I'm Larry Walther, and this is principlesofaccounting.com, Chapter 2.
In this module, we will be discussing Computerized Processing Systems.
Computerized Processing Systems present an attempt to simplify and
automate data entry and processing.
They divide accounting processes oftentimes into unique or
distinct modules relating to particular functional areas.
For example, there might be a module that relates to the sales function
where someone would at the data entry terminal
enter information about sales transactions that would be converted into what would
appear to be journal entries that can then be processed into financial statements.
Or in more sophisticated systems, it may be that a terminal at a store, a checkout
terminal or a scanner, would also be the interface to the computer system.
So that as customers bought goods, the particular transaction say, it was a sale
on account, would be completely processed and entered into the accounting system.
Obviously, that would do away with the need for
someone to additionally enter the transaction into the accounting record.
This system should be user-friendly and very intuitive.
There's an attempt to minimize key-strokes.
There's things like pick lists in the software,
automated call-up functions, auto-complete functions and so
on that are very much a part of the Computerized Processing System.
Most of them are built on a database logic set so,
although they may appear to be debit/credit base,
it's probably not really maintaining the records in a debit/credit form.
Instead, it's captured and housed in a database of information.
The transaction data can therefore be sorted and
processed based on an particular query structure.
For example, give me the sales between October 4th and October 7th,
some particular query such as that.
It's very likely the system will provide up-to-date data that can be assessed by
a business decision makers on a real time basis.
The idea that you would post at the end of a month may be replaced by a real time
posting of information as the account balances are updated within the database.
That can be used to produce numerous specialized reports in addition to the key
financial statements that we customarily think of in an accounting system.
Computerized systems, they range a lot in complexity.
There's very simple systems that are very appropriate for
small businesses that might cost just a few hundred dollars.
Oftentimes though, you'll move up though into five and
$10,000 type systems that are industry specific, that help produce invoices and
track inventory and things like this for a particular industry or group.
And then, there's the very advanced enterprise resource packages that go well
beyond just the accounting function and a business plan invest
millions of millions of dollars in a very large ERP type system.
However, whatever type of system you are referring to,
it's imperative that the basic accounting structure still be understood.
And that's why some students may feel, I don't really need to learn debits and
credits and preparing financial statements.
Yet I assure you understanding those in your manual context is essential for
being able to properly implement and use an automated accounting system.
Here's an example of a screenshot from a typical accounting software type package.
This is a Journal Entry type screenshot.
It's for a particular utility bill that was received for the month.
The entry number is automated, it sequences as each new transaction is about
to be entered, it automatically assigns a sequence number to the transaction.
The entry date, the date of the transaction,
is probably automated to the accounting system with perhaps an override function.
But ordinarily, you'll notice the account number list might be
a pick list when you click on that.
A listing of account numbers would drop down and you would select the appropriate
account number and automatically up would pop the account name.
You would enter an amount, it might automatically enter an offsetting amount
for the logically corresponding account.
That you would have an opportunity to override that if it was not
the right amount.
But before you could post this or before the computer would accept the transaction,
it would be imperative that the entry be in balance.
And so, there would be some sort of check box to indicate that the item
is entered appropriately.
And finally, there would be some sort of button to click or return key to go and
indicate you're happy with the entry and
ready to enter it into the accounting system.
And now, in closing this discussion on Computerized Processing Systems,
it's very important to consider in your own business that you think about
how important it is to maintain control over this system.
With a manual system, it's fairly easy to look at it and
see if there's been alterations or unauthorized entries into the system.
In a computerized system, it's very important to have appropriately authorized
personnel with password protection to make sure that all transactions that
are entered into the system are appropriate.
It's just simply harder to look back into an electronic database and
find things that are not appropriate or were entered incorrectly.
So, while they have the beauty of simplifying the accounting process,
they also pose unique controlled risk to the organization.