This page contains the NCERT class 12 Accountancy Computerised Accounting System Chapter 1 Overview of Computerised Accounting System. You can find the exercise questions for Overview of Computerised Accounting System from the NCERT Class 12 Accountancy book on this page.
Multiple Choice Questions
Question 1
1. The components of Computerised Accounting System are :
(a)
Data, Report, Ledger, Hardware, Software;
(b)
Data, People, Procedure, Hardware, Software ✔
(c)
People, Procedure, Ledger, Data, Chart of Accounts;
(d)
Data, Coding, Procedure, Rules, Output.
Answer 1
(b) Data, People, Procedure, Hardware, Software
These are the main components of a Computerised Accounting System. Data is the raw fact, people are the users, procedure means the steps to perform tasks, hardware includes computer devices, and software is used to process accounting transactions.
Question 2
2. The Computerised Accounting System refers to :
(a)
Printing of Balance Sheet and Profit and Loss Accounts using computer;
(b)
Processing of accounting transaction through computer and produce records and reports ✔
(c)
Processing of accounting related data and printing reports;
(d)
None of the above.
Answer 2
(b) Processing of accounting transaction through computer and produce records and reports
A Computerised Accounting System means using hardware and software to process accounting transactions and generate accounting records and reports like journals, ledger, trial balance, balance sheet, and profit and loss account.
Question 3
3. The components of Computerised Accounting System refers to :
(a)
Business transactions are analysed, transactions recorded, prepare trial balance, preparation of balance sheet and profit and loss account ✔
(b)
From data entry to preparation of final statements;
(c)
Transformation of manual accounting system to CAS;
(d)
None of the above.
Answer 3
(a) Business transactions are analysed, transactions recorded, prepare trial balance, preparation of balance sheet and profit and loss account
This option correctly reflects the main accounting process followed in the accounting cycle. It includes analysing transactions, recording them, posting them, preparing trial balance, making adjustments, and finally preparing financial statements.
Question 4
4. The CAS should be
(a)
Simple and integrated, transparent, accurate, scalability, reliability ✔
(b)
Complex, Accurate, Transparent, Faster to work;
(c)
Able to transform the manual accounting system to computerised accounting system;
(d)
None of the above.
Answer 4
(a) Simple and integrated, transparent, accurate, scalability, reliability
These are the salient features of good CAS software. It should be simple and integrated, provide transparency and control, ensure accuracy and speed, support scalability, and maintain reliability.
Question 5
5. The Grouping of Accounts means the classification of data from :
(a)
Asset, liabilities and capital
(b)
Asset, capital, liabilities, revenue and expenses ✔
(c)
Asset, owners equity, revenue and expenses
(d)
None of the above.
Answer 5
(b) Asset, capital, liabilities, revenue and expenses
Grouping of accounts means classifying accounting data into proper heads so that records are organised clearly. The major groups include assets, capital, liabilities, revenue, and expenses.
Question 6
6. Codification of Accounts required for the purpose of :
(a)
Hierarchical relationship between groups and components ✔
(b)
Data processing faster and preparing of final accounts
(c)
Keeping data and information secured
(d)
None of the above.
Answer 6
(a) Hierarchical relationship between groups and components
Codification is required so that accounts can be grouped properly at different levels. It helps maintain the hierarchical relationship between a group and its sub-groups and makes classification neat and systematic.
Question 7
7. Method of Codification should be :
(a)
Such that it leads to grouping of accounts ✔
(b)
An identification mark.
(c)
Easy to understand, cryptic, and leads to grouping of accounts
(d)
None of the above
Answer 7
(a) Such that it leads to grouping of accounts
The method of codification should support grouping of accounts at different levels so that Position Statement and Statement of Profit and Loss can be prepared properly.
Question 8
8. The need of Codification is :
(a)
The Encryption of data ✔
(b)
The Generation of mnemonic code
(c)
To secure the accounts, reports, etc.
(d)
Easy to process data, keeping proper records
Answer 8
(a) Easy to process data, keeping proper records
Codification is needed because it makes data processing easier and helps in proper maintenance of records. It improves organisation, classification, and retrieval of accounting information.
Question 9
9. What is the activity sequence of the basic information processing model?
(a)
Organise data, process data, and collect data
(b)
Collect data, organise and process data, and communicate information ✔
(c)
Process data, organise data, and collect data
(d)
Organise data, collect data, and communicate information
Answer 9
(b) Collect data, organise and process data, and communicate information
The basic information processing model starts with collecting data, then organising and processing it, and finally communicating the information in a useful form.
Question 10
10. What are internal controls designed to do?
(a)
safeguard assets and optimise the use of resource ✔
(b)
only achieve maximum revenue
(c)
only safeguard assets
(d)
only ensure accurate accounting records
Answer 10
(a) safeguard assets and optimise the use of resource
Internal controls are designed not only to safeguard assets but also to ensure better and efficient use of resources. They help in maintaining control and improving reliability in the system.
Question 11
11. What is a firm’s payment to a supplier for merchandise inventory recorded in?
(a)
Cash payment journal ✔
(b)
Purchases journal
(c)
Sales journal
(d)
Cash receipts journal
Answer 11
(a) Cash payment journal
When a firm makes payment to a supplier for merchandise inventory, it is a cash outflow. Therefore, it is recorded in the cash payment journal.
Question 12
12. Where are amounts owed by customers for credit purchases found?
(a)
accounts receivable journal
(b)
general ledger
(c)
sales journal
(d)
accounts receivable subsidiary ledger ✔
Answer 12
(d) accounts receivable subsidiary ledger
Amounts owed by customers for credit sales are shown in the accounts receivable subsidiary ledger. This record helps in tracking customer-wise dues in a detailed manner.
Answer The Following Questions
Question 1
1. Why the computerisation of Financial Accounting is required and why is it useful?
Answer 1
Why is the computerisation of Financial Accounting required?
1.
Computerisation of Financial Accounting is required because modern businesses handle a large number of accounting transactions.
2.
It helps in processing these transactions through the use of hardware and software.
3.
It enables the business to access information quickly, accurately and in a timely manner.
4.
This timely availability of information helps in decision-making.
5.
It also helps in producing accounting records and reports such as:
•
journals/day books
•
ledger
•
trial balance
•
position statement
•
statement of profit and loss.
Why is the computerisation of Financial Accounting useful?
1.
It is useful because it helps in timely generation of reports and information in the desired format.
2.
It supports efficient record keeping.
3.
It ensures effective control over the system.
4.
It improves speed and efficiency in accounting work.
5.
It provides better arithmetic accuracy in calculations.
6.
It helps in cost saving.
7.
It also maintains confidentiality of data through system security features.
Question 2
2. What is coding? Why codification is required for an Accounting System?
Answer 2
(i) What is coding?
1.
Coding means assigning numbers, letters, or a combination of both to identify an item.
2.
In an accounting system, coding is used for items such as:
•
account heads
•
budget heads
•
cost centres
•
other accounting elements.
3.
It acts like an identification mark and helps the system recognise items easily.
(ii) Why is codification required for an Accounting System?
1.
Codification is required because accounting data has to be grouped and arranged systematically.
2.
It helps in maintaining the hierarchical structure of accounts.
3.
It makes processing of accounting data faster and easier.
4.
It supports proper classification of accounts for preparation of:
•
Balance Sheet
•
Profit and Loss Account.
5.
It helps in proper record keeping and summarisation of information.
6.
It makes the accounting system more organised and suitable for computer processing.
Question 3
3. What are the salient features of Computerised Accounting Software?
Answer 3
1.
A Computerised Accounting Software should be simple and integrated.
2.
It should provide transparency and control in the system.
3.
It should ensure accuracy and speed in accounting work.
4.
It should have scalability, so that it can handle growing business data.
5.
It should have reliability, so that the financial information produced is dependable.
6.
It should help in quick processing of transactions and easy generation of reports.
Question 4
4. What are the phases in an accounting cycle?
Answer 4
1.
Business transactions are first analysed.
2.
These transactions are then recorded.
3.
The recorded transactions are posted to ledger accounts.
4.
A trial balance is prepared.
5.
Necessary adjustments are made.
6.
An adjusted trial balance is prepared.
7.
After this, financial statements are prepared.
8.
The final output includes statements such as:
•
Position Statement
•
Statement of Profit and Loss.
Question 5
5. Write differences between data and information with examples?
Answer 5
Basis
Data
Information
Meaning
Data means raw facts used as input.
Information means processed data that is meaningful and useful.
Nature
It is unorganised in the beginning.
It is organised and processed.
Stage
It exists before processing.
It is obtained after processing.
Use
It is used as input in a business application.
It is used for understanding and decision-making.
Example
Days worked, rate per day, account name, date, amount.
Amount to be paid, journal, ledger, reports.
Example
1.
Suppose days worked = 30 and rate per day = ₹ 600. These are data.
2.
When the system calculates amount to pay = ₹ 18,000, that becomes information.
3.
In the same way, transaction date, account name and amount are data, but reports produced from them are information.
Question 6
6. Explain various types of coding methods and the situations where each coding method is best suited?
Answer 6
(i) Sequential Codes
1.
In this method, numbers are assigned in a continuous sequence.
2.
It is best suited where serial order is important.
3.
It is useful for:
•
vouchers
•
invoices
•
cheques
•
serial records.
(ii) Block Codes
1.
In this method, a range of numbers is divided into blocks.
2.
Each block is allotted to a particular group or category.
3.
It is best suited for grouped classification.
4.
Example:
•
100–199 Small Pumps
•
200–299 Medium Pumps
•
300–399 Pipes
•
400–499 Motors.
(iii) Mnemonic Codes
1.
In this method, alphabets or abbreviations are used.
2.
It is best suited where easy remembrance is important.
3.
Examples:
•
SJ for Sales Journal
•
HQ for Head Quarters
•
DLH for Delhi
•
NDLS for New Delhi.
Conclusion
•
Sequential codes are best for serial identification.
•
Block codes are best for grouped classification.
•
Mnemonic codes are best for easy remembering and quick recognition.
Question 7
7. Define the term transaction and elaborate with the help of examples how the transaction will be shown in chart of accounts by hierarchical grouping?
Answer 7
(i) Meaning of transaction
1.
A transaction is a record of inflow and outflow of resources.
2.
Each transaction contains accounting data such as:
•
account name
•
code
•
date
•
amount.
(ii) How transaction is shown by hierarchical grouping
1.
In accounting, transactions are grouped under major heads.
2.
These heads are arranged in hierarchy for summarisation.
3.
Main heads generally include:
•
Assets
•
Liabilities
•
Capital / Equity
•
Revenue
•
Expenses.
(iii) Example
1.
If goods are sold for cash:
•
Cash goes under Assets
•
Sales goes under Revenue
2.
If salary is paid:
•
Salary goes under Expenses
3.
If machinery is purchased:
•
Machinery goes under Assets.
Simple Hierarchical Grouping
Question 8
8. What is a chart of accounts? How is it arranged?
Answer 8
(i) What is a chart of accounts?
1.
A chart of accounts is a systematic list of accounts used in the accounting system.
2.
It helps in recording transactions and preparing reports.
3.
It gives an organised structure to accounting data.
(ii) How is it arranged?
1.
It is arranged in hierarchical order.
2.
At the top level, accounts are grouped under broad heads such as:
•
Equity and Liabilities
•
Assets
•
Revenues
•
Expenses.
3.
These broad heads are divided into sub-groups.
4.
The arrangement supports summarisation for:
•
Balance Sheet
•
Profit and Loss Account.
5.
Coding is used so that the grouping remains systematic and computer-friendly.
Question 9
9. What is meant by Revenue and Expenses?
Answer 9
(i) Revenue
1.
Revenue means the inflow of resources from business activities.
2.
It arises mainly from sale of goods or services.
3.
It increases the income of the business.
4.
Example:
•
Sales
•
Other income.
(ii) Expenses
1.
Expenses mean the consumption of resources for earning revenue.
2.
These are costs incurred in carrying on business.
3.
Examples:
•
Salary
•
Wages
•
Interest
•
Depreciation
•
Administrative expenses.
Conclusion
1.
Revenue is what the business earns.
2.
Expenses are what the business spends to earn that revenue.
Question 10
10. What are the limitations of CAS?
Answer 10
1.
One limitation is fast obsolescence of technology.
2.
Another limitation is data loss due to:
•
power interruptions
•
hard disk damage.
3.
Data is also exposed to virus and security hazards.
4.
The system depends on proper hardware, software and security arrangements.
5.
So, CAS is useful, but it also needs careful maintenance and protection.
Question 11
11. What are the advantages of CAS?
Answer 11
1.
It helps in timely generation of reports and information in desired format.
2.
It ensures efficient record keeping.
3.
It provides effective control over the system.
4.
It improves speed in accounting work.
5.
It improves efficiency.
6.
It provides better arithmetic accuracy.
7.
It helps in cost saving.
8.
It maintains confidentiality of data.
Question 12
12. What is encryption and how is it helpful in CAS?
Answer 12
1.
Encryption means scrambling information so that it becomes very difficult to understand.
2.
It is used as a security feature in CAS software.
3.
It helps in protecting accounting data from unauthorised access.
4.
Even if the data reaches the wrong hands, it cannot be easily decoded or interpreted.
5.
Therefore, encryption helps in ensuring security, safety and confidentiality of data.
Skill Review
Question 1
1. Topic of debate: “Intentional manipulation of accounting records is much easier in computerised accounting system than in manual accounting system”. Do this exercise in the class forming group of 4 students to form a team and do the presentation in the class?
Answer 1
Debate Presentation
Topic:Intentional manipulation of accounting records is much easier in computerised accounting system than in manual accounting system.
Introduction
Today we are presenting our views on the statement that intentional manipulation of accounting records is much easier in a Computerised Accounting System than in a manual accounting system. Accounting records are very important because they are used for preparing journals, ledger, trial balance, position statement and statement of profit and loss. So, any manipulation in records can create serious problems for the business.
View in Favour of the Statement
Some points support the statement.
First, in a Computerised Accounting System, a person with unauthorised access can make changes very quickly. A large number of records can be altered in less time compared to manual books. In a manual system, changing many records takes more effort because entries have to be erased, rewritten or overwritten physically.
Second, digital data may be vulnerable to hacking and security hazards. If password security is weak, an outsider or even an insider may intentionally manipulate accounting data. This risk is one of the limitations of CAS.
Third, in a computerised environment, one wrong change can automatically affect many reports. Since CAS is integrated and fast, manipulated data may flow into ledger, trial balance and final accounts very quickly. That is why manipulation can spread faster in such a system.
View Against the Statement
Some points go against the statement.
A Computerised Accounting System also provides strong security and control features. It includes password security, data audit and data vault. Password security controls access, data audit helps in knowing who made changes in the original data, and data vault gives additional security through encryption. These features make manipulation easier to detect and prevent.
In a manual accounting system, a dishonest person may also manipulate records by changing vouchers, overwriting figures, hiding pages or preparing false summaries. Such manipulation may be difficult to trace if there is no proper checking. So, manual records are not fully safe either.
Also, CAS improves transparency and control. It provides better accessibility to data and helps management review records more effectively. If the organisation uses internal controls properly, manipulation can be reduced to a great extent.
Conclusion
Our group’s conclusion is that intentional manipulation can become faster in a Computerised Accounting System if security is poor or user rights are not properly defined. However, it is not correct to say that CAS always makes manipulation easier. In fact, CAS also provides better control features such as password security, data audit and encryption, which can make detection easier than in a manual system. Therefore, the real issue is not only the system, but also the internal controls, user rights, and security measures used by the organisation.
Question 2
2. Develop a coding structure for inventory items based on the following information: There are around 7000 items, which are grouped under 37 major categories. Each major category is further sub-divided into 15-40 sub-categories. Within a sub-category, the number of items will never exceed 1000.
Answer 2
To develop a coding structure for inventory items, we should create a code in such a way that it shows the hierarchical grouping clearly. The coding method should make classification easy and should help in proper record keeping and faster processing of data. Since the inventory is arranged as Major Category → Sub-category → Item, the code should also follow this same structure.
Step 1: Decide the hierarchy
The hierarchy is:
Major Category → Sub-category → Item Number
This is suitable because:
*
there are 37 major categories
*
each major category has 15 to 40 sub-categories
*
each sub-category can have up to 1000 items
Step 2: Decide number of digits
We now decide how many digits are needed for each level.
Part of Code
Maximum Required
Digits Needed
Reason
Major Category
37
2
Two digits can cover up to 99 categories
Sub-category
40
2
Two digits can cover up to 99 sub-categories
Item Number
1000
3
Three digits can cover up to 999 items, and if needed, code can start from 000 to 999
So, a suitable coding structure can be:
MM-SS-III
Where:
•
MM = Major Category code
•
SS = Sub-category code
•
III = Item code
This gives a total 7-digit code if hyphens are ignored, or an easy-to-read format if hyphens are used.
Step 3: Explain the coding structure
Suppose:
•
Major Category 05 = Electrical Goods
•
Sub-category 12 = Switches
•
Item 087 = 87th item in that sub-category
Then the inventory code will be:
05-12-087
This means:
•
05 tells the major category
•
12 tells the sub-category under that major category
•
087 tells the exact inventory item
Step 4: More examples
Inventory Code
Meaning
01-03-125
Major Category 01, Sub-category 03, Item 125
07-18-042
Major Category 07, Sub-category 18, Item 042
12-25-315
Major Category 12, Sub-category 25, Item 315
37-40-999
Major Category 37, Sub-category 40, Item 999
Why this coding structure is suitable
This coding structure is suitable for the following reasons:
1.
It shows the hierarchical relationship clearly.
2.
It is easy to classify and group inventory items.
3.
It supports quick identification of the item and its category.
4.
It helps in sorting and listing records in proper order.
5.
It is simple, systematic and useful for computer processing.
Conclusion
Therefore, the most suitable coding structure for the given inventory is:
MM-SS-III
or in plain numeric form:
MMSSIII
This structure is simple, logical and fully suitable for a Computerised Accounting System because it supports grouping, codification and easy processing of inventory records.