Computerised accounting systems

Accounting A2 · Financial accounting. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.

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The idea

Moving from manual books to accounting software is a planned project. The business chooses suitable software and hardware, sets up a chart of accounts with a code for each account, and creates records for every customer, supplier and inventory item. At a chosen cut-off date the closing balances of the manual books are entered as the opening balances of the new system.

The danger is that data is lost or changed on the way. Data integrity means the figures in the new system are complete, accurate and safe from unauthorised change. It is protected by checks at the time of transfer and by controls afterwards. Staff also need training, and many businesses use parallel running for a time.

Rules to remember

Transfer at a clear cut-off date, usually a period end, after the manual books have been balanced and checked.
After the transfer, print a trial balance from the new system and agree it with the closing manual trial balance.
Agree the totals of the customer and supplier accounts with the control account balances, and the inventory records with a physical count.
Parallel running: keep the manual and the computerised systems together for a period and compare the results.
Passwords and access levels limit who can enter or change data; an audit trail records who did what and when.
Take regular back-ups and store a copy away from the premises.
Keep the manual records until the new system has been checked.

Common mistake

Students say that a computerised system cannot contain errors. It removes arithmetic errors, but wrong data entered at the transfer stays wrong, so the opening balances must be checked.

Worked example

A business transfers its ledger balances to new software at 30 June. The opening balances entered total $412 600 debit and $410 800 credit. What does this show, and what should be done before any new transactions are posted?

The manual trial balance agreed, so a correct transfer must also give equal debits and credits.
The difference is $412 600 − $410 800 = $1800, so a credit balance has been left out or a balance has been entered wrongly.
Each opening balance should be compared with the closing manual trial balance until the difference is found and corrected.

Answer: The transfer is incomplete or inaccurate by $1800; the opening balances must be checked against the manual trial balance and corrected first.

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