Question

What is a Computer? Explain limitations of computerised accounting systems ?

Answer 1

A computer is an electronic device that is used to carry out a finite number of operations. It is an electronic machine that receives data, manipulates it and provides the useful information. Computers can be used for various accounting purposes as well. There are many software such as Tally, Busy, etc. which are installed in the computers to perform the accounting function.

Computerised accounting is a system that is based on the concept of database. It is an accounting information system that processes the financial transactions and events in accordance with the Generally Accepted Accounting Principles (GAAP) to produce reports as per the requirements of the users. Computerised accounting system maintains systematic and accurate records of financial information. It also saves cost and time.

The following are the limitations of Computerised Accounting System:

1. Human errors: Although transactions recorded under computerised accounting system are more reliable and accurate, human errors may occur at the time of installation of a computer or at the time of entering data.

2. Cost of installation and maintenance: The cost of accounting software includes cost of installing the related components and hardware, maintenance and alteration costs, cost of training the staff and the cost involved in recovering data in case of data failure. Thus, computerised accounting system also involves huge costs.

3. Level of secrecy: The level of expected security is another limitation of this system. The software that is installed for this system should be able to prevent unauthorised access and manipulation of data.

4. Power failure: Most businesses have to cope with frequent power failures. Computerised accounting system is of no use without electricity. Power failure may also result in the loss of accounting information.