Question 1. What Is Computerized Accounting?
Accounting is the method in which financial information is gathered, processed, and summarized into financial statements and reports.
The purpose of accounting is to provide information used in decision-making. Accounting may be viewed as a system (a process) that converts data into useful information.
Information processes include:
Every business has numerous processes. Some are simple, others complex and cumbersome. However, as the business grows, acquires new customers, enters new markets, and keeps pace with constant changes in statutory regulations… the company will need to maintain highly accurate and up-to-date accounting, inventory, and statutory records.
This is where a computerized accounting helps simplify, integrate, and streamline all the business processes, cost-effectively and easily.
Question 2. What Are The Problems Faced In Computerized Accounting System?
Problems Faced In Computerized Accounting System:
- User Training: The user, for using computer accounting software, needs to understand the concepts of the software. Hence, he should undergo proper training. A computer operator must learn the basics of computer, concepts of software, working with the operating system software [such as Windows/DOS] and the accounting software.
- System Dependency: Using a computer solution makes the user to depend fully on the computer system and necessitates the availability of computer at all times. If the system is not available [due to hardware failure or power cut], it would be difficult to verify the accounts.
- Hardware Requirements: A full-fledged computer system with a printer is required to operate the computerized accounting system. Most small organizations may not afford to have such facility with necessary software.
- System Failure: When there is a system crash [hard disk crash], there is high risk of losing the data available on the hard disk drive at any point of time. It would be highly painful, if the problem occurs at end of the financial year, when the financial statements should be ready.
- Backups and Prints: Backups of the data should be done regularly so that, when the data is lost, it can be restored from floppies [backups]. Regular print outs of the system information would be useful as manual records.
- Voucher Management: Accounting software allows easy alteration of data. If a voucher is wrongly placed in a wrong head, it would be very difficult to sort out and bring back the voucher. A good voucher management is very essential.
- Security: Additional security has to be provided because improper handling of the system [hardware/software] could be dangerous. Passwords, locks, etc., have to be set so that no unauthorized person can handle the system.
Peachtree Accounting Interview Questions
Question 3. What Are The Advantages Of Computerized Accounting?
Advantages of Computerized Accounting:
- Better Quality Work: The accounts prepared with the use of computers are usually uniform, neat, accurate, and more legible than manual job.
- Lower Operating Costs: Computer is a labor and time saving devise. Hence, the volume of job handled with the help of computers results in economy and lower operating costs.
- Improved Efficiency: Computer brings speed and accuracy in preparing the records and accounts and thus, increases the efficiency of employees.
- Facilitates Better Control: From the management point of view, greater control is possible and more information may be available with the use of computer in accounting. It ensures efficient performance in accounting work.
- Greater Accuracy: Computerized accounting ensures accuracy in accounting records and statements. It prevents clerical errors and omissions.
- Relieve Monotony: Computerized accounting reduces the monotony of doing repetitive accounting jobs, which are tiresome and time consuming.
- Facilitates Standardization: Computerized accounting facilitates standardization of accounting routines and procedures. Therefore, standardization in accounting is ensured.
- Minimizing Mathematical Errors: While doing mathematics with computers, errors are virtually eliminated unless the data is entered improperly in the first instance.
Question 4. What Are The Disadvantages Of Computerized Accounting?
Disadvantages of Computerized Accounting:
- Reduction of Manpower: The introduction of computers in accounting work reduces the number of employees in an organization. Thus, it leads to greater amount of unemployment.
- High Cost: A small firm cannot install a computer accounting system because of its high installation and maintenance cost. To be more economical there should be large volume of work. If the system is not used to its full capacity, then it would be highly uneconomical.
- Require Special Skills: Computer system calls for highly specialized operators. The availability of such skilled personnel is very scarce and very costly.
- Other Problems: Frequent repair and power failure may affect the accounting work very much. Computers are prone to viruses. Often time’s people will assume the computer is doing things correctly and problems will go unchecked for long period of time.
Question 5. Describe The Various Types Of Accounting Software?
The various types of accounting software are:
General Accounting Interview Questions
Question 6. Explain Ready-to-use Software?
This type of software is readily available in the market with prescribed and standard features. This accounting software is basically used by the small-size business enterprises, where the number of transactions is not so large. The cost of its installation and maintenance is also low. It has limited number of users. Its adaptability is very high as it is relatively easier to learn and operate. It does not have a wide scope to link it with other information systems.
Question 7. Explain Customized Software?
Customized software is the software that has standardized features to meet the special requirements of the users. It provides the scope of changing the features of accounting software. The functions of this software can be programmed as per the needs and requirements of the users. This type of software best suits the needs of medium and large businesses. Its cost of installation and maintenance is comparatively higher. It can be easily Linked to the other information systems.
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Question 8. Explain Tailored Software?
Tailored or Tailor-made accounting software is the software that is developed as per the specifications and requirements of the users. This accounting software is generally used in the Large business organizations with multi-users and geographically scattered locations. It is designed to meet the specific needs of the users and form an integral part of the organizational MIS. It has infinite number of users .
Question 9. What Are The Advantages And Disadvantages Of Ready-made Accounting Software?
Advantages of Ready-made Accounting Software :
- This software is easily available in the market.
- It is less expensive, as it comes with basic and standard features.
- It involves a lesser need for training.
- It is less sophisticated
- Its adaptability is very high as it is relatively easier to learn and operate.
- It is suitable for small-size business enterprises.
Disadvantages of Ready-made Accounting Software :
- It has limited number of users
- It is not suitable for medium and large business organization. where the number of transactions is very large.
- It fails to cater the specific needs of the users.
- It suffers from the low level of data secrecy.
- It does not have a wide scope to link at with other information systems.
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Question 10. What Are The Advantages And Disadvantages Of Tailor-mad. Accounting Software?
Advantages of Customised and Tailor-mad. Accounting Software :
- This software is suitable for medium and large business organization.
- It caters the specific requirements and needs of the users.
- It can be modified as per the needs of the organization.
- It has high level of security and minimizes the loss and unauthorized access of data.
- It cannot be easily mutated or duplicated in the market due to difference in the needs and requirements of different users.
- It does not involve high cost of training as the training can be imparted within the organization by the experienced personnel.
- It can be easily Linked to the other information systems.
- It forms an integral part of the organizational MIS.
Disadvantages of Customized and TaiLor-made Accounting Software :
- It involves high cost of installation and maintenance.
- Developing customized software is a tune-consuming process and involves high cost of development,
- Maintenance of this software is difficult as there exists limited avalibilty of knowledge to the developers.
- It lacks standard training modules.
Question 11. Distinguish Between A Manual And Computerised Accounting System?
The main difference between manual and computerized systems is speed. Accounting software processes data and creates reports much faster than manual systems. Calculations are done automatically in software programs, minimizing errors and increasing efficiency.
The Main difference is:
Speed : The main difference between manual and computerized systems is speed. Accounting software processes data and creates reports much faster than manual systems. Calculations are done automatically in software programs, minimizing errors and increasing efficiency. Once data is input, you can create reports literally by pressing a button in a computerized system.
Cost : Another difference between manual and computerized systems is cost. Manual accounting with paper and pencil is much cheaper than a computerized system, which requires a machine and software. Other expenses associated with accounting software include training and program maintenance. Expenses can add up fast with costs for printers, paper, ink and other supplies.
Backup : A third difference between manual and computerized systems is the ease of backup of a computerized system. All transactions can be saved and backed up, in case of fire or other mishap. You cannot do this with paper records, unless you make copies of all pages–a long and inefficient process.
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Question 12. How Do Automatic Bank Drafts Work?
Automatic Payments : When used synonymously with automatic payment plans, automatic bank drafts are a convenient and paperless means of paying bills whereby funds are debited from one account and credited to another.
ACH System : The Automated Clearing House computerized system processes electronic debit and credit transactions for financial institutions with the assistance of the Federal Reserve. Through the ACH system, funds are moved quickly from one account to another electronically with no paperwork.
Terminology : A business wanting to accept automatic bank drafts for ongoing regular payments or pay bills using automatic bank drafts can set up the process with the appropriate financial institution. Consumers offered this option to pay bills can then authorize the process and begin regular bank drafts to pay recurring bills.
Peachtree Accounting Interview Questions
Question 13. ‘computerised Accounting Systems Are Best Form Of Accounting System’. Do You Agree?
Accounting refers to identifying transactions and events of financial nature, record them in the books of account and produce meaningful information for the users. Thus, the foremost function of accounting is to identify transactions and events of financial nature and record them in the books of account.
Accounting process means preparing vouchers for the transactions, writing them in the Journal, posting the recorded transactions in the Ledger Accounts,drawing Trial Balance and thereafter, preparing the Financial Statements, i.e.,Trading Account, Profit and Loss Account and Balance Sheet.
The accounting process, whether carried out manually or by use of computers generates accounting records such as Cash Book, Bank Book, Journal,Purchases Book, Sales Book, Ledger and Trial Balance. Besides the accounting records certain reports such as Payroll, Stock Report, Statutory Returns (VAT,CST, etc)., Debtors Report, Creditors Report and Exception Report., etc., are also prepared under both the method.
When the accounting is carried out by means of computers, the accounting process remains exactly the same except that posting of recorded transactions to the ledger accounts and also the totaling of individual accounts and drawing of trial balance is carried by the computers with the help of softwares.
An example of Operating Software is “Windows”, “Windows XP” and “Windows Vista” etc. Accounting function is carried out utilizing accounting software. Accounting softwares fall in the category of “Application Softwares”. The end product of accounting process is producing financial statements, i.e., Trading, Profit and Loss Account and the Balance Sheet and the accounting softwares are so designed that the financial statements are produced by the system itself. A credible financial statement can be prepared if the accounting concepts and principles are followed. It necessarily means capital expenditure and capital income or receipts be transferred to Balance Sheet while revenue expenditure and revenue incomes be transferred to Trading, Profit and Loss Account. This objective of accounting can be achieved when the account heads are defined in a manner that capital expenditures and capital incomes form part of the Balance Sheet under appropriate main head. Similarly, revenue expenditure and revenue incomes form part of the Trading, Profit and Loss Account. The process by which this objective is achieved is known as “Grouping of Accounts”.
The process of “Grouping of Accounts” is carried out by giving a code to each main head, sub- heads and thereafter individual account heads. Code of the main head signifies whether the account is an item belonging to assets, liabilities, expenses or incomes. Code of the sub-head signifies the head under which individual account head will appear. Account if wrongly coded, will lead to errors of principle whereby an item of liability may be treated as income and vice versa. Similarly, an item of asset may be treated as expense and vice versa. The financial statements prepared without rectifying such errors will reveal incorrect financial results and position.
Therefore, extreme caution needs to be exercised when grouping of accounts is done and also when the transaction is recorded using computers.
Question 14. ‘accounting Software Is An Integral Part Of The Computerised Accounting System’ Explain. Briefly List The Generic Considerations Before Sourcing An Accounting Software.
It is essential to consider some factors before sourcing an accounting software, i.e.,
1. Flexibility – A computerized accounting system must be flexible in respect of data entry, retrieval of data and generating designs of report. The user should be able to run the software on a variety of computer environments and machines, that is, on any configuration of computers and available operating systems.
2. Cost of Installation and Maintenance – It is a must to consider that the cost of the accounting software, its relevant hardware and the maintenance, cost of addition of modules, training of staff, updating of versions and data recovery in case of data failure are negotiable and within the ability of the organization to afford it.
3. Size of organization – An accounting system must be according to the size of the organization, i.e., volume of business transactions,multi – user requirements.
4. Ease of Adaptation and Training Needs – some accounting softwares are user – friendly and require a simple training to the users. However, some other complex software packages, linked to other information systems, require intensive training on a continuous basis. The software must be capable of attracting users.
5. Expected Level of Secrecy (Software and Data) – Security features of an accounting system software are also important. Software should ensure that it prevents unauthorized access and manipulation of data. In tailored software,the user rights may be restricted according to the departments and their relevant accounting software functions.
6. Exporting/Importing Data Facility – The software should allow easy data transfer option for flexible reporting, such as transfer of information directly from the ledger into the spreadsheet software like Lotus or Excel
Question 15. Give Two Examples Each Of The Organisations Where ‘ready-to-use’, ‘customised’,and ‘tailored’ Accounting Packages Respectively Suitable To Perform The Accounting Activity.
The term ‘ Customised Software’ means making changes in the readymade software to suit the specific requirements of the user, i.e., making it user – specific. The software available off-the-shelf is modified to suit the requirements of the user. For example, the design of the invoice is changed to the specifications of the user. The developer, to meet specific user requirements, can modify all the readymade softwares.
The term ‘Tailor – made software’ refers to designing and developing user –These softwares, being user – specific, are not available off – the shelf but are developed to meet the requirement of the user on the basis of discussion between the users and the developers.
Readymade softwares are the softwares that are developed not for any specific user but for the users in general. Since, the readymade softwares are for general user, it is not necessary that all the modules of such softwares are of use for every user. It is likely that a particular module says ‘Payroll’ may ndot be used because the enterprise has very few employees.
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Question 16. Give Examples Of Two Types Of Operating Systems.
- Unix and Linux are examples of multi-user operating systems used to handle.
- voluminous data and complex reporting requirements.
Question 17. State The Four Basic Requirements Of A Database Applications?
The four basic requirements of database applications are
- Front-end interface.
- Back-end database.
- Data processing.
- Reporting System.
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Question 18. Distinguish Between ‘ready-to-use’ And ‘tailored’ Accounting Software.?
Ready-to-Use Accounting Software :
- This software is used in small and conventional businesses.
- Its adapatability is very high.
- Its interface with the other information system is limited.
- It has limited users.
- The installation and maintenance cost is Low.
Tailored Accounting Software :
- This software is used in large and typical businesses.
- Its adaptability is very specific and cannot be used by every business houses.
- Its interface with the other information system is unlimited.
- It has huge number of users.
- The installation and maintenance cost is comparatively higher.
General Accounting Interview Questions
Question 19. What Is The Need Of Computerized Accounting?
Need for Computerized Accounting:
The need for computerized accounting arises from advantages of speed, accuracy and lower cost of handling the business transactions.
Numerous Transactions: The computerized accounting system is capable of large number of transactions with speed and accuracy.
Instant Reporting: It is capable of offering quick and quality reporting because of its speed and accuracy.
Reduction in Paper Work: Manual accounting system requires large storage space to keep accounting records/books, and vouchers/documents. The requirement of books and stationery and books of accounts along with vouchers and documents is directly dependent on the volume of transactions beyond certain point.
There is a dire need to reduce the paper work and dispense with large volume of books of account. This can be achieved with the help of computerized accounting system.
Flexible Reporting: The reporting is flexible in computerized accounting system. It is capable of generating reports of any balance as when required and for any duration which is within the accounting period.
Accounting Queries: There are accounting queries, which are based on some external parameters. For example, a query relating to overdue customers’ accounts can be easily answered by using the structured query language [SQL] support of database technology in the computerized accounting system. Such an exercise would be quite difficult and expensive in manual accounting system.
Online Facility: Computerized accounting system offers online facility to store and process transaction data so as to retrieve information to generate and view financial reports.
Accuracy: The information and reports generated are accurate and quite reliable for decision-making. In manual accounting system, as many people do the job and the volume of transactions is quite large, such information and reports are likely to be distorted and unreliable and inaccurate.
Security: This system is highly secured and the data and information can be kept confidential, when compared to manual accounting system.
Scalability: The system can cope easily with the increase in the volume of business. It requires only additional data operators for storing additional vouchers.
Question 20. What Is Computerized Payroll Accounting?
Computerized payroll accounting systems allow you to process all your normal payroll tasks via a computerized system, rather than by hand. Essentials like name, address, Social Security number and withholding rate for each employee are automatically filled in for every pay period until you make an employee’s record inactive. Many different vendors offer computerized payroll systems. Like different word processors or other computer programs, they largely offer the same types of features with slightly different interfaces.
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