Computers have become part and parcel of the accounting industry. Today, we cannot imagine accounting without the help of computers. There are various uses of computer in accounting ranging from helping customers to making financial decisions in the company.
The computers in accounting are used in recording, summarizing, sorting, retrieving, storing the financial transactions, and for generating the report of analysis. The accountants undergo special training for learning the essential software of the accounting process. Therefore computers are an essential part of accounting.
What is role of computer in accounting?
- To keep records of financial transaction
- To make decision on basis of data
- To design the accounting reports
- To develop Accounting Information System (AIS)
- To develop in Management Information System (MIS)
- To generate salaries and payroll
- To generate sales ledger
- To account stock market data
- To keep the private data secure
- To minimize the accounting error
Top 5 Uses/Application of Computers in Accounting (Infographic)
The accounting sector is one of the places where computers are integrating to assist the learning of the students. There are various uses of computers in different industries that increased their growth exponentially in less than a decade.
First let’s discuss Top 10 uses of computers in accounting in greater detail.
Use of computers to keep records
The computer in accounting is used for keeping the records of the financial transaction of an organization.
Before computers were introduced into accounting, the bookkeepers were responsible for handling all the financial transactions within the organization. With the innovations in technology, we’re able to provide machines that were capable of performing the required accounting function.
For example, a billing machine, which was the combination of a typewriter and many calculators. The billing machine was able to record the various transactions that the customer did in the organization and to obtain the bill the accountant has to enter the name of the customer and the purchased items and the billing machine will store the record similar to the bookkeeper.
Use of computer in decision making
Every organization requires various decisions to be made and these decisions are made based on information that an organization contains in its database.
The organization works based on various independent decisions that occur within the company. and these decisions can only be made if the company has enough data. For example, if the company is running its website then this data can be required to analyze the performance of its products. The tracking of the data helps the company to make decisions on their experience and results that come from analyzing the data.
the collected data and the analysis of the data helps to make a decision that helps the organization in pursuit of its objective
Use of computer in designing accounting report
The computers are required in designing various reports that help in the operation within the organization.
Many accounting reports are required for making decisions. An effectively designed accounting report greatly helps the decision-making process. The computer system has a specific software application that helps in the creation of the report. In these computer applications, the accountant is required to fill some required columns and the computer application will generate the report based on standard templates.
there are various reports in accounting that require computer application such as customer/supplier report, demand report, responsibility reports, etc. let’s take the example of the customer and supplier report where the manager can require the accountant to prepare the report based on the invoices and statement of the customer to find the loyal customer to the organization.
Use of computer in Accounting Information System (AIS)
The computers are required in the Accounting Information System (AIS) which involves the transformation of financial and other data into information.
The Accounting Information System is responsible for producing reports such as customer lists, tax calculation, depreciation in assets, inventory information, etc. the purpose of the Accounting Information System is to collect the data and information that can help in decision making.
The data obtained from the Accounting Information system (AIS) are provided to both the internal users and external users. The internal users are the managers and staff of the organization whereas the external users are the investors, creditors, tax authorities, government bodies, etc. which also require these reports to make decisions.
The AIS reports are provided on a day to day basis and they contain the report of many financial indicators performance and these reports also ensure whether these indicators are responding to the desired results.
Use of computer in Management Information System
The computers are required in management Information systems which aid in the management decision making.
The management information system is generated with the help of an accounting information system. The management information system collects the required data such as financial reports, R&D, project timelines, raw materials, etc. these data requires various accounting function and calculations therefore the data is transferred to the Accounting information system that performs the calculation over the data and then the reports from the accounting system information are sent back to the management information system.
The reports from the accounting information system are then incorporated into the management information system to provide the management reports. For example, these reports can help to compare the sales generated each month and correspond these reports with the marketing expenditure and find the patterns that can help to boost the revenue inside the company.
Use of computer in generating salaries and payroll
The computers are commonly used in generating the payrolls and salaries of the employees within the organization and this is done by the accountant.
Many numbers of employees are working within the organization. The employees work in different departments and based on their work, the salary has to be decided. When the human resource manager decides the salary which has to be allotted to the employee working in the particular department then a specific amount is provided to the accountant which is responsible for calculating the in-hand salary of the employees. This is the salary that the employee receives after the reduction of taxes and other expenses.
These calculations required the need for computer software that can perform various accounting functions for calculating the payroll and the payslips of the employees. Accountants are generally trained to use these software tools and the software tools help in tracking and analyzing the salary of the employees.
When the human resource manager decides that the employee should get a salary hike then the human resource manager informs his Accountant and the Accountants recalculate the payroll of the employee.
Use of computer in generating sales ledger
The computers are used for generating the sales ledgers that are required for tracking, researching, and auditing for the debtors.
The sales ledger is an organized list of the items being sold in the organization. the sales ledger measures the list by having the name of the buyer along with the invoice number and the taxes and the other charges that he has paid along with the cost of the item. The sales ledger is then used for tracking the sales of the items and doing the research based on the item organized list of the products that are being sold popularly in the shop.
The sales ledgers can easily be done on a spreadsheet-based software such as a Tally or MS Excel. The accountants are trained in maintaining the sales ledger of the organization and they are well trained for using these software applications.
Uses of computers in accounting the stock market information
The computers are used in real-time tracking of the stock market prices and thereby accounting for any calculations that the investors require for purchasing or selling of the stock.
The prices of the stocks are fluctuating every second and the investor has to decide between buying or selling the stock by considering various factors. When the investors buy a stock then the accounting is done with the help of the computer. The computer then calculates the price of the stock at which the investor has bought it and by multiples the units Of the stock with the price of the stock at that time accounting for the overall cost. Later on when the investor wants to sell stocks then the accounting for the exit toll can be done at the selling time.
Use of computer to keep the data secure
The computers are used in accounting for keeping the data secure from breaches and other malicious activities.
The data that is present in the organization database is very important for decision making. The competitors always try to get their hands in the database of the other company, the computer does so that it can gain the insights of the Other organization and have a competitive edge. Some of the data reorganizations make it public but some data that is private to the company should not be exposed under any cases.
In such a situation the computers are installed with firewalls and other security programs that keep the Intruder from getting into the organization’s database. And it is also the responsibility of the organization to maintain the security of the company by investing in the IT Department because the database contains the records of their investors, customers suppliers, employees, etc and therefore this becomes the responsibility of the organization to keep the information safe and secure.
Use of computer to manual errors
The computer programs can minimize the errors that occur due to manual errors. With the help of accounting programs the accountant can easily identify the manual errors in entering the numbers in the software.
Earlier when the accounting was done on the handbooks then it was not easy for the errors to be found in the calculation and it would take days and nights to find the place where the error occurred.
Computers have become part and parcel of accounting. There are many jobs that the accountant has to do that are possible without the aid of the computer. With the innovation in the field of computer science, accounting is destined towards progress.
Frequently Asked Question (FAQ)
Why computer is so important for accounting?
Computers are very important for accounting as they make the process of accounting simpler, more accurate, and faster. Accounting allows a business to access financial transaction data and helps to prepare reports on which important business decisions are based.
What computer skills do accountants need?
Many soft skills are required in the field of accounting such as advanced excel, big data analysis, business intelligence, PowerPoint skills, MS visual basic, and many more.
What are the uses of computer in accounting?
Computers are used in accounting to keep record of financial transaction, design accounting report, generate salaries and payroll, generate sales ledger, minimize the accounting error, decision making, and many more
What are the main uses of accounting?
The main uses of accounting are assessing business performance, taking financial decisions, budgeting and planning, recording the transactions, controlling the cash flow, controlling the financial liquidity, and many more.
What is computer accounting?
Computerized accounting is utilized in the accounting information system that is responsible to process the financial transaction. Computerized accounting produces reports based on the principle of accounting.
Aayush Kumar Gupta is the founder and creator of ExploringBits, a website dedicated to providing useful content for people passionate about Engineering and Technology. Aayush has completed his Bachelor of Technology (Computer Science & Engineering) from 2018-2022. From July 2022, Aayush has been working as a full-time Devops Engineer.