Question

Why do you think you need to understand manual and computer-based accounting systems? What part does internal control and governance play?

Answer 1

Solution:-

Why do you think you need to understand manual and computer-based accounting systems:-

An accounting system is a set of records and the procedures and equipment used to perform the accounting functions. Manual systems consist of journals and ledgers on paper. Computerized accounting systems consist of accounting software, computer files, computers, and related peripheral equipment such as printers.

Regardless of the system, the functions of accountants include:

1. observing, identifying, and measuring economic events;
2. recording, classifying, and summarizing measurements; and
3. reporting economic events and interpreting financial statements.

Both internal and external users tell accountants their information needs. The accounting system enables a company’s accounting staff to supply relevant accounting information to meet those needs. As internal and external users make decisions that become economic events, the cycle of information, decisions, and economic events begins again.

The computer automatically performs some of the steps in the accounting cycle, such as posting journal entries to the ledger accounts, closing the books, and preparing the financial statements. However, if you understand all of the steps in the accounting cycle, you will better understand how to use the resulting data in decision making. We need to understand the how to follow the accounting process manually so that in the event there is an error made from a computerized system, you can “unwind” what was done from software with our knowledge of how to do things manually.

What part does internal control and governance play:-

Internal corporate governance controls (internal controls) play a vital role in ensuring the success of a business organization and preventing corporate fraud.

Internal control activities that ensure proper corporate governance include:

• Monitoring by board
• Internal audits and robust policies
• Proper balance of power
• Performance based remuneration
• Monitoring by large shareholders and other stakeholders