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a. Advantages / Benefits:
Single Point Entry: Single Point Entry of a transaction will automatically
update all the related ledgers and records.
Speed: CIS Accounting System can support heavy volumes of transactions,
with speed and quick recording.
Accuracy: Tallying of Trial Balance, correct posting into the General Ledger
and Subsidiary Ledger, etc. do not create difficulties in a CIS Accounting System.
Arithmetical accuracy can be easily assured.
Analytical Review: Detailed analytical review of financial data is possible,
e.g. product-wise and area-wise sales analysis, percentage of each expense to
total, Ratio Analysis, etc.
Financial Analysis: Financial Statements can be prepared quickly. For every
transaction, the effect on the B/S and P&L can be ascertained immediately. Day-
to- day Cash Flow and Fund Flow Analysis can also be handled easily.
Budget Comparison: GS Accounting helps in comparison with budget figures,
through preparation of Variance Reports and Performance Reports.
Eco-friendly: Voluminous paper use can be avoided. Only exception and
summary reports can be printed.
Voucher Generation: OS Accounting can be effectively used to generate
vouchers and documents online, and to print them on need basis. For example,
Sales Invoices generated by the system can be printed and delivered to
customers, while other internally used documents need not be printed, since
the system "records" the data and voucher automatically.
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b. Disadvantages:
Data Security: Data Security is a cause of concern, since data is not
stored in hard copy format, but only in soft copy (i.e. data files).
Unauthorized Access: Unauthorized access and copying of confidential
financial information can happen without any trails or loss of data to the
Owner. Unauthorized access can be had through LAN or through the internet
by hacking into the Company Server. Risk of Unauthorised Access increases
in case of outsourcing accounting to a Service Bureau (Third Party).
Data Integrity: Loss of data due to software snags or corruption of data
files is a serious threat in CIS accounting. These can happen unintentionally
or inadvertently, while updating a new module or repairing an existing
system.
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Advantages Disadvantages
1. Spreadsheets are very simple to use, i. Spreadsheet Packages can
and easy to understand. accommodate data only up to a specified
2. Grouping and re-grouping of accounts limit.
can be done very easily. ii. Huge volume of data will slow down
3. Functions like calculations, the package, and at times, the Data
setting formula, creating macros, etc. File may not work at all.
can be easily done. iii. Simultaneous Access on a Network is
4. Presentation (using Bar Diagram, not possible, since a File is
Histogram, Pie-Chart, etc.) can be "locked for editing", and only one
adopted for analysis of financial person will be able to have read-write
information. access at a time.
5. Security features like restricted iv. Double Entry is not automatically
access, locking of cells, password completed. User has to incorporate
protection of formula cells, can be repetitive formulas across a number of
used. files to implement double entry
6. Highly useful for small volume accounting.
analytical purposes. v. Users are required to extract data
independently by checking the settings
and fixing the data range, etc.
B. Functional Utilities:
i. Company Information: Creation of Company along with its details
such as Address, Phone Numbers, VAT Registration No. PAN, TAN,
Accounting Period, etc.
ii. Creation of Accounts: Ledger Accounts are created in the Master
Files under different classification / group such as Asset, Liability,
Income and Expenditure.
iii. Updating of Financial Data: Opening Balances in various asset and
liability accounts are updated in the Ledgers created as above.
iv. Updating Customers / Vendors Particulars: Customers / Vendor's
Name, Address and other basic details are also entered in the Customer
/ Vendor's Master File.
v. Inventory: System of Valuation of stock like the FIFO, UFO, Weighted
Average, etc. are defined in the Product Master Files. Units of
measurement can also be updated.
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vi. Reports: Reports include items like - (a) Financial Statements, (b) Bank
Reconciliation, (c) Cash and Funds Flow Analysis, (d) Ageing Analysis of
Debtors, (e) Ratio Analysis, etc.
C. Advantages:
i. They are Inexpensive compared to Customized Software.
ii. They are easy to install, with installation instructions given separately in
the User Manual and also appearing on screen at different stages of
installation. The Installation Process is predominantly restricted to clicking
on "Yes" or "No" or "Ok" buttons for appropriate instructions.
iii. Packages are generally based on GUI (Graphical User Interface), and hence are
menu- driven with Help options. User Manual provides most of the
solutions to problems that the User may face while using the software.
iv. Pre-Packaged Accounting Software have inbuilt data backup facility also.
v. They provide the basic reports which are required by a business unit.
vi. These packs also provide facilities of Invoice Generation, Delivery
Challans, Receipts, etc. and are very effective for small and medium sized
businesses.
vii.There is a good facility for up gradation and continuous Vendor Support.
D. Limitations:
i. Standard Package may not take care of individual complexities and
peculiar feature of each business.
ii. All accounting related functions may not be covered by a Pre-Packed
Accounting Software. Example: Some accounting packs do not provide for
facility to record Stock Movements within the Factory, i.e. From
Stores Department to Production Department.
iii. The Software may not be able to analyze or present reports to meet all
requirements. It generates only routine reports which may not suit
managerial decision-making.
iv. Bugs in the Software may remain for many years before it is rectified by the
Vendor.
v. It may not be possible to move the accounting data to another platform /
software.
vi. This increases the dependency of the Enterprise on the Software Vendor, for
software up gradation.
vii.The Software Vendor will be able to access all confidential data while on any
service maintenance duty. Once the Software Code is broken in one
particular Company, the perpetrator will be able to hack the software for
any other Company also. Further, many Packages do not provide for
different levels of access control.
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Ease of Use: Software which is easier to use (both interface and
performance-wise), should be considered. Software which are very high on GUI
may fall short on performance (speed) while handling high volume data.
Cost: Packages having more features cannot be opted because of the
prohibitive high costs.
Support: Vendor Support is essential for any software. A Stable Vendor
with reputation and good track record will always be preferred.
Regular Updates: Software which is constantly updated should be preferred
against those Software where Vendors do not update their Software regularly.
d) Limitations:
Requirement Specifications may be incomplete or ambiguous, resulting in a
defective or incomplete system.
Inadequate Testing may lead to software bugs, thereby affecting the
reliability of reports.
Documentation to the Development activity may not be complete.
Making frequent changes with inadequate Change Management Procedure,
results in System Compromise.
Lack of Vendor Support with regard to Support Service or Sharing of
Source Code, can lead to modification problems and delays.
Timeframe can neither be fixed nor are they adhered to, when
developing a Software. So, there is a delay in completion of the software.
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There may be changeover problems in moving from existing system to
new customised accounting system.
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10. Explain the concept of outstanding of accounting function. What are its
benefits? Also, explain the perils of outsourcing the accounting function.
1. Meaning: Outsourcing refers to assigning a third party the responsibility of
managing the accounting functions of an Enterprise. The Enterprise does not
manage its accounting records. The Third Party maintains the accounting
software and the Client data, does the processing, and hands over the required
reports from time to time.
2. Benefits:
o The Enterprise can save time, and concentrate on its operations or core
area of business activity.
o Accounting is entrusted to specialists in the area. Data Storage and
Maintenance is done by professionals.
o The Firm is not affected when any person from the Accounting Department
/ Function leaves the organisation.
o Outsourcing Approach is more sensible economically.
3. Disadvantages:
The Firm's data is handed over to a Third Party, leading to loss of data
security and integrity. There have been instances of leakage of sensitive
information to outsiders from Third Party Processing Units.
Sometimes, services provided by Third Party Units are not of the desired
quality. Vendors are not able to meet the quality standards set by the Firm.
Cost may ultimately be higher than initially envisaged.
Third Party Service Providers are catering to number of clients thereby
processing as per priority basis. This might result in delay in obtaining of
services in a timely manner.
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iv. Budgetary Constraints: An internally developed software could be costly
initially, and cheaper to maintain in medium term. In the long run, lack of
qualified people will make its maintenance costlier, ERP Packages are costlier
to procure and maintain. Spreadsheets and Pre-Packaged Software are
cheaper, but they are short on utilities / features.
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