AB-13SE - Horngren'S Financial And Managerial Accounting

Question

Ned Timmons, engineer, is considering using a computerized accounting system for his professional engineering business. Ned has asked that you help him understand the components of a computerized accounting information system by answering the following questions:

Requirements

1. What are the two basic components of a computerized accounting information system?

2. Provide examples of each component.

3. If Ned were interested in an entry-level software system, what software might you recommend?

Step-by-Step Solution

Answer

Two Components – Hardware and Software

Example of hardware – Monitor, Keyboard, Mouse, etc.

Examples of software – Operating system, Antivirus, etc.

Recommended entry-level software – QuickBooks

Basic components of computerized accounting

The two basic components of computerized accounting are as follows –

a) Hardware: - hardware is the component that can be seen and touched. It is also fragile in nature and can be broken. Hardware is like a body to the computerized system.

 

b) Software: - Software is the component that runs in the backend process and can not be seen or touched. Software is a predetermined program that makes the computer run. All the instructions and processing are done through software.

Examples of each component

a) Hardware – 

Monitor

Printer

Mouse

Keyboard  

CPU etc.

 

b) Software –

Operating System

Applications based Programs

Firewall

Antivirus etc.

Recommended software for Ned

There are two levels of software for the computerized accounting system. They are – 

i) Entry Level Software

ii) ERP System

 

Entry Level Software is used by a small business that has a limited volume of transactions and requires an economic system. On the other hand, Enterprise Resource Planning (ERP) is a customized solution for large and big organizations.

 

In the given case as Ned is interested in entry-level software, the most recommended software would be QuickBooks. This is so because QuickBooks is the latest entry-level software that is used on large scale and is easy to install and run. It also requires less time to learn the software. The complexity is also lower as compared to other entry-level software.