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Computerised Accounting Compliance
2 Version 1.0 - June 2016
Contents
In this book you’ll get an introduction to Computerised Accounting by
asking the following questions.
1. Who uses computerised accounting systems?
2. What is Hardware?
3. What is Software?
4. What are computerised accounting packages?
5. Why use a computerised accounting package?
6. What are accounting package modules?
7. What is an EPoS system?
8. What are integrated packages and interfaced software?
9. How do you set up an accounting package?
10. What are the risks posed by computerised accounting packages?
Reference material
There's some reference material at the end of this guide, which you
can use to increase your knowledge and understanding of the topics
when you need to for your job.
Computerised Accounting Compliance
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Introduction
Most businesses keep some, or all, of their accounting records
on computer.
Compulsory online filing of VAT and Corporation Tax (CT)
returns has made computerised accounting packages even
more attractive and relevant to businesses.
Many businesses also have internet access, email
communication and e-commerce systems for functions such as
marketing and online sales and ordering.
In this book, we’ll look at some of the hardware and software
businesses use for computerised accounting.
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Learning outcomes and study objectives
The following table sets out what you will be able to achieve
after you have successfully studied this book.
Learning outcomes Study objectives
You will To achieve this you need
to be able to
understand how
computerised
accounting systems
are used.
identify the benefits of
computerised
accounting packages
(CAP).
understand the basic
principles of CAPs.
identify the risks
associated with CAPs.
identify the controls
used to counter the
risks.
Time to complete
We estimate it should take you this long to finish the book.
Reading main text 20min
Total 20min
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1. Who uses computerised accounting systems?
The diagram below shows the various entities that use
computerised systems. It also indicates how the systems are
used to assist the entities achieve their objectives.
System Users
Sole Trader/Single Director
May run their computerised accounting system on little more than
a PC (either desktop or laptop) and a printer
Proprietor may operate a simple accounting package with minimal or no support
Large Organisations
Can have PCs linked to a network, with file
servers holding business data, may be in one
local office or various UK and overseas offices
May have an in-house computer department
or may have outsourced all or part of its IT requirements to one or more third
party providers
HMRC
Range of Specialists available to help check computer records: Data
Handling Specialist and Large Business
Audit Specialists
Both groups can work with you to:
Help with any general computer related queries
Identify the audit trail
Assist with obtaining information from the
system
Arrange data downloads for interrogation on an
HMRC computer
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2. What is Hardware?
Hardware consists of computers, servers and associated devices such
as printers, scanners and bar code readers or hand-held equipment
such as smartphones. It is important to find out which hardware
holds the accounting and business information you need to access.
Har
dw
are
Desktop PCs
Have enough processing and storage capacity to deal with large business accounts
Laptops and Netbooks
Are capable of running accounting software
Have suffiicient capacity to deal with most small to medium businesses
Local Area Network (LAN) and Wide Area Network (WAN)
Enable business computers to share information.
Can consist of two or thousands of computers
Connection will usually be to a local server which in turn is connected to another server "Peer to Peer"
LAN - network of computers in one building
WAN - network of computers linked to local server which is then linked to other servers
Smartphones
Capable of running computer applications, but it is unlikely that a mobile will be used to keep a customer's accounting
records
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3. What is Software?
Computer software performs tasks. The computer operating
system works with the computer hardware enabling the
different programs or application software to perform their
particular functions. Businesses may run many different types
of software. Below are some examples of those that may help
you in your compliance checks.
Soft
war
e
Accounting
Accounting package is associated with systems which account for money. Packages vary dependent on how they are used, what they produce and
cost. Examples:
Simple spreadsheets created as required by the user: free accounting packages: Standard accounting packages: Tailor-made or bespoke
accounting packages
Stock Control
Stock control records can be of great interest in a compliance check.
One of the early questions in a check should be whether the stock control is computerised.
Businesses also use computers to record flow of stock.
Design
Some businesses use design software to design consumer goods ranging from motor cars to knitting patterns. This area may potentially be of help
if you need to construct a business model.
Administrative Systems
Keep track of what is happening in the business , e.g.:
Human Resources Systems - info on employees and payroll systems.
Decision support systems
Word Processing software
Customer Relationship Management Systems - track sales reps customer contact
Transport Records
Email, Calendars & Internet
Most businesses routinely communicate by email. They may also use integrated calendar function. In some trade sectors the booking calendar
is a key record - these can be used to check credibility of company records.
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4. What are computerised accounting packages?
A simple definition of computerised accounting is the
computerised processing, recording and reporting of
transactions (sales, purchase, stock movements, asset sales
and acquisitions, payroll and many other functions).
The output of these systems are the reports they produce.
A package is made up of a number of accounting modules each
dealing with a particular area of accounting. Eighty per cent
(80%) of the software used in the small and medium business
sector is supplied by ten main software suppliers including
Sage and Quickbooks.
For large businesses the market is dominated by SAP and
Oracle.
The diagram on the next page shows the layout of a basic
computerised financial package.
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Reports from all modules
Simple principles of a basic Computer Accounts Package
Nominal Ledger
Assets
Liabilities
Capital
Bank payments/receipts
Cash payments/receipts
Journal Entries
Sales Ledger
Invoices
Credit notes
Receipts
Purchase Ledger
Invoices
Credit notes
Payments
Stock Control
Receipts
Despatches
Purchase Order
Processing
Invoices
Sales Order
Processing
Invoicing
Report Generator
Reports
Trial balance
Profit & Loss
Balance Sheet
Core modules likely to be found in all computerised accounting packages
Non-core modules commonly encountered
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5. Why use a computerised accounting package?
Here are some of the benefits for a business that uses a
computerised accounting package.
They can:
manage their business and accounts efficiently
save time as transaction details only need to be keyed
once – the system automatically posts the other side of
the double entry posting to the relevant accounts
reduce the possibility of errors, as the software carries
out validation checks on the data as it is keyed in
access displays or reports which give immediate access
to up-to-date and factual information
have up to the minute (real time) stock records
print documentation, such as delivery notes and
invoices, as part of an automated process
maintain information which allows business wide analysis
and reporting, such as sales by geographic region or
product type
share information readily between various staff members
and departments in the business
easily back up information so that it can be restored if
the computer system fails
be electronically linked directly to suppliers' or
customers' systems, to improve the processing of
orders, for example, e-commerce systems or internet
trading.
make informed management and strategic decisions,
keep close budget and financial control, monitor cash
flow, minimise human error, minimise internal fraud.
Most software carries out a validation check on the plausibility
of the data automatically.
Equally, HMRC validates data as it is entered on line and may
raise a validation check.
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6. What are accounting package modules?
Accounting packages come in various types and are made up of
modules. The table below explains how the different packages
are designed and work. Later, we’ll explain what the various
modules do within an accounting package.
HMRC has worked closely with software houses to ensure the
packages work.
Typ
es o
f A
cco
un
rtin
g Pa
ckag
es
Generic
An off the shelf package; minimal set up; handles basic accounting rquirements: Sage, Quickbook, Pegasus or
Quicken are typical examples.
User Defined
More complex and usually used by large businesses operating in a specialised market; acquired direct from software house, via a consultant; allows user to tailor the package to their need: Example - SAP and Oracle
Bespoke
Written by third party to specifically meet the requriements of a particular business
In-House
Similar to Bespoke but developed in-house by business' own staff.
Industry Solutions
Package written for particular business sector, could be generic or user-defined
Other Generic
Sage Payroll, Pegasus Opera Payroll and MYOB payroll -can be run as standalone. Abacus and Alpha Tax -
designed for Corporation Tax. Tax Engine performs complex tax calculations.
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Core Modules
These vary from package to package, however there are three
core modules that should always be present.
Co
re M
od
ule
s
Accounts Receivable (AR) or sales Ledger (SL)
In which the business enters its Sales Invoices and money received for Sales
Accounts Payable (AP) or purchase Leger (PL)
in which the business enters its purchase invoices and payments made for sums it owes.
Nominal Ledger (NL) or general ledger (GL)
Deteailed breakdown of all the debits and credits entered on the double entry system - assets, liabilities, income & expenses. This is the
keystone of a bookkeeping system and contains non-personal accounts. It is updated from the
cash book
petty cash book
purchase ledger
purchase day book
sales ledger
sales day book
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Non-Core Modules
In addition to the core modules, a business may use one or
more non-core modules. The three most common are Sales
Order Processing, Purchase Order Processing & Stock Control;
there are further examples which have been included below.
No
n-C
ore
Mo
du
les
Sales Order Processing
Records customer orders and may produce sales invoices
Purchase Order Processing
Records orders placed and possibly matches goods received & purchase invoices
Stock Control
Records receipts and dispatches, current stock and stocktaking adj
Expenses
Entries for business related expenses
Payroll
Calculates and tracks wages
Project Management/job costing
Records professional's time worked to enable a charge to be raised
Manufacturing
Controls production processes
Electronic Point of Sale (EPoS)
Gathers information from electronic tills
Logistics
Manges goods flow, transport facilities from point of origin to point of supply
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7. What is an EPoS system?
Epos systems and stock control systems have a particular
importance in relation to returns of tax and duty as they record
takings and control the stock that businesses sell. In retail,
catering, entertainment and leisure sectors goods or services
are often coordinated by EpoS systems.
EPo
Suses a till to record sales
uses bar codes for pricing (inc VAT)
handles credit or debit card payments
controls an integrated stock system
automatically records stock
checks sales details prior to issuing refunds
generates kitchen orders for restaurants
gathers information for marketing purposes
can range from a single electronic cash register (ECR) or till, to a large system with hundreds of ECRs
linked to a mainframe computer used by a large retail business
most EPoS systems hold details of all transactions on a computer to which each till is linked, often referred
to as the back office system
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8. What are integrated packages and interfaced software?
Inte
grat
ed a
nd
Inte
rfac
ed
IntegratedAn application that Comprises a number of modules which work
together and share data files.
Package works as a whole. There is no need to pass data out of the package
Interfaced
A package that is not restricted to original modules and contains third party software to handle specialist
functions (known as Bolt ons)
Bolted on software is not fully integrated with the main package and
stores the data in its own files. This information then is then interfaced into
the main package
Interface take many forms:
a special program which handles the transfer without human intervention
or
one applicatin may create a file which is then imported to another application
or
data may need to be manually rekeyed.
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9. How do you set up an accounting package?
Before a business can use any accounting package it must
input key information into the system. Below you will find the
standard information required for set up.
Sett
ing
up
business name, address & email
those using the system (User Details)
customer, supplier and maybe product details
tax or duty rates
tax rules and rates for example for exports
product or service tax liability
accounting periods
tax periods or special tax periods
Rules about non-deductibility again specific nominal ledger codes such as business entertainment
details of any opening account balances
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10. What are the risks posed by computerised accounting
packages?
There are various risks associated with Computerised
Accounting; below are the main identified risks.
Ris
ksHardware Risks
Physical Security of Hardware
Hardware Support
Data backup and recovery
Advances in technology
Software Risks
May not meet needs
Generic - may not meet legal requirements
Change of software
Lack of support from software provider
Set up may be wrong
Insufficient password protection
Problems with interfaces between software applications
User Risks
Poor Staff Training
Out of date procedures or guidance notes
Inadequate support
Assumption that computers are infallible
Bypassing system controls
Posting transactions to suspense accounts
Corrections and deletions
Other Risks
Multi company records
Spreadsheets
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Controls
In order to minimise the number of errors made in accounting
systems most businesses have controls in place to prevent
errors occurring; below is a snap shot of those controls.
Co
ntr
ols
Physical
Security and safeguard of equipment
System
Use of passwords
Setting security levels
Validation checks
Duplication checks
Auto generated system reports
Use of control accounts
Interfaces
Setting up checks to test and check interface is behaving correctly
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That completes the learning in this guide.
Make a note of anything you didn't understand in the space
below so you can ask your learning or line manager.
Google+
You can discuss any queries you have using your Google+
learning community forum, or talk to your learning or line
manager, or workplace coach.
Notes
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