Computerised Accounting

and Enterprise Resource

Planning (BRM 103)
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Unit-1
(Introduction of Computerised Accounting: Basic of Computerized Accounting : Meaning
Importance Difference of Computerized and traditional accounting ; Origin, Meaning, Definition,
Need, Importance, Functions, Limitations, Accounting principles, Generally accepted accounting
principles, Accounting equation, Double entry system. Recording Transactions: Journal, Ledger and
Trial Balance)
• Computerised Accounting refers to the system of maintaining
accounts with the help of accounting software on computers.
• “Computerised Accounting is an accounting information system
that processes financial transactions using computer software,
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following the accounting principles and producing reports for
decision-making.”
• It automates tasks such as recording, classifying,
summarizing, and reporting of financial data.
• Examples of popular accounting software: Tally, QuickBooks,
SAP, Oracle Financials.
Origin:
• Early 20th century: accounting done manually.
• 1950s onwards: with computers, businesses started shifting
towards automated systems.
• 1980s: launch of Tally and similar packages revolutionized
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accounting.
Importance of Computerised Accounting
• Accuracy: Reduces human errors like wrong posting, totalling mistakes, etc.
• Speed: Transactions are processed quickly, generating instant reports.
• Data Security: Information can be stored with passwords, encryption, and
backup systems.
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• Cost-Effective (long run): Saves expenses on clerical staff, physical registers,

and paper storage.
• Regulatory Compliance: Many systems are updated with taxation laws (e.g.,
GST, Income Tax).
• Decision-Making Support: Management can analyse reports and make
decisions quickly.
• Integration with ERP: Links with inventory, sales, HR, and production.
Basis of Difference Traditional (Manual) Accounting Computerised Accounting

Books of original entry (journals,

Method Uses software programs
ledgers) maintained manually

Speed Very slow and time-consuming Fast and real-time

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Accuracy Prone to human errors Very high, due to automation

Storage Requires physical space for registers Requires digital space (cloud or disk)

Reports Prepared manually, takes days Generated instantly

Lower initial cost, higher running cost Higher initial software cost, lower
Cost
(labor, space) running

Backup & Recovery Difficult, once books are lost/damaged Easy backups, quick recovery

Scalability Not suitable for large businesses Can handle large volumes easily
Limitations of Computerised
Accounting
• High Initial Cost: Purchasing software, hardware, and
training staff.
• Technical Issues: System failures, software bugs.
• Cyber Threats: Hacking, malware, and data theft risks.
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• Dependence on Technology: Power failure, hardware

breakdowns may halt operations.
• Skill Requirement: Trained staff is essential.
• Updates Needed: Regular updates for taxation and new
business needs.
Accounting Principles
• Accounting principles are basic rules, assumptions, and
guidelines that govern how financial transactions should be
recorded and reported.
• They provide consistency, comparability, and reliability in
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financial statements.
• Without principles, each accountant might record
transactions differently, leading to confusion.
Characteristics of Accounting Principles
• Universally Accepted: Followed globally or nationally
(GAAP/IFRS).
• Consistency: Applied year after year, unless a justified change
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• Relevance: Provide useful information for decision-making.

• Reliability: Based on verifiable data, not personal judgment.
• Comparability: Allow comparison across time periods and
with other businesses.
• Flexibility: Can evolve with changes in business and law.
(a) Business Entity Concept
o A business is treated as separate from its owner(s).
o Personal transactions of the owner are not mixed with business accounts.
Example: Owner invests ₹1,00,000 → recorded as Capital, not income.
(b) Going Concern Concept
o Assumes that business will continue for the foreseeable future.
o Assets are recorded at cost, not liquidation
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value.
Example: Machinery worth ₹5 lakh is recorded at cost, not at its resale value.
(c) Money Measurement Concept
o Only transactions measurable in money are recorded.
Example: Quality of employees, reputation, brand value are not recorded in
accounts.
(d) Cost Concept
o Assets are recorded at their original purchase price (including all costs to
bring asset into use).
Example: A building purchased for ₹50 lakh is recorded at that amount, even
if its market value rises to ₹80 lakh.
(e) Dual Aspect Concept
o Every transaction has two aspects: Debit & Credit.
o Foundation of the Double Entry System.
Equation:
o Assets=Liabilities+Capital

(f) Accrual Concept

o Revenues and expenses are recognized when they are earned or incurred, not when cash is received or
paid.
Example: Rent for March (₹10,000) is payable in April → still recorded in March books.
(g) Matching Concept
o Expenses must be matched with the revenue they
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helped to generate.
Example: Cost of goods sold is recorded in the same year when related sales revenue is recognized.
(h) Consistency Concept
o The same accounting methods should be used year after year to ensure comparability.
o A change is allowed only if it improves reliability and must be disclosed.
(i) Conservatism (Prudence) Concept
o “Anticipate no profits, but provide for all possible losses.”
o Helps avoid overstatement of profits or assets.
Example: Inventory is valued at cost or market price, whichever is lower.
(j) Realization Concept
o Revenue is recognized when goods or services are delivered, not when cash is received.
Example: Goods worth ₹20,000 sold on credit → Sales recorded immediately, even if payment comes later.
Generally Accepted Accounting Principles
(GAAP)
• GAAP is a framework of accounting standards, rules, and
procedures recognized by professional bodies and
governments.
• It ensures uniformity in preparation of financial
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statements.
• In India → Accounting Standards are issued by ICAI
(Institute of Chartered Accountants of India), based on
GAAP & converging towards IFRS (International Financial
Reporting Standards).
Objectives of GAAP
• Uniformity: Same set of rules across all firms.
• Transparency: Clear and honest reporting of financials.
• Comparability: Across companies and industries.
• Reliability: Helps investors, creditors, and management
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trust the data.

• Legal Compliance: Many laws (like Companies Act, 2013)
require GAAP-based accounts.
• Principle of Regularity – GAAP rules must be strictly followed.
• Principle of Consistency – Same methods used across accounting periods.
• Principle of Sincerity – Accountant should present an honest and accurate picture.
• Principle of Permanence of Methods – Same accounting methods applied consistently.
• Principle of Non-Compensation – Assets and liabilities, revenues and expenses cannot be
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offset unless permitted.
• Principle of Prudence (Conservatism) – Do not overstate assets or income.
• Principle of Continuity (Going Concern) – Assets valued as if the business will continue.
• Principle of Periodicity – Financial reporting must be done at regular intervals (quarterly,
yearly).
• Principle of Full Disclosure – All significant information must be disclosed in
statements/notes.
• Principle of Materiality – Only significant information that influences decision-making is
reported.
Accounting Equation
• Assets=Liabilities+Capital
• Assets: What a business owns (cash, stock, machinery).
• Liabilities: What a business owes (creditors, loans).
• Capital: Owner’s investment +Karan
profits retained.
• Example:
Owner invests ₹1,00,000 in business.
• Cash (Asset) = ₹1,00,000
• Capital = ₹1,00,000 Karan

Thus: Assets (1,00,000) = Liabilities (0) + Capital (1,00,000)

Double Entry
System Karan

Each transaction affects two

accounts – one debit, one credit.
• Real A/c (Assets, Possessions,
Property)
• Personal A/c (individuals, firms,
companies)
• Nominal A/c (expenses, losses,
incomes, gains)
• Paid rent ₹5,000 in cash →
o Rent A/c (Nominal – expense) → Debit ₹5,000
o Cash A/c (Real – asset goes out) → Credit ₹5,000
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Q- The following transactions took place in the books of Mr. Raj
during April 2025. Record them in Journal Entries, post them into
Ledger Accounts, and prepare a Trial Balance as on 30th April
2025.
Transactions
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• Commenced business with cash ₹50,000

• Purchased goods for cash ₹20,000
• Sold goods for cash ₹15,000
• Paid rent ₹2,000
• Purchased furniture for cash ₹10,000
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 Date Particulars Debit (₹) Credit (₹)

01-Apr-25 Cash A/c Dr. 50,000

To Capital A/c 50,000

(Being business commenced with cash)

02-Apr-25 Purchases A/c Dr. 20,000

•Journal Entries To Cash A/c 20,000

(Being goods purchased for cash)

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05-Apr-25 Cash A/c Dr. 15,000

To Sales A/c 15,000

(Being goods sold for cash)

10-Apr-25 Rent A/c Dr. 2,000

To Cash A/c 2,000

(Being rent paid)

15-Apr-25 Furniture A/c Dr. 10,000

To Cash A/c 10,000

(Being furniture purchased for cash)

• Opened a bank account in State Bank of India with an
amount of 4,80,000.
• Bought furniture for ` 60,000 and cheque was issued on the
same day. Karan

• Bought plant and machinery for the business for ` 1,25,000

and an advance of ` 10,000 in cash is paid to M/s Ramjee Lal.`
• Goods purchased from M/s Sumit Traders for ` 55,000.
• 5. Goods costing ` 25,000 sold to Rajani Enterprises for `
35,000.
• Business started with cash ` 1,50,000.
• Goods purchased form Manisha ` 36,000.
• Stationery purchased for cash ` 2,200.
• Open a bank account with SBI for ` 35,000.
• Goods sold to Priya for ` 16,000.
• Received a cheque of ` 16,000 from Priya.
• Sold goods to Nidhi ` 14,000.
• Nidhi pays ` 14,000 cash.
• Purchased goods for ` 20,000 on credit from Ritu.
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• Insurance paid by cheque ` 6,000.
• Paid rent ` 2,000.
• Goods costing ` 1,500 given as charity.
• Purchased office furniture for ` 11,200.
• Cash withdrawn for household purposes ` 5000.
• Interest received cash ` 1,200.
• Cash sales ` 2,300.
• Commission paid ` 3,000 by cehque.
• Telephone bill paid by cheque ` 2,000.
• Business commenced with a capital of ` 6,00,000.
• 4,50,000 deposited in a bank account.
• 2,30,000 Plant and Machinery Purchased by paying ` 30,000 cash
immediately.
• Purchased goods worth ` 40,000 for cash and ` 45,000 on account.
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• Paid a cheque of ` 2, 00,000 to the supplier for Plant and Machinery.

• 70,000 cash sales (of goods costing ` 50,000).
• Withdrawn by the proprietor ` 35,000 cash for personal use.
• Insurance paid by cheque of ` 2,500.
• Salary of ` 5,500 outstanding.
• Furniture of ` 30,000 purchased in cash.
Prepare Cash Ledger

• Sept. 01 Bank balance 42,000

• Sept. 01 Cash balance 15,000
• Sept. 04 Purchased goods by cheque 12,000
• Sept. 08 Sales of goods for cash 6,000 Karan

• Sept. 13 Purchased machinery by cheque 5,500

• Sept. 16 Sold goods and received cheque (deposited same day) 4,500
• Sept. 17 Purchase goods from Mriaula in cash 17,400
• Sept. 20 Purchase stationery by cheque 1,100
• Sept. 24 Cheque given to Rohit 1,500
• Sept. 27 Cash withdrawn from bank 10,000
• Sept. 30 Rent paid by cheque 2,500
• Sept. 30 Paid salary 3,500
Prepare double column cash book of M/s Advance Technology Pvt. Ltd.
for the month of December 2024 from the following transactions :
• Dec. 01 Cash in hand 3,065, Cash at bank 6,780
• Dec. 02 Cash paid to petty cashier 1,000
• Dec. 03 Received cheque from Priya 3,000
• Dec. 04 Cash sales 2,000
• Dec. 05 Deposited into bank 1,200
• Dec. 06 Priya’s cheque deposited into bank 3,000
• Dec. 08 Purchased furniture by cheque 6,500
• Dec. 10 Paid trade expenses 400
• Dec. 12 Cash sales 9,000
• Dec. 13 Bank charges 300
• Dec. 15 Dividend collected by bank 1,200
• Dec. 16 Paid electric bill by cheque 600
• Dec. 17 Cash purchases 2,000 Karan
• Dec. 19 Paid for advertising 1,000
• Dec. 21 Goods sold and received a cheque 6,000 (deposited same day)
• Dec. 22 Paid legal charges 500
• Dec. 23 Drew from bank for personal use 2,000
• Dec. 24 Paid establishment expenses 340
• Dec. 25 Paid for printing of bill book 850
• Dec. 26 Paid insurance premium by cheque 2,150
• Dec. 27 Cash sales 7,200
• Dec. 28 Paid salary by cheque 4,000
• Dec. 29 Rent paid 3,000
• Dec. 30 Commission received by cheque 2,500 (deposited same day)
• Dec. 31 Paid for charity by cheque 800
• Errors of Commission: These occur when a transaction is recorded, but entered
incorrectly in the books of accounts. Example: Writing ₹5,000 instead of ₹500 in the
Sales Book, or posting an amount to the wrong customer’s account.

• Errors of Omission: These occur when a transaction is completely or partially not

recorded in the books. Example: Forgetting to enter a cash sale of ₹1,000 in the Cash
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Book.

• Errors of Principle: These occur when a transaction is recorded but against accounting
principles (wrong classification of capital and revenue, assets and expenses). Example:
Treating purchase of furniture (capital expenditure) as an expense in the Purchase Book.

• Compensating Errors: These are errors that cancel each other out in the trial balance.
Example: Excess debit of ₹500 in one account and excess credit of ₹500 in another
account.