Chapter 12
Application of Computers in Accounting
Meaning and Elements of Computer System
A computer is an electronic device. It can do a variety of operations on the basis of set of instructions
called programs. The important elements of a computer system are hardware, Software, Live ware, Firm
ware, Data, Procedures and Connectivity.
1. Hardware:- Hardware means and includes all physical components such as CPU, Key board, Monitor,
Mouse, Processor, Modem, Printer, etc.
2. Software:- Software is a set of programmes used to work with hardware. Examples are – Microsoft
Windows, Tally, C++, Oracle, etc.
Types of Software
a. Operating Software:- It is popularly called OS. It is an integrated set of specialised program
which are designed to create necessary interface between user and hardware. Eg. Microsoft
Windows, Ubantu/Linux, MS Dos, Unix, Android, etc.
b. Utility Programmes:- Programme designed to provide certain utilities or supporting operations
are called Utility Programmes. Eg. Disk Cleanup, Kaspersky Antivirus, Format Recovery, etc.
c. Application Software :- Programme or software used for performing specific tasks are called
Application Software. Eg. Tally, Libre Office Calc, MS Access, Oracle, MS Excel etc.
d. Language Processor :- A language processor is a programme that processes programmes
written in a programming language. Eg. COBOL, FORTRAN
e. System Software:- System software is a type of computer program that is designed to run a
computer’s hardware and application programs.
f. Connectivity Software:- Computer programs that connect a computer to a local computer
network or to the internet.
3. People (Live-Ware):- People include all those who interact with the computers. They are
also called live-ware. Eg. System admisnistrators, system analysts, programmers, data entry
operators.
4. Procedure:- The procedure means a series of operations in a certain order or manner to achieve
desired results. ie. A fixed, step by step sequence of activities or course of action. It has a definite
start and end points. It should involve a series of actions. It must be followed in the same order or
manner.
5. Data:- These are facts and may consist of numbers, text, etc. Data means and includes all facts
gathered and entered into a computer system. Processed data is called information, which is
relevant and can be used for decision making.
6. Connectivity:- Connectivity refers to the manner in which a computer system establishes
connections to other devices or a network.
Capabilities of Computer System:- Computer system has many capabilities than human
beings.
1. Speed:- Computers have high speed operating capability. Modern computers can perform a 100
million instructions per second.
2. Accuracy:- Computers can perform all computations with exact degree of accuracy and
perfection. Computers rarely commit errors or mistakes. Most computer errors are caused by
human being or bad programming.
3. Reliability:- Computer systems are capable of performing repetitive operations. They are not
affected by tiredness, boredom or fatigue. Hence, they are more reliable than human beings.
4. Versatility:- Versatility refers to the ability of a computer to perform various tasks. It can do
multiple tasks at the same time.
5. Storage:- Computers have huge storage capacity. It can store huge volume of data in a very
small physical area in binary form.
Limitations of Computer System:-
Computers are noty super human. It has the following limitations-
, 1. Lack of Commonsense:- Computers always do what they are asked to do. That is, as
programmed. They do not possess any commonsense.
2. Zero IQ:- Computer is only a dumb device with zero IQ. They cannot for see or visualise and
think what exactly do undert a changing situation.
3. Lack of Decision Making:- Computers do not possess knowledge, intelligence, wisdom, ability
to judge, etc. Which is a pre requisite for decision making. They cannot take decisions as their own.
They can take decisions only the way they are told to do.
4. No feeling – Computers are free from emotions. They cannot judge based on feelings, tastes and
preferences like human beings.
Componenets of a Computer
The basis components of a computer are -
CU
Input Output
ALU
Storage
Diagram of main components of a computer
1. Input Unit:- Input devices are used for entering data into the computer system. An input device is
any device that provides input to a computer.
Example- Key board, Mouse, Magnetic tape/disk, Joy stick, Track ball, Touch pad, Optical scanner, Light
pen, Optical Character Recognition(OCR), Magnetic Ink Character Recognition(MICR), Bar code reader,
Card reader, Smart card reader, Voice sensor, Web Cam, etc.
2. Central Processing Unit (CPU):- It is the main part of a computer. The Central Processing Unit
takes data and instructionws from the storage unit and makes all sorts of calculations based on the
instructions. It has three main parts.
a. Arithmatic and Logic Unit (ALU):- It performs arithmetic functions like addition, subtraction,
multiplication, division and also logical operations.
b. Memory Unit:- Memory unit is used to store data before being processed.
c. Control Unit:- It controls and co ordinates all units and their activities.
It performs the following tasks.
i) Read instructions
ii) Decode instructions
iii) Set up routing of data
iv) Pass data in right time
v) Determine where from to get next instructions
3. Output Unit:- The output unit is used for storing the result as output produced by the computer after
processing. It makes the results readly available as and when needed in future. The most common output
devices are- Visual Display Unit(VDU), printer, Ploter, Projector, Speech Synthesiser, Facsimale(FAX), etc.
4. Secondary storage unit – Storage capacity of the primary memory is limited and isexpensive.
Therefore, it is complemented by external storage through secondarystorage devices. The secondary storage
devices are used to store data permanently. The commonly used storage devices are floppy disk, hard disk,
magnetic tape, optical disk or CD ROM, Pen drive, memory card etc.
Information and Decisions:
Every organisation consists of various interdependent sub units. For managerial decision making it has to
accept input and transform them into output among these units. Information is, therefore the key resource for
any organisation, irrespective of its size.
Application of Computers in Accounting
Meaning and Elements of Computer System
A computer is an electronic device. It can do a variety of operations on the basis of set of instructions
called programs. The important elements of a computer system are hardware, Software, Live ware, Firm
ware, Data, Procedures and Connectivity.
1. Hardware:- Hardware means and includes all physical components such as CPU, Key board, Monitor,
Mouse, Processor, Modem, Printer, etc.
2. Software:- Software is a set of programmes used to work with hardware. Examples are – Microsoft
Windows, Tally, C++, Oracle, etc.
Types of Software
a. Operating Software:- It is popularly called OS. It is an integrated set of specialised program
which are designed to create necessary interface between user and hardware. Eg. Microsoft
Windows, Ubantu/Linux, MS Dos, Unix, Android, etc.
b. Utility Programmes:- Programme designed to provide certain utilities or supporting operations
are called Utility Programmes. Eg. Disk Cleanup, Kaspersky Antivirus, Format Recovery, etc.
c. Application Software :- Programme or software used for performing specific tasks are called
Application Software. Eg. Tally, Libre Office Calc, MS Access, Oracle, MS Excel etc.
d. Language Processor :- A language processor is a programme that processes programmes
written in a programming language. Eg. COBOL, FORTRAN
e. System Software:- System software is a type of computer program that is designed to run a
computer’s hardware and application programs.
f. Connectivity Software:- Computer programs that connect a computer to a local computer
network or to the internet.
3. People (Live-Ware):- People include all those who interact with the computers. They are
also called live-ware. Eg. System admisnistrators, system analysts, programmers, data entry
operators.
4. Procedure:- The procedure means a series of operations in a certain order or manner to achieve
desired results. ie. A fixed, step by step sequence of activities or course of action. It has a definite
start and end points. It should involve a series of actions. It must be followed in the same order or
manner.
5. Data:- These are facts and may consist of numbers, text, etc. Data means and includes all facts
gathered and entered into a computer system. Processed data is called information, which is
relevant and can be used for decision making.
6. Connectivity:- Connectivity refers to the manner in which a computer system establishes
connections to other devices or a network.
Capabilities of Computer System:- Computer system has many capabilities than human
beings.
1. Speed:- Computers have high speed operating capability. Modern computers can perform a 100
million instructions per second.
2. Accuracy:- Computers can perform all computations with exact degree of accuracy and
perfection. Computers rarely commit errors or mistakes. Most computer errors are caused by
human being or bad programming.
3. Reliability:- Computer systems are capable of performing repetitive operations. They are not
affected by tiredness, boredom or fatigue. Hence, they are more reliable than human beings.
4. Versatility:- Versatility refers to the ability of a computer to perform various tasks. It can do
multiple tasks at the same time.
5. Storage:- Computers have huge storage capacity. It can store huge volume of data in a very
small physical area in binary form.
Limitations of Computer System:-
Computers are noty super human. It has the following limitations-
, 1. Lack of Commonsense:- Computers always do what they are asked to do. That is, as
programmed. They do not possess any commonsense.
2. Zero IQ:- Computer is only a dumb device with zero IQ. They cannot for see or visualise and
think what exactly do undert a changing situation.
3. Lack of Decision Making:- Computers do not possess knowledge, intelligence, wisdom, ability
to judge, etc. Which is a pre requisite for decision making. They cannot take decisions as their own.
They can take decisions only the way they are told to do.
4. No feeling – Computers are free from emotions. They cannot judge based on feelings, tastes and
preferences like human beings.
Componenets of a Computer
The basis components of a computer are -
CU
Input Output
ALU
Storage
Diagram of main components of a computer
1. Input Unit:- Input devices are used for entering data into the computer system. An input device is
any device that provides input to a computer.
Example- Key board, Mouse, Magnetic tape/disk, Joy stick, Track ball, Touch pad, Optical scanner, Light
pen, Optical Character Recognition(OCR), Magnetic Ink Character Recognition(MICR), Bar code reader,
Card reader, Smart card reader, Voice sensor, Web Cam, etc.
2. Central Processing Unit (CPU):- It is the main part of a computer. The Central Processing Unit
takes data and instructionws from the storage unit and makes all sorts of calculations based on the
instructions. It has three main parts.
a. Arithmatic and Logic Unit (ALU):- It performs arithmetic functions like addition, subtraction,
multiplication, division and also logical operations.
b. Memory Unit:- Memory unit is used to store data before being processed.
c. Control Unit:- It controls and co ordinates all units and their activities.
It performs the following tasks.
i) Read instructions
ii) Decode instructions
iii) Set up routing of data
iv) Pass data in right time
v) Determine where from to get next instructions
3. Output Unit:- The output unit is used for storing the result as output produced by the computer after
processing. It makes the results readly available as and when needed in future. The most common output
devices are- Visual Display Unit(VDU), printer, Ploter, Projector, Speech Synthesiser, Facsimale(FAX), etc.
4. Secondary storage unit – Storage capacity of the primary memory is limited and isexpensive.
Therefore, it is complemented by external storage through secondarystorage devices. The secondary storage
devices are used to store data permanently. The commonly used storage devices are floppy disk, hard disk,
magnetic tape, optical disk or CD ROM, Pen drive, memory card etc.
Information and Decisions:
Every organisation consists of various interdependent sub units. For managerial decision making it has to
accept input and transform them into output among these units. Information is, therefore the key resource for
any organisation, irrespective of its size.
