Terms Used in Computerised Accounting

Computerized accounting involves the use of various terms and concepts specific to digital financial record-keeping and reporting. Here’s a detailed overview of some key terms used in computerized accounting:

  1. Chart of Accounts:
    • A list of all accounts used by an organization to classify financial transactions. Each account is assigned a unique code for easy identification and sorting.
  2. General Ledger:
    • The main record where all financial transactions are posted and summarized. It contains individual account balances and serves as the foundation for financial reporting.
  3. Subsidiary Ledger:
    • A supporting ledger that provides details for specific accounts in the general ledger, such as accounts receivable or accounts payable.
  4. Double-Entry Accounting:
    • The fundamental accounting principle where every transaction has equal and opposite effects on at least two accounts.
  5. Debits and Credits:
    • Debits and credits are entries made in the accounting system to record changes in asset, liability, equity, revenue, and expense accounts. Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts.
  6. Trial Balance:
    • A report that lists the balances of all accounts in the general ledger to ensure that total debits equal total credits.
  7. Journal Entries:
    • Records of individual transactions, including the date, accounts involved, amounts, and a brief description.
  8. Financial Statements:
    • Reports summarizing the financial performance and position of a business, including the balance sheet, income statement, and cash flow statement.
  9. Balance Sheet:
    • A snapshot of a company’s financial position, showing assets, liabilities, and equity at a specific point in time.
  10. Income Statement (Profit and Loss Statement):
    • Reports a company’s revenues, expenses, and net income over a specific period, indicating profitability.
  11. Cash Flow Statement:
    • Details cash inflows and outflows during a specific period, showing the sources and uses of cash.
  12. Accounts Payable:
    • The amount a company owes to its suppliers or creditors for goods and services received but not yet paid for.
  13. Accounts Receivable:
    • The amount customers owe a company for goods or services provided on credit.
  14. Inventory:
    • The goods and materials a company holds for production, sale, or use in its operations.
  15. Depreciation:
    • The systematic allocation of the cost of a long-term asset over its useful life to match its expense with the revenue it generates.
  16. Amortization:
    • The process of spreading the cost of an intangible asset (such as patents or copyrights) over its useful life.
  17. Reconciliation:
    • The process of comparing financial records to ensure they are accurate and consistent.
  18. Bank Reconciliation:
    • The process of matching a company’s internal financial records with the bank statement to ensure they agree.
  19. Voucher:
    • A document that supports a financial transaction, providing details such as date, amount, accounts involved, and purpose.
  20. ERP (Enterprise Resource Planning) System:
    • Integrated software that manages various business functions, including accounting, inventory, human resources, and more.
  21. Data Backup:
    • Creating copies of electronic data to protect against data loss due to hardware failures, viruses, or other incidents.
  22. Data Security:
    • Measures taken to safeguard sensitive financial information from unauthorized access, theft, or data breaches.
  23. Cloud Accounting:
    • Using online software hosted on remote servers to manage accounting processes and data.
  24. User Access Control:
    • A system that restricts access to certain parts of the accounting software based on user roles and permissions.
  25. Financial Ratios:
    • Calculations used to evaluate a company’s financial performance, liquidity, profitability, and other aspects.

These terms provide a foundation for understanding and utilizing computerized accounting systems effectively. They are essential for accurately recording transactions, preparing financial statements, and making informed business decisions.