Assignment PGD-2104

Computer Based Accounting

USOL-PGDCA

GURPREET SINGH BEDI

ROLL NO-56463
PGDCA- 2nd SEMESTER (2019-2020)
Q.1: What do you mean by accounting principles? How would you classify them?

Accounting is the language of business through which economic information is communicated

to all the parties concerned. In order to make this language easily understandable all over the
world, it is necessary to frame or make certain uniform standards which are acceptable
universally. These standards are termed as "​Accounting Principles​".

Accounting principles may be defined as those rules of action or conduct which are adopted by
the accountants universally while recording accounting transactions. They are a body of
doctrines commonly associated with the theory and procedures of accounting. They are serving
as an explanation of current practices and as a guide for selection of conventions or procedures
where alternatives exist.

These principles can be classified into two groups.

1. Accounting concepts
2. Accounting conventions.

Accounting Concepts:

The term ' ​accounting concepts​' includes those basic assumptions or conditions on which the
science of accounting is based. These concepts are used by accountants and bookkeepers all
over the world.

Following are the most important accounting concepts:

1. Separate entity concept.

2. Going concern concept.
3. Money measurement concept.
4. Cost concept.
5. Dual aspect concept.
6. Accounting period concept.
7. Matching concept.
8. realization concept.

Accounting Conventions:

GURPREET SINGH BEDI ROLL NO-56463

The term '​accounting conventions​' includes those customs or traditions which guide the
accountant while communicating the accounting information.

Important accounting conventions are:

1. Conservatism convention
2. Full disclosure
3. consistency
4. Materiality

Q.2: Define a ledger. Explain its importance.

Ledger is a collection of an entire group of similar accounts in double-entry bookkeeping. Also

called book of final entry, a ledger records classified and summarized financial information from
journals (the 'books of first entry') as debits and credits, and shows their current balances. In
manual accounting systems, a ledger is usually a loose leaf binder with a separate page for each
ledger account. In computerized systems, it consists of interlinked digital files, but follows the
same accounting principles as the manual system.

The following are the important utilities of ledger accounts

1. Ledger account keeps a permanent record of all financial transactions in a classified manner.

2. Ledger account shows detailed financial information of a business regarding debtors and
creditors, assets, and incomes and expenses.

3. Ledger account helps to prepare a balance in order to check the arithmetical accuracy of the
recording of the financial transactions of the business.

4. Ledger account helps to prepare ​profit and loss account so as to ascertain the profit or loss
of the business.

5. Ledger account helps to prepare the balance sheet with a view to show the financial position
of the business.

GURPREET SINGH BEDI ROLL NO-56463

Q.3: What is posting? Explain how a transaction is posted to ledger.

Posting refers to the process of transferring entries in the journal into the accounts in
the ledger. Posting to the ledger is the classifying phase of accounting.
An accounting ledger refers to a book that consists of all accounts used by the company, the
debits and credits under each account, and the resulting balances.
While the journal is referred to as Books of Original Entry, the ledger is known as Books of Final
Entry.

The Posting Process

Let us illustrate how accounting ledgers and the posting process work using the transactions we
had in the previous lesson. Click ​here​ to see the journal entries we will be using.

Take transaction #1 first.

Date
Particulars Debit Credit
2017

10,000.0
Dec 1 Cash
0

10,000.0
Mr. Gray, Capital
0

Now, go to the ledger and find the accounts. Post the amounts debited and credited to the
appropriate side. Debits go to the left and credits to the right. After posting the amounts, the
cash and capital account would look like:

Cash Mr. Gray, Capital

GURPREET SINGH BEDI ROLL NO-56463

 10,000.00 10,000.00

Explanation:
First, we posted the entry to Cash. Cash in the journal entry was debited so we placed the
amount on the debit side (left side) of the account in the ledger. For Mr. Gray, Capital, it was
credited so the amount is placed on the credit side (right side) of the account. And that's it.
Posting is simply transferring the amounts from the journal to the respective accounts in the
ledger.
Note: The ledger accounts (or T-accounts) can also have fields for account number, description
or particulars, and posting reference.

Q.4: What are adjustments? What is the need of making adjustments while preparing final
accounts?

Adjustments: Adjustment entries are those entries which need to be passed at the end of
the accounting period so that the true profit or loss and fair financial position of the business
can be shown. Trial Balance is the base for preparing final accounts of any business enterprise.

Adjusting Entries

Before financial statements are prepared, additional journal entries, called adjusting entries,
are made to ensure that the company's financial records adhere to the revenue recognition and
matching principles. Adjusting entries are necessary because a single transaction may affect
revenues or expenses in more than one accounting period and also because all transactions
have not necessarily been documented during the period.

Each adjusting entry usually affects one income statement account (a revenue or expense
account) and one balance sheet account (an asset or liability account). For example, suppose a
company has a $1,000 debit balance in its supplies account at the end of a month, but a count
of supplies on hand finds only $300 of them remaining. Since supplies worth $700 have been
used up, the supplies account requires a $700 adjustment so assets are not overstated, and the
supplies expense account requires a $700 adjustment so expenses are not understated.

GURPREET SINGH BEDI ROLL NO-56463

Adjustments fall into one of five categories: accrued revenues, accrued expenses, unearned
revenues, prepaid expenses, and depreciation.

Q. 5: What do you mean by manufacturing account? Explain the main items in the
manufacturing account.

· MANUFACTURING ACCOUNT is an accounting statement that is an integral part of the

final accounts of a manufacturing organization. For any particular period, it indicates,
among other things, prime cost of manufacturing, manufacturing overhead, the
total manufacturing cost, and the manufacturing costs of finished goods.
· A manufacturer must understand and control the three basic elements of
manufacturing costs – direct materials, direct labor and factory overhead.

· Direct materials consist of all of the materials that become an integral part of the
finished product. Direct materials should include the actual cost of the materials, as well
as freight in, import duties, purchasing costs, receiving costs, storage costs and other
directly attributable costs of acquiring the materials. Direct materials should be
recorded net of any trade, quantity or cash discounts attributed to the materials.

· Direct labor consists of all of the personnel costs required to manufacture the finished
product. Direct labor should include wages, payroll taxes, and benefits associated with
personnel who are integral to manufacturing the finished product.

· Factory overhead consists of all of the other costs required to manufacture the finished
product that do not fit into the direct material or direct labor elements. They consist
mainly of indirect material, indirect labor, depreciation, utilities, rent, repairs and
maintenance and insurance.

Q.6: What do you mean by computerized accounting? Why it is needed?

Computerized Accounting involves making use of computers and accounting software to

record, store and analyze financial data. A computerized accounting system brings with it many
advantages that are unavailable to analog accounting systems.

Computerized accounting systems are important to business in various ways. Computers helps
businesses by making their staff efficient, productive and also save their valuable time. It helps
to maintain business and all financial information for the business is well-organized.

GURPREET SINGH BEDI ROLL NO-56463

 · Automation​: Since all the calculations are handled by the software, computerized
accounting eliminates many of the mundane and time-consuming processes associated
with manual accounting. For example, once issued, invoices are processed automatically
making accounting less time-consuming.

· Accuracy​: This accounting system is designed to be accurate to the minutest detail.

Once the data is entered into the system, all the calculations, including additions and
subtractions, are done automatically by software.
· Data Access​: Using accounting software it becomes much easier for different individuals
to access accounting data outside of the office, securely. This is particularly true if an
online accounting solution is being used.

· Reliability​: Because the calculations are so accurate, the financial statements prepared
by computers are highly reliable.

· Scalable​: When your company grows, the amount of accounting necessary not only
increases but becomes more complex. With computerized accounting, everything is
kept straightforward because sifting through data using software is easier than sifting
through a bunch of papers.

· Speed​: Using accounting software, the entire process of preparing accounts becomes
faster. Furthermore, statements and reports can be generated instantly at the click of a
button. Managers do not have to wait for hours, even days, to lay their hands on an
important report.

· Security​: The latest data can be saved and stored in offsite locations so it is safe from
natural and man-made disasters like earthquakes, fires, floods, arson and terrorist
attacks. In case of a disasters, the system can be quickly restored on other computers.
This level of precaution is taken by Clever Accounting.

· Cost-effective:​ Since using computerized accounting is more efficient than paper-based

accounting, than naturally, work will be done faster and time will be saved. When one
considers that Clever Accounting, one of the latest online accounting solutions, starts at
a low monthly subscription, then computerized accounting really becomes a no-brainer.

GURPREET SINGH BEDI ROLL NO-56463

 · Visuals​: Viewing your accounts using a computer allows you to take advantage of the
option to view your data in different formats. You can view data in tables and using
different types of charts.

Q.7: How selective control is exercised by ABC analysis?

ABC analysis underlines a very important principle “VITAL FEW – TRIVIAL MANY”. Statistics
reveal that just a handful of items account for the bulk of the annual expenditure on materials.
These few items, called “A” items, therefore, hold the key to business. The other items, known
as B and C items, are numerous in number, but their contribution is less significant. ABC
analysis thus tends to segregate all items into 3 categories: A, B and C on the basis of their
annual usage. The categorization so made enables one to pay the right amount of attention and
minimum of effort and expenditure as merited by the item.

The annual consumption analysis of any organization would indicate that a handful of top high
value items less than 10% of the total number will account for a substantial portion of about
75% of the total consumption value and such vital few items are called ‘A’ items which need
careful attention of the materials managers. Similarly, a large number of “bottom” items over
70% of the total consumption of units, are called trivial many account only for about 10% of the
consumption value, are known as ‘C’ class. The items which lie between the top and bottom are
called ‘B’ category items.

Application of ABC Analysis​:

This approach helps the materials manager to exercise selective control and focus his attention
only on a few items when he is confronted with lakhs of stores items. Any sound stock control
system should ensure that every item gets right amount of attention, at the right time. ABC
analysis makes it possible with considerably less effort its selective approach. The following are
the applications of ABC analysis.

Degree of Control:

‘A’ class items form a substantial part of total consumption in rupees and so it must draw our
attention. Up to date and accurate and accurate records should be maintained for these times.
The inventory should be kept at a minimum by putting blanket orders covering annual
requirements and then arranging frequent deliveries from vendors.

GURPREET SINGH BEDI ROLL NO-56463

‘B’ class items should have normal or moderate control made possible by good records and
regular attention.

A little or no control is required for ‘C’ class items. Large inventories should be maintained to
avoid stock outs.

Ordering Procedure:

‘A’ class items require careful and accurate determination of order quantities and order points
based on exact requirements. They should be subjected to frequent reviews to reduce
possibility of overstocking.

A reasonably good analysis for order quantities an order points is required for ‘B’ items but the
stock may be reviewed less frequently or only when major changes occur.

No such computations are required for ‘C’ items. These items should be brought in bulk, may be
for the full year.

Stock Records:

Detailed records of goods reserved, received, ordered, issued and on hand need to be
maintained for ‘A’ category of items. Tight and accurate controls are required for such items.

No such detailed records are necessary for the ‘C’ class items

Any routine method that ensures good and accurate records is enough for ‘B’ class items.

Priority Treatment:

VIP treatment may be accorded to ‘A items in all activities such as processing of purchase
orders, receiving, inspection, movement on the shop floor etc with an object to reduce lead
time and average inventory.

No such treatment is necessary for ‘B’ items. Normal plant procedures should take care of
inward and outward flow of those items.

No priority is assigned to ‘C’ items.

GURPREET SINGH BEDI ROLL NO-56463

Q.8: What is sales order processing?

In any business, it is important to be organised and follow processes to ensure the effective
smooth running of the business. One process that must be adhered to concerns the ordering of
goods or services by customers, ensuring everyone who needs to be involved is aware of the
order, and that the customer is invoiced on time. This is called sales order processing.

Customer order

The first part of the process involves the customer ordering the goods. This may be a phone
call, an email, or a purchase order maybe received. This tells us what the customer wants to
order, and how much they have been quoted. It may also tell us information about where the
goods are to be delivered, or where the service is to be carried out.

Sales order
This confirmed order will then be raised into a sales order, an internal document that the
customer does not need to see, but will enable the operations and finance teams to ensure a
high quality service. This is an important step, as without a sales order if the order, there would
be no paperwork for what the customer requires, the quantities they require, and the pricing.
This means no auditable trail.

Production

The sales order that is raised by the sales team will then be sent to the production team to
either produce the goods, the warehouse team to pick the goods, or the operations team to
carry out the service. The sales order gives these teams enough information for them to carry
out their tasks without having to complete lots of paperwork.

Once the goods have been completed and delivered, a delivery note will be sent to the
customer. This will also need to be sent to the finance team who, using the sales order and the
delivery note, will be able to produce a sales invoice to ensure the goods or service are paid for.

The smooth running of this process will ensure orders are received, completed and invoiced on
time, allowing a smooth and efficient process.

GURPREET SINGH BEDI ROLL NO-56463

Q.9: write note on payroll accounting system and its salient features

Payroll accounting involves a company's recording of its employees' compensation including:

● gross wages, salaries, bonuses, commissions, and so on that have been earned by its
employees

● withholding of payroll taxes such as federal income taxes, Social Security taxes, Medicare
taxes, state income taxes (if applicable)

● withholding for the employees' portion of health insurance premiums, employees'

contributions to savings plans, garnishments of salaries and wages, employees' contributions
to United Way, etc.

● employer's portion/expense for Social Security taxes, Medicare taxes, state and federal
unemployment taxes

● employer's portion/expense of fringe benefits such as health and dental insurance, paid
holidays, vacations and sick days, pension and savings plan contributions, worker
compensation insurance, etc.

Accuracy

Your payroll system must be able to accommodate your employees and their various working
hours. Once a good system is in place, you will have an accurate record of the working hours of
your employees. An automated system minimizes the possibility of human error, as the only
real factor is whether employees remember to clock in and out. An in-house accountant or
bookkeeper, however, can easily make corrections when employees forget to clock out for
lunch or when your time clock breaks down. The payroll system functions as a neutral third
party that accurately records work hours when you outsource your payroll functions.
Deductions

Payroll systems do not simply record work hours and pay. They must be set up for more
complex operations, such as deductions for tax and benefits purposes. Between state and
federal taxes, Medicare and Social Security, plus whatever benefit plan each employee
contributes to, a substantial amount of calculations are needed. Most payroll systems can be
customized to accommodate your tax and benefits needs and can be further adjusted for the

GURPREET SINGH BEDI ROLL NO-56463

specific circumstances of each employee. In-house payroll personnel and outside contractors
must be thoroughly knowledgeable about which deductions are required under the law. No
matter which payroll system you use, however, you are ultimately responsible for the accurate
reporting and paying of payroll taxes.
Record-Keeping

Another feature of a payroll system is that it can be used to keep detailed and accurate records.
These records can be stored in a main database on site, online or in an outside record-keeping
facility. Record-keeping can help you monitor trends such as how much overtime you're paying
and how many employees participate in your company retirement plans. Records also ensure
that you’re complying with all relevant laws and can prepare you for an audit or any other type
of investigation of your business when you set up your system to monitor those activities. A
payroll system that accurately stores hours makes end-of-year tax preparation smoother as
well.
Streamlining

An automated payroll system can help eliminate busywork by streamlining the whole process of
scheduling, record-keeping and payment. Employees can access their records, print pay stubs
and, in some cases, put in requests for time off through an automated payroll system. Effective
payroll systems of all kinds can be standardized and streamlined with advance directions. You
can direct third-party administrators, automated systems and in-house bookkeepers to deposit
earnings directly into employees' bank accounts, eliminating the need for you to write personal
checks. You can automate systems to alert you when employees are going into overtime pay or
when employees pass a certain amount of allocated time off, what percentage of 401(k)
matching payments you authorize and how much to take out for health care premiums.

Q. 10: Explain features of tally.

● Tally is powerful accounting software, which is driven by a technology called concurrent

multi-lingual accelerated technology engine. It is easy to use software and is designed to
simply complex day to day activities associated in an enterprise. Tally provides
comprehensive solution around accounting principles, inventory and data integrity. Tally
also has feature encompassing global business. Tally software comes with easy to use
interface thus making it operationally simple.

GURPREET SINGH BEDI ROLL NO-56463

 ● Tally accounting software provides a solution around inventory management, stock
management, invoicing, purchase order management, discounting, stock valuation
methodology, etc.

● Tally accounting software also comes with drill down options, which can track every
detail of transaction. It helps in maintaining simple classification of accounts, general
ledger, accounts receivable and payable, bank reconciliation, etc.

● The technology employed by tally makes data reliable and secure. Tally software
supports all the major types of file transfer protocols. This helps in connecting files
across multiple office locations.

● Tally accounting software is capable of undertaking financial analysis and financial

management. It provides information around receivables turnover, cash flow statement,
activity consolidation and even branch accounting.

● Tally accounting software is east to set up and simple to use. A single connection can
support multiple users. It can be easily used in conjunction with the Internet making
possible to publish global financial reports.

● Tally accounting software can seamlessly connect with various Microsoft applications.

Benefits of Tally Accounting Software

● Any business owner understands the importance of maintaining proper books of

account. This practice ensures that finance for the company is always in order and are
correct at all given points of time. Company should always be aware of its financial
positions.

● Earlier, most of the businesses were employing manual practice in maintaining books of
account. However, with the advent of modern information technology, this task can be
performed by accounting software. Tally is one such all-powerful accounting software.

● Tally accounting software provides a solution to all the problems real businesses have to
encounter. Single software takes care of all tasks required for enterprise management.
Accounting task such as records keeping, accounts receivable and payable management
and bank reconciliation are made simple through tally.

● Financial management is also made simpler under Tally software. The software allows
management of finances across multiple locations can handle multiple currency
transactions, manage cash flow and interest payment.

GURPREET SINGH BEDI ROLL NO-56463

 ● Thus, Tally software is flexible, reliable, secure, easy to use and affordable.

GURPREET SINGH BEDI ROLL NO-56463