Question

1: Understand the application of professional knowledge and skills in the workplace (max. 200 words). • As a professional accountant, how would the process for completing the practice set assignment (a manual accounting process) be used in an accounting department. Explain whether communication, teamwork, time management and interpersonal skills play a role in completing this process within an accounting department?

• When (why) would you use this manual accounting system rather than a computerised accounting system?

• What are the benefits and limitations of each type of system (manual vs computer

Answer 1

Understand the application of professional knowledge and skills in the workplace (max. 200 words). • As a professional accountant, how would the process for completing the practice set assignment (a manual accounting process) be used in an accounting department. Explain whether communication, teamwork, time management and interpersonal skills play a role in completing this process within an accounting department?

1) Identify The Event

2) Recording The Transaction

3) Classifying

4) Summarising

5) Financial Statement

6) Communicating the Information

Identify The Event

The first step is to identify the event. Ie to recognized the transaction of monetary nature.

As the event comprising of monetary value (value in money terms) is cable of being recorded.

Recording

The Next step is to record the events in the form of journal entries.

Proper Journal Format is being prepared to record the transaction.

Date

Particular

JF

Debit

Credit

Classifying

After Recording the transactions in journal entries, Ledgers are being made to Classify the accounts.

Every Account recorded in Journal entries is classified in Ledger.

Dr                                                                                                                                                                        Cr.

Date

Particular

L.F

Amount

Date

Particular

L.F

Amount

Summarizing

The next step is to Summarize all the ledger account by preparing Trial Balance.

Trial balance consist of the closing balance of each account.

Particular

Debit

Credit

Financial Statement

After the preparation of trial balance, Financial Statement is made (Final Accounts)

It comprises of

· Trading and Profit & Loss A/C

· Balance Sheet

Note * Trial Balance have to be adjusted according to adjustment in journal entries(during the period) before making financial Statements.

· Trading and Profit & Loss A/C gives the information about Gross Profit and Net Profit Respectively.

· Balance sheet consist of liabilities and Assets which shows the actual position of the company in the market

Communicating the information

After the preparation of final accounts, i.e after preparing Trading and Profit & Loss A/C and Balance Sheet, Information contained in theses account is being communicated to the interested parties.

Parties interested/ Stakeholders:

Shareholders - They reqire information to ensure that their funds are being properly utilized.

Debenture holders- They require information to ensure that the company has the capacity to pay its debts

Creditors – They require information to ensure that company has sufficient liquidity.As their funds are being due from the company

Management- They require information to know whether the stratigies employed is working or not, how much profit is company able to earn. Financial Statement forms the basis of planning,, controlling activities.

Government- Government requires the information to ensure that the company is paying tax according to their income on consistent basis. And also to ensure that there is no illegal or fraudlent activities carried out by the company

Employees: Sound and good financial statement means company is performing well in the market , on the basis of which employees get regular and timely wages.

Banks : Banks before providing loans sees the financial statement of the company. And if satisfies proceeds the loan.

When (why) would you use this manual accounting system rather than a computerised accounting system?

File Corruption – There are chances of File corruptions or errors occurred in computerised accounting

Hacks             - Computers can be hacked, and can lead to data leakage or misuse of data.

Budget- Professional accounting tools comes to be expensive to bought and require personnel to know the knowledge of both computer software and accounts, and therefore charge more salary.

Hence if the Firm has low budget the company should choose manual accounting.

Technical errors – It is very common in computers.

Software/ Application Crash – There is a possibility of software crash regularly which will be frustrating for the user.

Not reliable   - For computerized accounting , software of another company is being bought, and all the entries are made on that third party software, there is always a fear of getting the data stolen, or accepting their harsh terms and conditions as all the company data is already been put there.

What are the benefits and limitations of each type of system (manual vs computer

Advantages of Compterized accounting

Time Saving –Accounting on computer saves time, There are software in which only journal entry has to be done and the rest – (ledger, trial balance, Final Accounts, Ratios) are automatically prepared which saves much time , which otherwise might required days , weeks , months or year etc. as in large business have thousands and lakhs of entries.

Cost Saving- With help of software , there is no need to employee more number of personnel, same amount of work can now be carried with less number of people, Hence Lower staff means low cost to the company

Accuracy- While making accounts on computers all calculations are done automatically, Hence calculations are error free, and also there are software which does not allow to post wrong entries.

Accessibility- With the help of internet using accounting software one can easily aces data from anywhere in the world. Hence it expands Accesibility

Reliable- Because of its accuracy , it is Highly reliable.

Secured- All the data is secured from any natural disaster such as, earthquake, Flood etc As the data is saved in the cloud(Internet)

Efforts- It saves effort of the personnel employed.

Disadvantages

Cost of Installation: Accounting software first have to be installed , and hence have high cost of installation.

Cost of training: Company has to bear Cost of training of employees as now they are required to have knowledge of both accountancy and software on which they have to work on

File Corruption – There are chances of File corruptions or errors occurred in computerised accounting

Hacks             - Computers can be hacked, and can lead to data leakage or misuse of data.

Advantages of Manual Accounting]

No Corrupt Files or Data – In Manual Accounting one can easily access data as there are no errors of data to be corrupted. All the information is in written form.

Easy Alterations – In manual Accounting alterations can be made easily.

Core Knowledge required – While Performing manual accounting only core knowledge of accounting is required .

Simplicity - Since only core knowledge of accounting is required , unnecessary complexity of computers can be avoided.

Disadvantages of manual accounting system

Time Taking – Mannual system to make accounts require lots of time.

Costly -   More number of personnel are required in order to do accounting manually, Hence company has to bear more cost

Errors- Humans are not machines, There are chances of making an error in calculation, posting entries .

Loss of Physical Copies