Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.1 Chapter 22 Computers and accounting

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.2 Learning objectives After you have studied this chapter, you should be able to:  Explain that different computer hardware configurations are used, depending largely upon company size  Explain why financial accounting packages tend to be bought ‘off-the-shelf’, possibly customised to the business, or the software (particularly in larger companies) may be commissioned from computer software specialists either within the business or from external agencies

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.3 Learning objectives (Continued)  Explain why accountants use spreadsheets to write many of their own computer programs, particularly for managerial accounting purposes  Explain that an accounting information system is just one part of the management information system  Describe the structure and flexibility of spreadsheets

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.4 Learning objectives (Continued)  Explain why a database package is a useful tool  Explain the importance of backing up data in a computerised environment  Explain the importance of and benefits of the use of passwords  Describe the requirements and implications of the Data Protection Act 1998

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.5 Computers in accounting  Computers can be used to complete a virtually every task in the entire accounting function.  Systems used include spreadsheets, databases and accounting software that can be specially written for the particular company.  However they are used, the operator needs to understand the accounting processes.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.6 Large versus small systems  The scale of technology a business uses will vary according to the needs of a business.  A large company may use a networked system so that all staff can access the accounting system as needed.  A small company may have one stand- alone computer operated by one person.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.7 Networks  Where a central computer is used to hold the data, terminals are networked together via wires or the Internet.  A network can be over a smaller area, known as a local area network (LAN), or a wider area, known as a wide area network (WAN).  Some networks hold an internal form on the Internet, known as an intranet.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.8 Software  Small or medium-sized businesses will use purchased off-the-shelf software packages.  These sorts of packages can usually be customised to the needs of an organisation.  Larger businesses will develop their own software in-house or have it written for them by an outside business.  These sorts of bespoke systems will be tailored to exactly what the business wants.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide 22.9 Benefits from computers The benefits of using a computerised accounting system include:  Saving time in transaction processing  Increased accuracy  Immediate production of reports  More efficient use of time

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Spreadsheets  The spreadsheet is a very popular tool for accountants.  Spreadsheets allow data to be entered into a large area of cells and calculations can be made from this data.  Data can be changed at any time and new results will be shown immediately meaning that the effects of decisions can be seen.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Use of spreadsheets  Financial plans and budgets, with columns for time periods.  Tax, investment and loan calculations.  Statistics using the built-in functions  Consolidations.  Multi-dimensional spreadsheets for deeper analysis of data.  Currency conversion.  Timetabling and roster planning of staff.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Databases  A database is a collection of related files that can be organised into records, for example inventory.  For instance, you could have fields for reference, description, quantity, reorder level and so on, that are updated regularly.  A database is more flexible and cheaper than an accounting package.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Data back-ups  Backing-up is the most important task when using a computer.  Backing-up simply means to copy the relevant files to another storage medium.  It means that if anything goes wrong with the data, the business can revert to the back-up.  Most software packages routinely back-up in case of disaster.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Passwords  It is usual for both a computer and an accounting package to be passworded.  Passwords can restrict access to certain parts of the computer system.  This ensures that management have tighter control of the system and that the system is not exposed to all operators.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Data security  Businesses that use computers and hold the personal details of individuals need to register with the Information Commissioner’s Office.  The business must declare what information they have access to and what uses that information will have.  This ensures that individuals are aware of what information is being held about them and allows them access to this information.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Data Protection Act 1998 The DPA 1998 holds that: 1. Personal data shall be processed fairly and lawfully. 2. Personal data shall only be obtained for the specified purposes. 3. Personal data shall be adequate, relevant and not excessive. 4. Personal data shall be accurate.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Data Protection Act 1998 (Continued) 5. Personal data shall not be kept for longer than is necessary. 6. Personal data shall be processed in accordance with the rights of the data subjects. 7. Measures will be taken against unauthorised or unlawful processing, or accidental loss, damage or destruction of personal data. 8. Personal data shall not be transferred.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Learning outcomes You should have now learnt that: 1. Computers can be and normally are linked together when they are used as part of the accounting system. 2. Software may be written from scratch or bought ‘off-the-shelf’. 3. Software bought ‘off-the-shelf’ is often customised to fit the needs of the organisation.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Learning outcomes (Continued) 4. Accounting information systems are just one part of an overall management information system. 5. Output can be excessive and cause information overload if not controlled to ensure it is useful to the person who receives it. 6. Spreadsheets are in general use by accountants who commonly develop their own software applications with them. 7. Databases are well suited to recording facts such as names, addresses and stock levels.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12 th Edition, © Pearson Education Limited 2012 Slide Learning outcomes (Continued) 8. Backing up data is an essential task in a computerised environment. 9. Use of passwords assists in limiting access to parts of an information system and to the system as a whole and should not be ignored, particularly as the Internet has opened up the possibility of information systems being penetrated by outsiders. 10. The Data Protection Act 1998 must be observed when personal data is held on computer.