and costly. Quantifiable decisions. The program can only take decisions that can be quantified. It cannot make value judgments. a solution indicated by the program many have to be modified because of intangible factors known to the manager but incapable of being expressed in the program. High initial costs Inflexibility. They take longer and cost more to alter than manual systems. Vulnerability .To strikes and natural disaster. Recovery procedures must be put in place. 5 FINANCIAL ACCOUNTING SYSTEMS They are a number of integrated accounting packages which handle all parts of the accounting system and ultimately produce the financial statements. Type of integrated Suitable for: Contains: Package Cash book Small business Cash book systems, emulatingselling for cash, a manual cash providing a service book. and buying inventory from a small group of suppliers for cash Basis bookkeeping Small business The above plus: system buying and selling Accounts for cash and credit receivable ledger Accounts payable ledger General ledger including a cash account Bank reconciliation feature Facility for producing trial balances and financial statements Bookkeeping and Larger, more complex The above plus: accountancy commercial Credit control facilities, system organization, Sales invoice generation Greater number of Customer statement customer and creation supplier accounts and more sophisticated Ageing schedules of receivables. Standard letters to chase overdue receivables. Inventory control facilities. 6 WORD PROCESSING Word processing: produces typescript using computer facilities ,i.e. the ability to store text and to manipulate it on a VDU screen. Minimum hardware requirements are: - VDU and keyboard - Processor - Disk drive - Printer Word processing allows for frequently revised versions of standard documents, easy corrections and less checking than if documents have to retyped. Types of words processor: -dedicated-only used as a word processor -a word processing software package on a PC or micro-computer. 7 SPREADSHEETS Spreadsheet: a computer package that can be used for numerous’ modeling’ type business application. -Displays on the screen a serious of rows and columns. -The intersection of rows and columns form' cell’ into which the user can type information using the computer keyboard. -Three types of information are entered :test, numbers or formulate. -When the content of any cell is altered the effects of the alteration are reflected, using the formula, on all other cells. -Once a model has been entered onto the spreadsheet it can be later recalled, altered and used with new data. -The output can be printed in tabular form. Most spreadsheets have the following features: -‘What if’ analysis: the ability to calculate the effect of changes in the data or formula used in the model -Conditional statements: calculations may be made dependent upon values in other cells. -Look-up tables :the value to be inserted in a specific cell can be selected from a range of values held in a table. -Selective printing :a portion of the model may be printed rather than the whole of it. -Graphics :bar charts, pie-charts etc. Goal-seeking facility :all possible input value combinations can be included which produce a specified bottom line output value. Statistical function :statistical analysis such as values for an average, sum, standard deviation, etc. Flexibility :the user should have flexibility in designing the model ,e.g. inserting blank rows and columns, deleting rows and columns and moving blocks of rows and columns to another part of the spreadsheet. Databases :can be used as simple databases (see below) 8 DATABASE SYSTEMS Database :a collection of information that can be used for many different purposes. A database is like an electronic card index. Each card contains some information ,e.g. about a client-it is a record. The items of information held (e.g. mane, address, fees) are fields. Advantages of a database: -Expandability -Large amount of information held in each record. -Automatic calculations can be performed -Records may be sorted, or those matching a certain criterion selected, automatically, and in a variety of orders. -Production of reports based on the information Database design to link the data together: -Flat file database :a single file database. All records are of a standard format. Data can be stored, accessed,sorted and updated. -Relational database :file can be linked together and data can be accessed from any file. -Programmable database :has its own programming language which enables the database to be tailed to individual needs. -Database management system :software that runs the database, organizing the input data and allowing various application program to use the database.
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