Full Text Transcript
15
A I C E
CCOUNTING N OMPUTERISED NVIRONMENT
BASIC CONCEPTS
(cid:190) Role of Computer in accountancy
• Controlling operations
• Deciding sequence of operations
• Accounting operations
(cid:190) Consideration for Selection of Pre-Packaged Accounting Software
• Fulfilment of business requirements
• Completeness of reports
• Ease of use
• Cost
• Reputation of the vendor
• Regular updates
(cid:190) Choice of an ERP
• Functional requirement of the organisation
• Reports available in the ERP
• Background of the vendors
Question 1
What are the advantages and disadvantages of ERP package? (May, 2007)
Answer
Larger organisations often go for an ERP package where finance comes as a module. An ERP is
an integrated software package that manages the business process across the entire enterprise.
© The Institute of Chartered Accountants of India
Accounting In Computerised Environment
Advantages of using an ERP
The advantages of using an ERP for maintaining accounts are as follows:
1. Standardised processes and procedures : An ERP is a generalised package which covers
most of the common functionalities of any specific module.
2. Standardised reporting : Majority of the desired reports are available in an ERP package.
These reports are standardised across industry and are generally acceptable to the users.
3. Duplication of data entry is avoided as it is an integrated package.
4. Greater information is available through the package.
Disadvantages of an ERP
The disadvantages of an ERP are the following:
1. Lesser flexibility : The user may have to modify their business procedure at times to be able
to effectively use the ERP.
2. Implementation hurdles : Many of the consultants doing the implementation of the ERP may
not be able to fully appreciate the business procedure to be able to do a good implementation
of an ERP.
3. Very expensive : ERP are normally priced at an amount which is often beyond the reach of
small and medium sized organisation. However, there are some ERP coming into the market
which are moderately priced and may be useful to the small businesses.
4. Complexity of the software : Generally an ERP package has large number of options to
choose from. Further the parameter settings and configuration makes it a little complex for the
common users.
Question 2
What are the advantages of outsourcing the accounting functions? (November, 2007)
Answer
Following are the advantages of outsourcing the accounting functions:
(i) The organisation that outsources its accounting function is able to save time to concentrate
on the core area of business activity.
(ii) The organisation is able to utilise the expertise of the third party in undertaking the
accounting work.
(iii) Storage and maintenance of the data is in the hand of professional people.
(iv) The organisation is not bothered about people leaving the organisation in key accounting
positions.
(v) The proposition is proving to be economically more sensible.
© The Institute of Chartered Accountants of India
15.2
Accounting
Question 3
Explain the factors to be considered before selecting the pre-packaged accounting software.
(May, 2008)
Answer
There are many accounting softwares available in the market. To choose the accounting software
appropriate to the need of the organization is a difficult task, some of the criteria for selection could
be the following:
1. Fulfillment of business requirements: Some packages have few functionalities more than
the others. The purchaser may try to match his requirement with the available solutions.
2. Completeness of reports: Some packages might provide extra reports or the reports match
the requirements more than the others.
3. Ease of Use: Some packages could be very detailed and cumbersome compare to the
others.
4. Cost: The budgetary constraints could be an important deciding factor. A package having
more features cannot be opted because of the prohibitive costs.
5. Reputation of vendor: Vendor support is essential for any software. A stable vendor with
good reputation and track records will always be preferred.
6. Regular updates: Law is changing frequently. A vendor who is prepared to give updates will
be preferred to a vendor unwilling to give updates.
Question 4
What are the advantages of customised accounting packages? (November, 2008)
Answer
Following are the advantages of the customised accounting packages:
1. The functional areas that would otherwise have not been covered gets computerised.
2. The input screens can be tailor made to match the input documents for ease of data entry.
3. The reports can be as per the specification of the organisation. Many additional MIS reports
can be included in the list of reports.
4. Bar-code scanners can be used as input devices suitable for the specific needs of an
individual organisation.
5. The system can suitably match with the organisational structure of the company.
© The Institute of Chartered Accountants of India
15.3
Accounting In Computerised Environment
Question 5
“Recently a growing trend has developed for outsourcing the accounting function”. Explain the
advantages and disadvantages of outsourcing the accounting functions. (November, 2010)
Answer
Recently a growing trend has developed for outsourcing the accounting function to a third
party. The consideration for doing this is to save cost and to utilise the expertise of the
outsourced party.
Advantages
1. The organisation that outsources is able to save time to concentrate on the core area of
business activity.
2. Storage and maintenance of the data is in the hands of professional people.
3. The organisation is able to utilise the expertise of the third party.
4. The organisation is not bothered about people leaving the organisation in key accounting
positions.
Disadvantages
1. The third party may unable to meet the standards desirable.
2. The cost may ultimately be higher.
3. The data of the organisation are handed over to the third party. This raises two issues of
security and confidentiality.
4. Delays in obtaining services.
© The Institute of Chartered Accountants of India
15.4