ACC 2306 (Application of Computer in Accounting)

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UMARU MUSA YAR’ADUA UNIVERSITY FACULTY OF SOCIAL AND MANGEMENT SCIENCES

DEPARTMENT OF ACCOUNTING 8th September, 2014 COURSE: ACC 2306 (Application of Computer in Accounting) CLASS: B.Sc. Accounting 200 Level SEMESTER /SESSION: 2nd Semester, 2013/2014 Session LECTURER: Kabir Tahir Hamid, PhD CONSULTATION: Whenever we are available in Katsina OFFICE: Department of Accounting, Bayero University, Kano A. COURSE DESCRIPTION Computer is an information processor capable of performing some computations, including numerous arithmetical and logic operations without human intervention. Therefore, there is need to prepare Accounting students for practical application of computer in various aspects of accounting. This course is, therefore, designed to introduce students to the historical development of computer and its application in business, types of computers, computer input and output devices, computer application in accounting and finance, data capture and validation, payroll and accounting system and sales process applications and system analysis and design. B.COURSE OBJECTIVES The main objective of this course is to introduce students to computer and its application in accounting. It is expected that on completion of this course, the students should be able to: i) understand the definition of computer; ii) understand the historical development of computer; iii) know the why and how of computers; iv) know the different types of computers and their uses and application in business; v) understand computer input and output devices; vi) understand data capture, transmission, nature, validation and error detection; vii) appreciate the applications of computer in accounting and finance; viii) understand transaction data, master data, payroll and accounting system; ix) understand data transmission, nature and speed of computer x) know sales process applications like POS and online sales processing; and xi) understand system analysis and design. C. COURSE CONTENTS Week 1: History and Development of Computer Technology Week 2: Generations of Computers Week 3: The why and How of Computer Week 4: Types of Computer (Analog, Digital and Hybrid) Week 5: Computer Input and Output Devices Week 6: Data Nature, Speed and Data Capture Week 7: Data Transmission and Validation including Error Detection Week 8: Computer Application in Accounting and Finance

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Week 9: Transaction and Master Data Week 10: Payroll and Accounting System Week 11: Sales Process Applications Week 12: POS and Online Sales Processing Week 13: System Analysis Week 14: System Design Week 15: Revision /General Overview D. RECOMMENDED TEXT BOOKS 1. Basic Computer Applications, First Edition by Doyin, T., 2005, Published by Datalink Associates Limited, Block 3, House 6B, Howson Wright Estate Olusegun Ojota-Lagos.ISBN:978-057-488-3 2. An introduction to Computing, by Wooldridge, R., 1966, London Oxford University Press. New York Toroto 3. Design of information systems: A Modern Approach, by Jibitesh, M. and Ashok, M., 2007, Publishing House, 22, Delhi Medical Association Road, Dayaganj, New Delhi 4. Auditing Automatic Data Processing, by A.B. Frielink, Elsevier Publishing Company, Netherlands, 1959 (this book contains information about ways to make data more safe and secure in the computer). 5. The Beginners Guide To Computers, by Robin Bradbeer, Peter DeBono, & Peter Laurie, Addison Wesley Publishing Co. Reading, Mass, 1982 (this book explains the many uses of the computer, including all aspects of Accounting). 6. Breakthrough To Computer Age, by Harry Wulforst, Charles Scribner & Sons, New York, 1982 (this book deals with the history of computers). 7. Computer: The Mind Stretcher, by Weyman Jones, The Dial Press, New York, 1969 (this bock deals with the uses of computers). 8. Computer Insecurity, by Adrian R. D. Norman. London and New York, Chapman & Hall, 1983 (this book deals with the ways to make the use of computers more safe and secure). 9. Computers and People, by John A. Postley, McGraw-Hill, New York, 1960 (this book deals with how people use the computers). 10. Computers, Teaching & Learning, by Jerry W. Willis, Johnson, D. LaMont, Dixon, Dilithium Press, Beaverton, Orgeon, 1983 (this book deals with ways that teachers use computers in the classroom). 11. Computers: Their Impact and Use, by Robert E. Lynch, Robert R. Rice, Holt, Rinehard & Winston, 1977 (this book deals with uses of the computer, including Accounting uses). 12. Computers & Their Uses, by William H. Desmonde, Prentice Hall, Inc., 1964 (this book deals with uses of the computer, including Accounting uses). 13.Computerize Your Business, by Phillip I. Goodod, Chilton Book. Co., Radnor, PA, 1984 (this book includes ways to use the computer in Accounting). 14. Computers: Their History and How They Work, by Richard B. Rusch, Simons & Schuster, 1969 (this book deals with the history of the computer). 15. Computer Abuse: Risks and Defensive Measures, by Rainer von zur Muhlen and V. Hamann, Bit, April 1973 (this book deals with problems that one occurs when using a computer). 16. The Making of the Micro, Christopher Evans, Van Nostrand Reinhold, New York, 1981 (this book deals with the history of the computer).

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17. Programming Computers for Business Applications, Ned Chapin, PH D., McGraw-Hill, New York, 1961 (this book deals with uses of the computer in Accounting). E. COURSE REQUIREMENTS Every student is required to attend the class regularly and participate actively in group discussions and study group activities. Attendance at lecture is compulsory and at least 75% attendance record is mandatory for a student to qualify to sit for the end of semester examination. Students are also expected to sign up for an email account for effective e–discussions. F. COURSE DELIVERY STRATEGIES/METHODOLOGY Face to face lectures, class discussion, group work, and online interaction. The course outline along with the complete lecture notes would be made available to the class and would be posted onto the internet. Students are expected to photocopy (and or download) and read the notes before each lecture for better understanding and effective participation during class discussion. G. BREAK-DOWN OF GRADING S/No. Type

Scores (%)

1 Assignments 20 2 Continuous Assessment

(Tests) 20

3 Final Examination 60 Total Score 100 The continuous assessment marks are to be absorbed through snap test (s) to be given without notice, scheduled test (s) and/or paper presentation. `

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1.0 History and Development of Computer Technology 1.1 Introduction The term computer is derived from the Latin term ‘computare’, this means to calculate or programmable machine. A computer is a set of electronic device that can systematically and sequentially follow a set of instructions called a program to perform high-speed arithmetic and logical operations on data. Nothing epitomizes modern life better than the computer. In other words, a computer is an advanced electronic device that takes raw data as input from the user and processes these data under the control of set of instructions (called program) and gives the result (output) and saves output for the future use. It can process both numerical and non-numerical (arithmetic and logical) calculations. Today computers do much more than simply computing: supermarket scanners calculate grocery bill while keeping store inventory; and Automatic Teller Machines (ATM) let us conduct banking transactions from virtually anywhere in the world. But where did all this technology come from and where is it heading to? To fully understand and appreciate the impact computers have on accounting and promises they hold for the future, it is important to understand its historical evolution. 1.2 Evolution of Computer The abacus, which emerged about 5,000 years ago in Asia and is still in use today in places like China, Japan and Russia, may be considered the first computer. The word Abacus is said to have been derived from the Greek word ‘abax’, meaning ‘calculating board’ or ‘calculating table’. This device allows users to make computations using a system of sliding beads arranged on a rack. Early merchants used the abacus to keep trading transactions. But as the use of paper and pencil spread, particularly in Europe, the abacus lost its importance. It took nearly 12 centuries, however, for the next significant advance in computing devices to emerge.

Figure I. Abacus Device

In 1642, Blaise Pascal (1623-1662), the 18-year-old son of a French tax collector, invented what he called a numerical wheel calculator (popularly known as the Pascaline) to help his father with his duties. This brass rectangular box, called the Pascaline, used eight movable dials to add sums up to eight figures long only. Pascal's device used a base of ten to accomplish this. The drawback to the Pascaline, however, was its limitation to addition and its inability to perform other arithmetic operations of multiplication, division and subtraction. Figure II: Pascaline

In 1694, a German mathematician and philosopher, Gottfried Wilhem von Leibniz (1646-1716), improved the Pascaline by creating a machine that could also multiply. Like its predecessor, Leibniz's mechanical multiplier worked by a system of gears and dials. Partly by studying Pascal's original notes and drawings,

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Leibniz was able to refine his machine. It was not until 1820, however, that mechanical calculators gained widespread use. Charles Xavier Thomas de Colmar, a Frenchman, invented a machine that could perform the four basic arithmetic functions. Colmar's mechanical calculator, the arithometer, presented a more practical approach to computing because it could add, subtract, multiply and divide. With its enhanced versatility, the arithometer was widely used up until the First World War. Although later inventors refined Colmar's calculator, together with fellow inventors Pascal and Leibniz, he helped define the age of mechanical computation.

Figure III. Leibniz Machine

The real beginnings of computers as we know them today, however, lay with an English mathematics professor, Charles Babbage (1791-1871) who is called the "Grand Father" of the computer. Frustrated at the many errors he found while examining calculations for the Royal Astronomical Society, Babbage begun the automation of computers by 1812. Babbage noticed a natural harmony between machines and mathematics: machines were best at performing tasks repeatedly without mistake; while mathematics, particularly the production of mathematics tables, often required the simple repetition of steps. The problem centered on applying the ability of machines to the needs of mathematics. Babbage's first attempt at solving this problem was in 1822 when he proposed a machine to perform differential equations, called a Difference Engine. After working on the Difference Engine for 10 years, Babbage was suddenly inspired to begin work on the first general-purpose computer, which he called the Analytical Engine. Babbage's assistant, Augusta Ada King, Countess of Lovelace (1815-1842) was instrumental in the machine's design. One of the few people who understood the Engine's design as well as Babbage, she helped revise plans, secure funding from the British government, and communicate the specifics of the Analytical Engine to the public. Also, Lady Lovelace's fine understanding of the machine allowed her to create the instruction routines to be fed into the computer, making her the first female computer programmer. In the 1980's, the U.S. Defense Department named a programming language ADA in her honor.

Figure IV. Babbage Machine (the Analytical Engine)

Babbage's engine outlined the basic elements of a modern general purpose computer and was a breakthrough concept. Consisting of over 50,000 components, the basic design of the Analytical Engine included input devices in the form of perforated cards containing operating instructions and a "store" for memory of 1,000 numbers of up to 50 decimal digits long. It also contained a "mill" with a control unit that allowed processing instructions in any sequence, and output devices to produce printed results. In 1889, an American inventor, Herman Hollerith (1860-1929) found a faster way to compute the U.S. census. The previous census in 1880 had taken nearly seven years to count and with an expanding population, the bureau feared it would take 10 years to count the latest census. Unlike Babbage's idea of

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using perforated cards to instruct the machine, Hollerith's method used cards to store data information which he fed into a machine that compiled the results mechanically. Instead of ten years, census takers compiled their results in just six weeks with Hollerith's machine. In addition to their speed, the punch cards served as a storage method for data and they helped reduce computational errors. Hollerith brought his punch card reader into the business world, founding Tabulating Machine Company in 1896, later to become International Business Machines (IBM) in 1924 after a series of mergers.

Figure V. Hollerith Machine

In the ensuing years, several engineers made other significant advances. Vannevar Bush (1890-1974) developed a calculator for solving differential equations in 1931. The machine could solve complex differential equations that had long left scientists and mathematicians baffled. Similarly, John V. Atanasoff, a professor at Iowa State College (now called Iowa State University) and his graduate student, Clifford Berry, envisioned an all-electronic computer that applied Boolean algebra to computer circuitry. By extending this concept to electronic circuits in the form of on or off, Atanasoff and Berry had developed the first all-electronic computer by 1940. Their project, however, lost its funding and their work was overshadowed by similar developments by other scientists. 1.1 Generations of Computers The history of the computer goes back several decades however and there are five definable generations of computers. Each generation is defined by a significant technological development that changes fundamentally how computers operate-leading to more compact, less expensive, but more powerful, efficient and robust machines. The following are the five generations of computers. First Generation (1940-1955) – Vacuum Tubes With the onset of the Second World War, governments sought to develop computers to exploit their potential strategic importance. This increased funding for computer development projects hastened technical progress. By 1941 German engineer Konrad Zuse had developed a computer, the Z3, to design airplanes and missiles. The Allied forces, however, made greater strides in developing powerful computers. In 1943, the British completed a secret code-breaking computer called Colossus to decode German messages. The Colossus's impact on the development of the computer industry was rather limited for two important reasons. First, Colossus was not a general-purpose computer; it was only designed to decode secret messages. Second, the existence of the machine was kept secret until decades after the war. American efforts produced a broader achievement. Howard H. Aiken (1900-1973), a Harvard engineer working with IBM, succeeded in producing an all-electronic calculator by 1944. The purpose of the computer was to create ballistic charts for the U.S. Navy.

Figure VI. Colossus Machine

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It was about half as long as a football field and contained about 500 miles of wiring. The machine was slow (taking 3-5 seconds per calculation) and inflexible (in that sequences of calculations could not change); but it could perform basic arithmetic as well as more complex equations. Another computer development spurred by the war was the Electronic Numerical Integrator and Computer (ENIAC), produced by a partnership between the U.S. government and the University of Pennsylvania. Consisting of 18,000 vacuum tubes, 70,000 resistors and 5 million soldered joints, the computer was such a massive piece of machinery that it consumed 160 kilowatts of electrical power, enough energy to dim the lights in an entire section of Philadelphia. Developed by John Presper Eckert (1919-1995) and John W. Mauchly (1907-1980), ENIAC, unlike the Colossus it was a general-purpose computer that computed at high speed.

Figure VII: ENIAC Computer

In the mid-1940's John von Neumann (1903-1957) joined the University of Pennsylvania team and designed the Electronic Discrete Variable Automatic Computer (EDVAC) in 1945 with a memory to hold both a stored program as well as data. The key element to the von Neumann architecture was the central processing unit, which allowed all computer functions to be coordinated through a single source. In 1951, the UNIVAC I (Universal Automatic Computer), built by Remington Rand, became one of the first commercially available computers to take advantage of these advances.

Figure VIII: EDVAC Computer

These early computers used vacuum tubes as circuitry and magnetic drums for memory as a result taking up entire rooms and costing a fortune to run. These were inefficient materials which generated a lot of heat, sucked huge electricity and subsequently generated a lot of heat which caused ongoing breakdowns. These first generation computers relied on ‘machine language’ (which is the most basic programming language that can be understood by computers). These computers were limited to solving one problem at a time. Input was based on punched cards and paper tape. Output came out on print-outs. The two notable machines of this era were the UNIVAC and ENIAC machines – the UNIVAC is the first every commercial computer which was purchased in 1951 by a business – the US Census Bureau.

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Second Generation Computers (1956-1963) – Transistors By 1948, the invention of the transistor greatly changed the computer's development. The transistor replaced the large, cumbersome vacuum tube in televisions, radios and computers. As a result, the size of electronic machinery has been shrinking ever since. The transistor was at work in the computer by 1956. Coupled with early advances in magnetic-core memory, transistors led to second generation computers that were smaller, faster, more reliable and more energy-efficient than their predecessors. The first large-scale machines to take advantage of this transistor technology were early supercomputers. These computers, developed for atomic energy laboratories, could handle an enormous amount of data, a capability much in demand by atomic scientists. The machines were costly, however, and tended to be too powerful for the business sector's computing needs, thereby limiting their attractiveness. Only two LARCs were ever installed: one in the Lawrence Radiation Labs in Livermore, California and the other at the U.S. Navy Research and Development Center in Washington, D.C. Second generation computers replaced machine language with assembly language, allowing abbreviated programming codes to replace long, difficult binary codes. Throughout the early 1960's, there were a number of commercially successful second generation computers used in business, universities, and government from companies such as Burroughs, Control Data, Honeywell, IBM, Sperry-Rand, and others. These second generation computers contained all the components associated with the modern day computer: printers, tape storage, disk storage, memory, operating systems, and stored programs. One important example was the IBM 1401, which was universally accepted throughout industry, and is considered by many to be the Model T of the computer industry. By 1965, most large business routinely processed financial information using second generation computers. More sophisticated high-level languages such as COBOL (Common Business-Oriented Language) and FORTRAN (Formula Translator) came into common use during this time, and have expanded to the current day. These languages replaced binary machine code with words, sentences, and mathematical formulas, making it much easier to program a computer. New types of careers (programmer, analyst, and computer systems expert) and the entire software industry began with second generation computers. The second generation computers were smaller, faster, cheaper and less heavy on electricity use. They still relied on punched card for input/printouts. Transistor-driven machines were the first computers to store instructions into their memories – moving from magnetic drum to magnetic core ‘technology’. Third Generation Computers (1964-1971) – Integrated Circuits Though transistors were clearly an improvement over the vacuum tube, they still generated a great deal of heat, which damaged the computer's sensitive internal parts. The quartz rock eliminated this problem. Jack Kilby, an engineer with Texas Instruments, developed the integrated circuit (IC) in 1958. The IC combined three electronic components onto a small silicon disc, which was made from quartz. Scientists later managed to fit even more components on a single chip, called a semiconductor. As a result, computers became ever smaller as more components were squeezed onto the chip. Another third-generation development included the use of an operating system that allowed machines to run many different programs at once with a central program that monitored and coordinated the computer's memory. Fourth Generation (1972– 2010) – Microprocessors After the integrated circuits, the only place to go was down-in size. Large Scale Integration (LSI) could fit hundreds of components onto one chip. By the 1980's, Very Large Scale Integration (VLSI) squeezed hundreds of thousands of components onto a chip. Ultra-Large Scale Integration (ULSI) increased that number into the millions, thus helping to diminish the size and price of computers. It also increased their power, efficiency and reliability. The Intel 4004 chip, developed in 1971, took the integrated circuit one step further by locating all the components of a computer (central processing unit, memory, and input and output controls) on a minuscule chip. Whereas previously the integrated circuit had had to be manufactured to fit a special purpose, now one microprocessor could be manufactured and then programmed to meet any number

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of demands. Soon everyday household items such as microwave ovens, television sets and automobiles with electronic fuel injection incorporated microprocessors. Such condensed power allowed everyday people to harness a computer's power. They were no longer developed exclusively for large business or government contracts. By the mid-1970's, computer manufacturers sought to bring computers to general consumers. These minicomputers came complete with user-friendly software packages that offered even non-technical users an array of applications, most popularly word processing and spreadsheet programs. Pioneers in this field were Commodore, Radio Shack and Apple Computers. In the early 1980's, arcade video games such as Pac Man and home video game systems such as the Atari 2600 ignited consumer interest for more sophisticated, programmable home computers. In 1981, IBM introduced its Personal Computer (PC) for use in the home, office and schools. The 1980's saw an expansion in computer use in all three arenas as clones of the IBM PC made the personal computer even more affordable. The number of personal computers in use more than doubled from 2 million in 1981 to 5.5 million in 1982. Ten years later, 65 million PCs were being used. Computers continued their trend toward a smaller size, working their way down from desktop to laptop computers (which could fit inside a briefcase) to palmtop (able to fit inside a breast pocket). In direct competition with IBM's PC was Apple's Macintosh line, introduced in 1984. Notable for its user-friendly design, the Macintosh offered an operating system that allowed users to move screen icons instead of typing instructions. Users controlled the screen cursor using a mouse, a device that mimicked the movement of one's hand on the computer screen. As computers became more widespread in the workplace, new ways to harness their potential developed. As smaller computers became more powerful, they could be linked together, or networked, to share memory space, software, information and communicate with each other. As opposed to a mainframe computer, networked computers allowed individual computers to form electronic co-ops. Using either direct wiring, called a Local Area Network (LAN), or telephone lines, these networks could reach enormous proportions. A global web of computer circuitry, the Internet, for example, links computers worldwide into a single network of information. The two most popular use of computer for networks today are the Internet and electronic mail, or E-mail, which allow users to send messages through networked terminals across the office or across the world. What filled a room in the 1940s now fit in the palm of the hand. The Intel chip housed thousands of integrated circuits. The year 1981 saw the first ever computer (IBM) specifically designed for home use and 1984 saw the MacIntosh introduced by Apple. Microprocessors even moved beyond the realm of computers and into an increasing number of everyday products. The increased power of these small computers meant they could be linked, creating networks, which ultimately led to the development, birth and rapid evolution of the Internet. Other major advances during this period have been the Graphical user interface (GUI), the mouse and more recently the astounding advances in lap-top capability and hand-held devices. Fifth Generation (2011 and Beyond) – Artificial Intelligence Many advances in the science of computer design and technology are coming together to enable the creation of fifth-generation computers. Two such engineering advances are parallel processing, which replaces single central processing unit design with a system harnessing the power of many CPUs to work as one. Another advance is superconductor technology, which allows the flow of electricity with little or no resistance, greatly improving the speed of information flow. Using recent engineering advances, computers are able to accept spoken word instructions (voice recognition) and imitate human reasoning. The ability to translate a foreign language is also moderately possible with fifth generation computers. Computers today have some attributes of fifth generation computers. For example, expert systems assist doctors in making diagnoses by

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applying the problem-solving steps a doctor might use in assessing a patient's needs. It will take several more years of development before expert systems are in widespread use. Computer devices with artificial intelligence are still in development, but some of these technologies are beginning to emerge and be used such as voice recognition. Leaning to the future, computers will be radically transformed again by quantum computation, molecular and nano technology. The essence of fifth generation will be using these technologies to ultimately create machines which can process and respond to natural language, and have capability to learn and organise themselves. 2.0 Why and How of Computers 2.1 Basic Computer Operations Figure X: Basic Computer Operations

i. Input: This is the process of entering data and programs in to the computer system. The computer is an electronic machine like any other machine which takes as inputs raw data and performs some processing giving out processed data. Therefore, the input unit takes data to the computer in an organized manner for processing. ii. Storage: The process of saving data and instructions permanently is known as storage. Data has to be fed into the system before the actual processing starts. It is because the processing speed of Central Processing Unit (CPU) is so fast that the data has to be provided to CPU with the same speed. Therefore, the data is first stored in the storage unit for faster access and processing. The storage unit or the primary storage of the computer system provides space for storing data and instructions before and after processing and the results of processing. iii. Processing: The task of performing operations like arithmetic and logical operations is called processing. The Central Processing Unit (CPU) takes data and instructions from the storage unit and makes all sorts of calculations based on the instructions given and the type of data provided. It is then sent back to the storage unit. iv. Output: This is the process of producing results from the data for getting useful information. Similarly the output produced by the computer after processing must also be kept somewhere inside the computer before being given out in human readable form. Again the output is also stored inside the computer for further processing. v. Control: Controlling of all operations like input, processing and output are performed by the control unit. It takes care of step by step processing of all operations inside the computer. 2.2 Functional Units of the Computer In order to carry out the operations mentioned above the computer allocates the task between its various functional units. The computer system is divided into three separate functional units for its operation. They are: (i) arithmetic logical unit, (ii) control unit and (iii) central processing unit.

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2.2.1 Arithmetic Logical Unit (ALU) After data is entered through the input device it is stored in the primary storage unit. The actual processing of the data and instruction are performed by Arithmetic Logical Unit. The major operations performed by the ALU are addition, subtraction, multiplication, division, logic and comparison. Data is transferred to ALU from storage unit when required. After processing the output is returned back to storage unit for further processing or getting stored. 2.2.2 Control Unit (CU) The next component of computer is the Control Unit, which acts like the supervisor seeing that things are done in proper fashion. Control Unit is responsible for coordinating the various operations using time signal. The control unit determines the sequence in which computer programs and instructions are executed. Things like processing of programs stored in the main memory, interpretation of the instructions and issuing of signals for other units of the computer to execute them. It also acts as a switch board operator when several users access the computer simultaneously, thereby, coordinating the activities of computer’s peripheral equipment as they perform the input and output. 2.2.3 Central Processing Unit (CPU) The ALU and the CU of a computer system are jointly known as the central processing unit (CPU). The CPU is the brain of any computer system. It is just like brain that takes all major decisions, makes all sorts of calculations and directs different parts of the computer functions by activating and controlling the operations.

2.3 Benefits of Computers in Accounting Computers are essential tools in a wide range of fields and occupations. In accounting, computers have largely replaced paper ledgers and accounting machines, combining typewriters with calculators to make the job faster and easier. Modern accountants perform their work of tracking a business's financial transactions using computers that run spreadsheet, ledger, list and calendar software. (i) Speed: The primary advantage of computers over earlier methods of accounting is speed. Accountants can input numbers with a keyboard and screen at a much faster rate than with a pen and paper. An accountant may need to enter the same data in two or more sections of the ledger, but accounting software handles these duplicate entries automatically. Accounting software features automated functions that reduce the tedious work of data entry and give accountants more time to be productive. (ii)Accuracy: Computers offer much greater accuracy than manual methods of accounting. Instead of relying on mental arithmetic, spreadsheets and ledgers on a computer total columns and perform other math functions automatically. With a paper ledger, an accountant must perform equations on paper, with each transcription and calculation offering a new opportunity for human error. The time that accountants save also gives them more opportunities to check their work and examine potential problems with the bookkeeping. (iii) Easy Changes: Accounting software allows users to make changes quickly and easily without updating long strings of data that rely on the information that has been changed. Updating an item near the top of a computer's ledger causes the entire document to update, whereas the procedure for making the same correction on paper would be time-consuming and might require the accountant to draw up an entire new ledger, increasing the opportunity for further error. (iv) Training: Computers make it easier for accountants to learn their profession and train their colleagues and new staff in an accounting department. Accounting programs come with tutorials, online user manuals and searchable help files, all of which make it easier to learn an advanced accounting method alone or answer a minor question quickly and accurately. Faster and more comprehensive training saves businesses time and money when they acquire new accountants or introduce new software for the existing accounting team to use. (v) Saves Time: Using computers can perform complex calculations, thus saving time to do all calculations manually. Client data can be stored in database bringing it up fast and efficiently. Automated form filling can be accomplished through computing which can be a time consuming process when done by hand.

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(vi) Sharing of Information : The introduction of computers in the accounting environment allows accountants to share information and other accountant's knowledge through the Internet through both LAN and WAN. This allows accountants to gain more intelligence from other accountants around the world. Every accountant in a firm can access an accounting database and accounting information which saves time, as less work needs to be carried out. Such things as invoices, stock checks, purchase orders, prepare payroll, purchase progress reports and other standardized document forms can be exchanged directionally between computer systems instantaneously for automatic processing. (vii) Reduces Cost: Computer saves money (it is cheap, paperless and instant) and strengthens relationships between customers and suppliers by providing a good means for useful and vital communication resulting in cheaper information. (viii) Improved detail: Storage in a computer system is not confined in the same way as in the pages of a book. It can handle a more or less indefinite number of rows and columns. Records of transactions do not therefore have to be confined to very basic information such as the date and amount. A variety of other details can easily be added; for example, when a sale is made, codes can be recorded to show what category of customer this was, the identity of the salesperson, the product type, the sales district, and so on. When details on perhaps hundreds of customers are recorded in this way, they provide a rich source of data for the company to analyse. (ix) Real-time, on-line processing: ‘real-time’ means that files are updated as transaction happen; ‘on-line’ means that the files are permanently accessible to be updated. For example, when a depositor withdraw cash from an ATM cash machine, the machine can access his bank account record (it is on-line) to see if he has the funds and when he take the money out his bank account is immediately updated (real-time).

(x) Diligence: A computer is free from tiredness, lack of concentration, fatigue, etc. It can work for hours without creating any error. If millions of calculations are to be performed, a computer will perform every calculation with the same accuracy. Due to this capability it overpowers human being in routine type of work.

(xi) Versatility: It means the capacity to perform completely different type of work. One computer may be used to prepare payroll slips. Next moment it may be used for inventory management or to prepare electric bills.

(xii) Storage: Computer has the power of storing any amount of information or data. Any information can be stored and recalled as long as it is required, for any numbers of years. It depends entirely upon the Accountants how much data they want to store in a computer and when to retrieve it. The Computer has an in-built memory where it can store a large amount of data. In addition, one can also store data in secondary storage devices such as floppies, which can be kept outside the computer and can be carried to other computers.

(xiii) Improved reporting: Having recorded accounting transactions in electronic form, the production of reports becomes a matter of running some appropriate software to turn the data into summaries and tables (for management accounting) or standard statement of financial position and income statement (for financial accounting). No longer do staff have to extract information directly from the ledger entries. This saves a lot of staff time, and reduces errors of calculation and transcription. Most accounting software provides facilities for generating period-end and year-end reports as described elsewhere in this book, and will produce a ‘trial balance’. 2.2.4 Why knowledge of Computer is Necessary to the Accountant 1. Accuracy and Efficiency: Accountants spend much of their work day crunching numbers, reporting

financial transactions and keeping track of a business’ money. They ensure taxes are paid and all

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financial records comply with local, state and federal tax regulations. All of this requires the use of computer software, applications and specialized programs to create a variety of financial reports. A computer is beneficial to accountants because it allows them to perform their job efficiently and accurately, while keeping the information securely stored.

2. Ease of Work: In a business environment, computers typically have spreadsheet applications, such as Microsoft Excel, that are installed manually or bundled when the computer is initially purchased. Spreadsheets allow accountants to create customized financial reports to track specific information. Such programs can perform a variety of functions such as adding and subtracting numbers simply by formatting cells on the current project file. This type of software makes calculations fast and accountants can perform all operations more efficiently. Spreadsheets also allow accountants to import and export data to other external applications. Accounting application suites provide specific programs and reports to make an accountant’s job easier.

3. Better Financial Reporting: Accounting applications can prepare tax documents automatically and send them electronically to government reporting agencies. Financial reports are maintained simply by entering information and creating reports with a set of keystrokes, many of which can be configured by the user. Many accounting programs also have industry-specific applications for different types of small businesses.

4. Paper-Less Work: A computer helps accountants store and access financial records, make changes and alleviate the need to keep paper files. If paper work is needed, computer files can easily be accessed and printed along with any changes the accountant makes at any given time. The storage capacity of a computer helps reduce costs and makes financial information more readily accessible. Financial files that require storage can be transferred to CDs, flash drives or other storage devices.

5. Information Security : Computers allow secure access of accounting information by requiring a password for files, programs and the computer system itself. For most small businesses, such records are confidential and are only accessed by specific personnel, such as executives, accountants, payroll administrators and human resources workers. Overall, a computer provides multiple security levels to protect financial records.

6. Computerization of Accounting Systems: Since accounting systems in most organizations both in the public and private sectors are being computerized the accountant has no option rather than to acquire the knowledge of computers technology and its application in various fields of accounting so as to remain relevant.

2.2.5 Disadvantages of Computer The use of computer has also created some problems in society which are as follows.

(i) Unemployment: Different tasks are performed automatically by using computers. It reduces the need of people and increases unemployment in society.

(ii) Wastage of time and energy: Many people use computers without positive purpose. They play games and chat for a long period of time. It causes wastage of time and energy. Young generation is now spending more time on the social media websites like Facebook, Twitter etc or texting their friends all night through smartphones which is bad for both studies and their health and it also has adverse effects on the social life.

(iii) Data Security: The data stored on a computer can be accessed by unauthorized persons through networks. It has created serious problems for the data security.

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(iv) Computer Crimes: People use the computer for negative activities. They hack the credit card numbers of the people and misuse them or they can steal important data from big organizations.

(v) Privacy violation: The computers are used to store personal data of the people. The privacy of a person can be violated if the personal and confidential records are not protected properly.

(vi) Health risks: The improper and prolonged use of computer can results in injuries or disorders of hands, wrists, elbows, eyes, necks and back. The users can avoid health risks by using the computer in proper position. They must also take regular breaks while using the computer for longer period of time. It is recommended to take a couple of minutes break after 30 minutes of computer usage.

Study Questions 1. What is a computer? 2. Trace the history and Development of computer technology in the society. 3. Explain the contributions of any three renowned individuals to the development of computers. 4. What are the different generations into which computers can be identified? What are the special features of each generation? 5. Enumerate the benefits of computer in Accounting. 6. Why is the knowledge of computer necessary to the Accountant? 7. What are the disadvantages of computer? 8. Identify the leaders of the Computer Revolution 9. Identify the changes in the computer in the last twenty years 10. Project what future improvements in the computer will do to change of mode of accounting and record keeping. 3.0 Types of Computers Generally, computers can be classifieds on the basis of purpose, work, size, model and brand.

3.1 Purpose Based Classification According to purpose, computers are classified into two (2) namely general purpose or specific purpose computers. (i) General Purpose Computers: General purpose computers are designed to perform a range of tasks,

provided that the correct instructions are loaded in the computer They have the ability to store numerous programs, but lack in speed and efficiency.

(ii) Specific Purpose Computers: These are built to solve only one particular task. VCR and Optical

recorders/players, Auto-pilot, Automatic Washing Machines, Mobile Phones, GPS, etc. will have an embedded computer to control them. The program for these computers is normally ‘hard coded’ that is built in the machine’s ROM (Read Only Memory). Embedded systems controlling common appliances are one form of dedicated computers – they have a CPU, Input Output devices, software stored in ROM and some RAM as workspace.

3.2 Work (Functionality) Based Classification According to work (functionality), computers are classified into three (3), Analog, Digital and Hybrid computers.

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i) Analog Computers: An analog computer (spelt analogue in British English) is a form of computer that uses continuous physical phenomena such as electrical, mechanical, or hydraulic quantities to model the problem being solved. Analog computers are used to process analog data. Analog data is of continuous nature and which is not discrete or separate. Such type of data includes temperature, pressure, speed weight, voltage, depth etc. These quantities are continuous and having an infinite variety of values. It measures continuous changes in some physical quantity e.g. the Speedometer of a car measures speed, the change of temperature is measured by a Thermometer and the weight is measured by Weights machine. Analog computer measures continuous type of data and uses a physical quantity like electric current, voltage, temperature, etc. to present and process the data. It represent numbers by a physical quantity; that is, they assign numeric values by physically measuring some actual property, such as the length of an object, an angle created by two lines, or the amount of voltage passing through a point in an electric circuit. Analog computers are widely used for certain specialized engineering and scientific applications, for calculation and measurement of analog quantities. They are frequently used to control process such as those found in oil refinery where flow and temperature measurements are important. They are used for example in paper making and in chemical industry. Analog computers do not require any storage capability because they measure and compare quantities in a single operation. Output from an analog computer is generally in the form of readings on a series of dial (Speedometer of a car) or a graph on strip chart.

(iii) Digital Computers: A Digital Computer, as its name implies, works with digits to represent numerals, letters or other special symbols. Digital Computers operate on inputs which are ON-OFF type and its output is also in the form of ON-OFF signal. Normally, an ON is represented by a 1 and an OFF is represented by a 0. So we can say that digital computers process information which is based on the presence or the absence of an electrical charge or we prefer to say a binary 1 or 0.

A digital computer can be used to process numeric as well as non-numeric data. It can perform arithmetic operations like addition, subtraction, multiplication and division and also logical operations. Most of the computers available today are digital computers. The most common examples of digital computers are accounting machines and calculators. The results of digital computers are more accurate than the results of analog computers. Analog computers are faster than digital. Analog computers lack memory whereas digital computers store information. One can therefore say that digital computers count and analog computers measures.

(iv) Hybrid Computers (Analog + Digital): A combination of computers those are capable of inputting and outputting in both digital and analog computers. It combines the best features of both types of computers, i-e. it has the speed of analog computer and the memory and accuracy of digital computer. Hybrid computers are used mainly in specialized applications where both kinds of data need to be processed. Therefore, they help the user, to process both continuous and discrete data. For example a petrol pump contains a processor that converts fuel flow measurements into quantity and price values. In hospital Intensive Care Unit (ICU), an analog device is used which measures patient's blood pressure and temperature etc, which are then converted and displayed in the form of digits. Hybrid computers for example are used for scientific calculations, in defense and radar systems.

3.3 Size Based Classification

According to size, computers are classified into four (4) namely super, mainframe, mini and micro computers.

i) Super Computers: Supercomputers are the fastest and most powerful type of computers with large storage capacity that are very expensive and are employed for specialized applications that require

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immense amounts of mathematical calculations. For example, weather forecasting requires a supercomputer. Other uses of supercomputers include space exploration, earthquake studies, weather forecasting (hurricanes, tsunami, rainfall, windstorm forecast etc), nuclear weapons testing (testing the range, accuracy and impact of nuclear weapons), animated graphics, and natural resources exploration (natural gas, exploration, and other minerals). The chief difference between a supercomputer and a mainframe is that a supercomputer channels all its power into executing a few programs as fast as possible, whereas a mainframe uses its power to execute many programs concurrently. Figure IX: Super Computers

The most powerful computers in terms of performance and data processing that performed specialized/specific task used by large organizations. NASA uses supercomputers for launching space shuttles, controlling them and for space exploration purpose. They are very expensive and very large in size which can span an entire building.

ii) Mainframe Computers: A very large, high speed, large storage capacity and expensive computer capable of supporting hundreds, or even thousands, of users simultaneously. Many large firms & government organizations use Mainframes to run their business operations and to process & store large amount of data. It occupies space of about 100 sq. feet. Banks educational institutions & insurance companies use mainframe computers to store data about their customers, students & insurance policy holders. They are also used for population census, result publication etc. In some ways, mainframes are more powerful than supercomputers because they support more simultaneous programs. But supercomputers can execute a single program faster than a mainframe.

iii) Mini Computers: Minicomputers are used by small businesses & firms. Minicomputers are also called as “Midrange Computers” . They are small machines that do not have processing and data storage capabilities as super-computers & Mainframes. These computers are not designed for a single user and are capable of capable of supporting from 4 to about 200 users simultaneously. Individual departments of a large company or organizations use Mini-computers for specific purposes. For example, a production department can use Mini-computers for monitoring certain production process.

iv) Micro Computers: The micro-computers are widely used & the fastest growing computers. These computers are the cheapest among the other three types of computers. The Micro-computers are specially designed for general usage like entertainment, education and work purposes and are small in size and are portable. It features are increasing rapidly. They are used for multi-purposes and include desktop computer (a personal or micro-mini computer sufficient to fit on a desk), Laptop Computer (a portable computer complete with an integrated screen and keyboard. It is generally smaller in size than a desktop computer and larger than a notebook computer, Palmtop Computer/Digital Diary /Notebook /PDAs (a hand-sized computer) which has no keyboard but the screen serves both as an input and output device and workstations (a terminal or desktop computer in a network). Desktop computers, laptops, personal digital assistant (PDA), tablets & smartphones are all types of microcomputers. Well known manufacturers of Micro-computer are Dell, Apple, Samsung, Sony & Toshiba. Desktop computers,

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Gaming consoles, Sound & Navigation system of a car, Netbooks, Notebooks, PDA’s, Tablet PC’s, Smartphones, Calculators are all type of Microcomputers.

3.4 Model Based Classification According to size, computers are classified into three (3) namely XT, PS/2 computers. i) XT computers: XT is abbreviated form of Extended Technology. They use 8086 or 8088 micro

processor. They have speed of 4.77Mhz. ii) AT Computers: AT is abbreviated form of Advanced Technology. They have 80286 microprocessor. iii) PS/2 Computers: They have advanced design. They can run the latest programs.

3.5 Brand Based Classification

According to brand, computers are classified into three (3) namely IBM PC, IBM Compatible and Apple Macintosh.

i) IBM PC : IBM is an abbreviated form of International Business Machine. They are manufactured by IBM company. It is one of the popular companies in manufacture of Computers.

ii) IBM Compatible : They have similar features of IBM computers and are called as duplicate of IBM PC.

iii) Apple Macintosh: They have different features than IBM computers. They require different Supercomputer

Study Questions 1. Mention and briefly explain the various types of computers you were taught in the class. 2. How is digital computer different from hybrid computer? 3. List and explain the factors used in classifying computer by size. 4. Write short notes on the following: (i) Mainframe (ii) Minicomputer (iii) Microcomputer 5. Differentiate between the categories of computer. 6. Identify the kind of computer with high and low capacity.

4.0 Input and Output Devices The processor or Central Processing Unit (CPU) makes all the calculations of the computer. In order for a process to be possible we need to feed in data to the computer through the input devices. The computer will then process the data according to a particular program and finally deliver information through the output devices. If the information produced needs to be stored for the future, we will store this into a secondary storage peripheral device. Any information or data that is entered or sent to the computer to be processed is considered input and anything that is sent from the computer to an internal or external device is output. An input device, such as a computer keyboard or mouse, can send information (input) to the computer, but it cannot receive information (output) from the computer. An output device, such as a computer monitor or printer, can receive information (output) from the computer, but it cannot send information (input) to the computer. An input/output device, such as a CD-RW drive or USB flash drive, can send information (input) to a computer and receive information (output) from a computer. Before a computer can process any data, a method is needed to input the data into the machine. The device to be used will depend on what form this data takes (be it text, sound, artwork, etc.). Similarly, after the computer has processed the data, often there may be the need to produce output of the results. This output

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could be displayed on the computer screen, hardcopy on printed pages, or even the audio playback of music that was composed on the computer. The variety of peripheral devices used for computer input and output include the following:

Input/output Devices

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Input Devices a) Keyboard: The computer keyboard is used to enter text information into the computer. The keyboard

can also be used to type commands directing the computer to perform certain actions. Commands are typically chosen from an on-screen menu using a mouse, but there are often keyboard shortcuts for giving these same commands. In addition to the keys of the main keyboard (used for typing text), keyboards usually also have a numeric keypad (for entering numerical data efficiently), a bank of editing keys (used in text editing operations), and a row of function keys along the top (to easily invoke certain program functions). There are different types of keyboards but the QWERTY keyboard is the most widely used. Apart from the normal alphabetical keys, the keyboard has: A Numeric Keypad, Navigation Keys and Function Keys

b) Graphics Tablets: A graphics tablet consists of an electronic writing area and a special “pen” that

works with it. A graphics tablet allows artists to create graphical images with motions and actions similar to using more traditional drawing tools. The pen of the graphics tablet is pressure sensitive, so pressing harder or softer can result in brush strokes of different width (in

c) Trackballs: Some sub-notebook computers (such as the IBM ThinkPad), which lack room for even a touch pad, incorporate a trackpoint, a small rubber projection embedded between the keys of the keyboard. The trackball has the same basic functions of the mouse. The only difference is that the trackball is stationary and one doesn’t need to move it on a mouse pad.

d) Joystick: This device is well known with young people as it is mainly used for playing computer games. As the name implies, it is like a stick connected to a platform, which can be moved in all directions. These movements in turn will move something on screen depending on the game. Usually joysticks have buttons also called triggers.

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e) Mouse (pointing device): The mouse helps the user to point and access items on the computer. Its

main function is to control the cursor or pointer on the computer’s screen. The mouse can have 2 or 3 buttons, used according to the software application being used. Today, most mice also have a scroll wheel which is used mainly to scroll through documents. The traditional PC mouse has two buttons, while the traditional Macintosh mouse has one button.

Two-button mouse with scroll wheel Wireless Macintosh mouse

f) Touchpads: Most laptop computers today have a touch pad pointing device. This is a small sensitive

pad used on portable computers (laptops). The touch pad is used as a pointing device. The pointer is moved on screen by touching the touch pad with the finger. Tapping on the touch pad will give the same results as when using the mouse buttons. The touchpad is particularly useful for persons with disability whom can have limitations in moving their hand.

g) Touch screen: Some computers, especially small hand-held PDAs, have touch sensitive display

screens. The user can make choices and press button images on the screen. One often uses a stylus, which he holds like a pen, to “write” on the surface of a small touch screen.

h) Barcode reader: When we buy products from shops we usually see small labels containing white and black stripes called barcodes. These labels contain information on the product. In order to read this information, one must pass the barcode in front of a special reader. This reader can be in a form of a pen or installed on the shop’s counter. The barcode reading consists of a light emitting diode that will emit light on the code. The reflected light from the barcode is translated to the computer by a light sensitive diode.

i) Scanner: The scanner is a device that transfers printed text and images to a computer. Today, most home users have a scanner connected to their computers. These are generally called flatbed (others less common such as barcode readers are called handhelds). The scanner alone is not enough to capture the data and transform it to a format that can be understood by the computer.

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j) Pen Input: Pens are used on hand held computers such as PDA’s (Personal Data Assistant). These hand

held computers have a special sensitive screen. When the user touches the screen it will interact with the computer.

k) Graphics Table: Professionals, such as draftsmen and engineers, usually use this input device. It is used

to speed up their drawing work. The device consists of a hand held operated device (similar to a pen) used to trace diagrams placed on a digitized table. The drawing will then be transferred to the computer.

l) Magnetic Ink Character Reader (MICR): This system uses special ink to write numbers with coded

magnetic ink. This special ink contains the written numbers magnetically. This system is widely used on cheques issued by banks. The MICR is much faster than OCR or other methods when reading codes and thus identifying cheques.

m) Optical Mark Reader: This device reads marks in predetermined places on specially prepared cards.

These are usually used in multiple-choice questions. The student will have to fill a space with a pencil, usually HB. The filled examination paper is then inserted into the OMR so as to enable it to read the answers marked.

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n) Digital camera o) Camera p) Video Capture Hardware q) Microphone r) MIDI keyboard s) Webcam t) Electronic Whiteboard

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Output Devices After processing the inputted data, the computer will give its output. This output can be in two different formats:

(i) Softcopy – Visual (monitor) or Sound (speakers) (ii) Hardcopy – Output on a tangible (something you can touch) such as a printer printout.

a) Printers (all types): A printer is an external output device that takes data from a computer and generates output in the form of graphics / text on a paper. Printers can be divided into two categories Impact and Non-Impact: Impact – refers to all those printers whose printing heads touch the paper. An example is the Dot matrix printer. Non-Impact – are all those printers whose printing heads do not touch the paper. An example is a Laser or an Ink-Jet printer.

b) Monitor : The monitor is the most common type of output device and is also called Visual Display

Unit (VDU).

c) Plotters: The plotter uses pens to write on paper and is usually used for engineering drawings. There

are two types of plotters: Flatbed Plotter – This uses a flat paper which is fixed, and pens (or styluses) that move on it draw the required design. Drum Plotter – Here the paper moves along a drum vertically while pens move side to side horizontally.

d) Projector e) LCD Projection Panels f) Computer Output Microfilm (COM) g) Speaker(s): These devices are used to produce sound from the computer system. The soundcard is a

card installed in the tower case of the computer. Its role is to convert the signal coming out of the computer to a format that can be reproduced by the external speakers.

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Both Input -Out Put Devices

a) Modems b) Network cards c) Touch Screen d) Headsets (headset consists of speakers and microphone. speaker act output device and microphone

act as input device) e) Facsimile (FAX) (It has scanner to scan the document and also have printer to Print the document) f) Audio Cards/Sound Card

Study Questions

1. Clearly differentiate between computer input and output devices? 2. What are the uses of input and output devices you were taught in the Class? 3. Mention and briefly explain five (5) input and output devices you know? 4. Write short notes on the following:

(i) Mouse (ii) Monitor (iii) Printer (vi) Joy Stick (vii) Graphics Tablet (viii) Trackballs (ix) Touch screen (x) Projector (xi) Headsets (xii) Fax

5.0 Nature of Data, Speed, Data Capture, Transmission and Validation including Error Detection The Nature of Data: Data means information or ‘known facts or things used as basis for inference or reckoning’. Strictly speaking, data is the plural of datum, so is always treated as plural. Data are not only elusive, but also ephemeral. If the data collected is meaningless, then the information will have no use either [garbage in = garbage out (GIGO)]. Organisations therefore, need to ensure that appropriate data is available at the time of processing. When data is entered into information system it is organised into different data types including images, audio, video, text and numbers. Information will be valuable if it is relevant, accurate, timely, organised and cost-effective. Speed of Data: The speed with which data can be transmitted from one device to another is often measured in megabits (million bits) or megabytes (million bytes) per second. These are usually abbreviated as Mbps and MBps, respectively. Another term for data transfer rate is throughput. Data Capture: Data capture is the conversion of data to electronic media. This is a process for achieving the extraction of relevant data while the related transaction or operation is occurring. An example is a supermarket checkout equipped with point-of-sale terminals. The transaction is primarily concerned with the sale to the customer but while the purchased items are being entered onto the bill it is usual for the machine to record, and thus capture data that will allow calculation of stock movement and other information. If the

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equipment for data capture is online to a computer system, it is part of a data collection process and may be referred to as either data capture or data collection equipment. The term data capture is often used where a computer system monitors (or controls) laboratory instruments, process parameters. In this context it is also known as data logging Methods of Data Capture Data may be captured by many automated methods without traditional key entry. As technology advances, many more tools will become available for data capture. Multiple methods are available for capturing data from unstructured documents (letters, invoices, email, fax, forms etc). As one considers the method of data capture, due consideration of the origins of the documents(s) that need to be captured must done, to see if the documents are available in their original electronic format which, has the potential to massively increase data capture accuracy and remove the need for printing and scanning. The following are the common methods of data capture:

Manual Input Methods

Keyboard A very familiar input device. Typically used to input data into personal computer applications such as databases and spreadsheets

Touch-sensitive screens

Developed to allow computer monitors to be used as an input device. Selections are made by users touching areas of a screen. Sensors, built into the screen surround, detect what has been touched. These screens are increasingly used to help external customers input transactional data - e.g. buying transport tickets, paying for car parking or requesting information

Automated Input Methods

Magnetic ink character recognition (MICR)

MICR involves the recognition by a mchine of specially-formatted characters printed in magnetic ink. This is an expensive method to set up and use - but it is accurate and fast. A good example is the use of magnetic ink characters on the bottom of each cheque in a cheque book.

Advantages

(i) Data is easily read by humans as well as the computer (ii) Little training is required – you just feed the cheques into the machine (iii)It’s difficult for forgers to change details

Disadvantages (i) Specialist high-quality printing equipment is required – this obviously costs more!

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Optical mark reading (OMR)

Optical Mark Reading (OMR) uses paper based forms which users simply mark (using a dash) to answer a question. OMR needs no special equipment to mark a form other than a pen/pencil. Data can be processed very quickly and with very low error rates. An OMR scanner then processes the forms directly into the required database. An example you are probably familiar with is answer sheets for those dreaded multiple choice exam papers!

Optical character recognition (OCR) and scanners

OCR is the recognition of printed or written characters by software that processes information obtained by a scanner. Each page of text is converted to a digital using a scanner and OCR is then applied to this image to produce a text file. This involves complex image processing algorithms and rarely achieves 100% accuracy so manual proof reading is recommended.

Text is scanned then converted into real, editable text as follows:

Advantages

(i) No special data-preparation equipment required – it just uses text on ordinary paper (ii) Data is easily read by humans as well as the computer

Disadvantages (i) Recognition is not 100% accurate (ii) Converted documents will need to be checked (iii)Dirty or damaged documents are difficult to read

Intelligent Character Recognition (ICR)

Intelligent Character Recognition (ICR) again uses paper based forms which respondees can enter handprinted text such as names, dates etc. as well as dash marks with no special equipment needed other than a pen/pencil. An ICR scanner then processes the forms, which are then verified and stored the required database.

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Bar coding and EPOS

A very important kind of data collection method - in widespread use. Bar codes are made up of rectangular bars and spaces in varying widths. Read optically, these enable computer software to identify products and items automatically. Numbers or letters are represented by the width and position of each code's bars and spaces, forming a unique 'tag'. Bar codes are printed on individual labels, packaging or documents. When the coded item is handled, the bar code is scanned and the information gained is fed into a computer. Codes are also often used to track and count items. Businesses of all types and sizes use bar code systems. Best known are retailers using Electronic Point of Sale (EPOS) technology, familiar in supermarkets and many retail operations. Not only saving time at checkout, EPOS cuts management costs by providing an automatic record of what is selling and stock requirements. Customers receive an accurate record of prices and items purchased. Producers use bar coding for quick and accurate stock control, linking easily to customers. Distributors use bar codes as a crucial part of handling goods. Larger businesses and those with high security requirements can use bar codes for personnel identification and access records for sensitive areas.

EFTPOS EFTPOS stands for Electronic Funds Transfer at Point Of Sale. You will find EFTPOS terminals at the till in certain shops. An EFTPOS terminal electronically prints out details of a plastic card transaction. The computer in the terminal gets authorisation for the payment amount (to make sure it's within the credit limit) and checks the card against a list of lost and stolen cards.

Magnetic stripe cards

A card (plastic or paper) with a magnetic strip of recording material on which the magnetic tracks of an identification card are recorded. Magnetic stripe cards are in widespread use as a way of controlling access (e.g. swipe cards for doors, ticket barriers) and confirming identity (e.g. use in bank and cash cards).

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Smart cards

A smart card (sometime also called a "chip card") is a plastic card with an embedded microchip. it is widely expected that smart crads will eventually replace magnetic stripe cards in many applications. The smart chip provides significantly more memory than the magnetic stripe. The chip is also capable of processing information. The added memory and processing capabilities are what enable a smart card to offer more services and increased security. Some smart cards can also run multiple applications on one card, this reducing the number of cards required by any one person. One of the key functions of the smart card is its ability to act as a stored value card, such as Mondex and Visa cash. This enables the card to be used as electronic cash. Smart cards can also allow secure information storage, making them ideal as ID cards and security keys.

Voice recognition

A data collection technology that converts speech into text or interprets it as a sequence of computer commands. Voice recognition is most common in data entry and word processing environments, and fields where a user needs to interact with a computer without using their hands. Advantages

(i) No special data-preparation equipment required – you just say the data (ii) Data is easily understood by humans as well as the computer (iii)Little training is required

Disadvantages

(i) Recognition is not 100% accurate (ii) Dictation systems need to be trained (iii)Not everything – e.g. mathematical formulae – are easy to describe in words

Web Data Capture

Web data capture use electronic forms on either on an Intranet or Internet. They are becoming increasingly popular and have the advantage of being accessible by any user having access to a computer. Users complete the questions online and the returned data is then imported in electronic format to the required database.

Data Transmission Computers encode and transmit data, voice, and video over networks via various transmission media. Encoding is the process of transforming information into digital and analog signals. Data is transmitted over networks using signals, which are transformed, or encoded, by computers into the voice, video, graphics, and/or the print we see on our computer screens. The signals used by computers to transmit data are either digital or analog. Analog signals are continuous signals that vary in strength. Sound is an example of an analog signal. Telephones have transmitters that encode sound waves into electromagnetic waves, which then travel over wires toward their destination. The receiving telephone decodes the electromagnetic waves back into sound waves. Our brains then decode the sound waves into the words we hear. Computer modems use the same

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principle. Analog signals can be represented digitally. For instance, a high electromagnetic voltage could be interpreted as 1 and low voltage as 0.

Analog signal

Digital signals are discrete rather than continuous. Either there is a signal or there isn't a signal. Telegraphs transmit data with discrete signals.

Discrete signals can also be represented digitally. The presence of a signal could be coded as a 1 and the absence of a signal coded as a 0. The digits 0 and 1 are used because computer circuitry is based on binary digital data. The computer’s brain, the central processing unit (CPU), transforms these codes of 0s and 1s into the voice, video and data we see. Digital data is based on two states, on or off. The binary numbering system uses only two digits, 0 and 1, so it makes sense to use the binary numbering system. One digit, 0 represents off, the other digit represents on. A single 0 or 1 is called a bit. In order to appreciate how computers communicate over networks, it is necessary to be aware of how they encode information. Connection-Oriented and Connectionless Transmissions Data transmission may be:

(i) Connection-oriented (ii) Connectionless

The main difference between the two is that with a connection-oriented transmission, the destination device acknowledges receipt. Whereas, with connectionless, there is no acknolwedgement. In connection-oriented transmissions, the sending (source) device establishes a connection with the receiving (destination) device. The connection is continued until all data packets have been transmitted and the source device receives notification that the data was received by the destination device and has been checked for errors. A telephone conversation is an example of a connection-oriented transmission. When a call is made, data is transmitted across phone lines, the receiving party picks up the phone, and a conversation takes place. The individual making the call knows that it arrived at the correct destination and that it was understood.

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In a connectionless transmission, the source device transmits data but the connection is not maintained. The source device does not wait for notification that the destination device actually received the information accurately. This method is faster than connection-oriented, however less reliable since there is no notification of whether the data is received or not. It is more common to find connectionless transmissions on LANs. To understand a connectionless transmission, think of a radio broadcast: A radio disc jockey tells his/her friends to be sure to listen to her/his program at 9:00 p.m. At that time the disk jockey broadcasts a message to them. Did they receive the message? Although it is quite likely, the disk jockey cannot be sure that they turned the radio on, listened, or understood the message. Synchronous and Asynchronous Transmission Computers need to know when to expect data and where a character begins and ends. When receiving data, timing on both computer devices must be coordinated if they are to work together efficiently. This coordination is called clocking, timing, or framing. There are two protocols for the timing or coordination of data signals:

(i) Synchronous (ii) Asynchronous

When transferring data, both the transmitting and receiving nodes need to agree when the signal begins and ends so the signals can be correctly measured and interpreted. This timing process is called bit synchronization, framing, or clocking. Imaginehowdifficultitwouldbetoreadifyoudidnotknowwhenawordstartedan dwhenawordendediftherewerenopunctuationandnospacesyoucandoitbecaus ethereareseveraldifferentcharactersanditisnotincodewhatifthiswerecodedas zerosandonesthenyouwouldhaverealproblems. As you can see, synchronization of data is very important. Clocking is somewhat like timing in music. There are a specific number of beats expected per bar. When computer devices are synchronized, a specific number of signals or “beats” are expected within a set amount of time. Timing is important because it helps you be prepared. In many schools, every 50 minutes, a new class period starts. Students watch the clock and expect a signal. Usually, they are already prepared to leave the classroom. That is because they expected the signal. Synchronous transmission requires the communicating devices to maintain synchronous clocks during the entire connection. The sending device transmits on a specific schedule and the receiving device accepts the data on that same fixed schedule. The receiving device knows the timing of the sending device because the timing information is embedded within the preamble of the frame. Synchronous transmissions are common in internal computer communications and usually are sent as entire frames. Synchronous transmission is common when large blocks of data are transferred, since it is efficient and has a low overhead (number of bytes of data/control + data bytes). Asynchronous data transmission does not involve synchronizing the clocks of the sending and receiving devices. Instead, start and stop bits are used for synchronization of data signals. The start and stop bits tell the receiving device how to interpret the data. Asynchronous sends one character at a time. Data transmission may be half-duplex; meaning data is transferred in only one direction at a time. An example of half-duplex is a CB radio where only one person can talk at a time. Or, transmission may be full duplex, transmitted in two directions simultaneously. A telephone conversation illustrates full-duplex communication. Data Validation including Error Detection Data validation refers to careful editing and checking of input data prior to its use in an electronic data processing system with a view to detecting erroneous data. In other words, data validation is a process used to determine inaccurate, incomplete, or unreasonable data and then improving the quality through correction of detected errors and omissions. There are a number of terms used by different people to refer largely to the same process. These terms include: error checking; error detection; data validation; data cleaning; data cleansing; data scrubbing; and error correction.

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Input data needs to be validated before other use in order to assure the reliability of results from data application. Generally, data validation process consists of two main steps: faulty data detection and faulty data correction. Faulty data detection identifies doubtful values or errors in data and the correction process provide methods to deal with problematic data. However, it is important to note that Data can be valid, but inaccurate! Validation only involves checking the reasonableness (not the accuracy) of input data - usually checks of existence, type and range. e.g. if a student in year 7 says he is 13, the data is valid (unlike an age of 99 or -3), but not necessarily accurate – because he could be 12. The Need for Data Validation The need for data validation is centred on improving the quality of data to make them “fit for use” by users through reducing errors in the data and improving their documentation and presentation. Errors in data are common and are to be expected. Rapidly increasing computing power and storage capacity at lower cost are making it now relatively cheap and easy to store and process large amounts of data. In recent years, many surveys have therefore been designed to collect several items which require more variables and with larger sample sizes, and which creates more cases in SPSS. Validating and analysing more variables and cases increases the workload of all data handlers including coding staff, entry clerks, and data editors. When there is a combination of pressure to complete the analysis on time and inefficiencies in training and recruiting staff, the quality of data transmitted from the data manager to the analysts can be questionable. In some cases, surveys have been planned without including a step to check the coding or to verify that the data have been entered accurately. Validation is used, therefore, to check the validity and consistency of data before using the data set. Checking the reasonableness of the data before it is processed is therefore essential. Remember GIGO: garbage in, garbage out. Processing rubbish data gives rubbish information. Common Data Quality Problems a) Illegal values b) Violated attribute dependencies c) Uniqueness violation d) Referential integrity violation e) Missing values f) Misspellings g) Cryptic values h) Embedded values i) Misfielded values j) Word transpositions k) Duplicate records l) Contradicting records m) Wrong references n) Overlapping data/matching records o) Name conflicts p) Structural conflicts q) Inconsistencies

Types of validation Data validation may be divided into two, namely electronic and manual data validation. (i) Electronic validation (performed by the RDBMS, spreadsheet, program etc) i) Range checking in database (to make sure that the data entered lies within a certain range e.g. age

between 5 and 25)

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ii) Existence checking to ensure that every filed is completed so that no essential data, such as a name, is missing.

iii) Spell checking using "typing error checker". iv) Validation rules in databases, spreadsheets (rejects or queries dubious input). Using a check digit to

validate a credit card number v) Spreadsheet formulas to check values in other cells (e.g. =IF(AND(A10< >"M",A10< > "F","Gender

must be M or F","") vi) Data Type Check (also known as character check or alphanumeric check), which is to make sure that

the data entered is of the correct data type (e.g., numeric or alphabetic). vii) Check digit, which is an extra digit appended to a code consisting of a series of numbers or characters to

detect errors arising from transcription. viii) Format check: e.g. an ID must be three letters followed by 4 digits. Is date entered as dd/mm/yy?

(ii) Manual validation (performed by humans) Data analyst is required not to use electronic validation for data that must be checked with human judgement (e.g. people's surnames, dates of events). For that the analyst need manual validation. a. Consistency Check: Checking for inconsistencies in surveys (e.g. a person claims to be unemployed

but earns N80,000 a year.) Some surveys ask similar questions in different parts of the survey to check whether people are lying when they answer.

b. Control Total Check, which is to compare the computer-calculated total (e.g., total value of all the invoices) with the manually calculated total.

c. Hash Total Check, which is to compare the computer-calculated total with the manually calculated total, except that the total does not have any real meaning (e.g., adding up invoice numbers of all the invoices).

d. Reasonableness: does it seem logical? Checking hours are within reasonable limits (e.g. anything over say 50 hours a week may be questioned)

e. checking the placement of graphics and text on a page/screen f. examining items that require human common sense to tell if they are valid or not g. checking if an image is too blurry or obscure h. checking colour combinations for readability and attractiveness i. checking spelling of words or names that are not in a dictionary j. checking that data is complete (e.g. that "Printing" is included in a set of instructions) k. review of the data to identify outliers (geographic, statistical, temporal or environmental)

Tools for Preventing Invalid Data Entry (i) Verification - the process of entering data twice, and comparing the two entries to find differences. A

common example of this is when you are asked to enter a new password twice to ensure it has been entered accurately.

(ii) Limited lists (value lists) - Some controls that help enforce validation rules are limited lists where the user must choose data from a list of options. For example restricting ‘state of origin’ to the 36 States in Nigeria. However, abuse of limited lists should be avoided by not using them where the possible entries are not actually limited. e.g. If one forced users to select their title from a limited list and he offered from the options of Mr, Mrs, Miss and Dr - what about professors, Mal. Malama, Ms etc? One could never guarantee that he included every title in existence and even if one did the list of every title, a new one may be invented tomorrow and the "limited" list would be so large it would be impossible to work with.

(iii) Calendar controls to prevent the entry of invalid dates.

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(iv) Sending data back to its source for confirmation before it is entered into a system (e.g. people joining a club might be sent back the data they put on their application forms: they have to confirm it is correct before the data is entered into the club database)

Study Questions 1. What is the nature of data? At what speed is it transmitted? 2. What are the methods of data capture you know? Explain them. 3. When it would be appropriate to use each method mentioned in (1) above? 4. What are the advantages and disadvantages of each method of data capture? 5. What is data Transmission? 6. How is computer speed applied In transmitting Data 7. What do you understand by the word ERROR detection 8. How can an error be detected? 9. Describe the characteristics of digital and analog signaling. 10. Why do the variations in data transmission signals need to be synchronized? 11. Explain how the two binary numbers, 0s and 1s, are used to interpret data. 12. Distinguish between connectionless and connection-oriented data transmissions. Give an example of

when you think a connection oriented transmission might be useful. 13. What do you understand by data validation? Why is data validation important for data validation? 14. What are the common data quality problems? Explain any two. 15. Data validation may be divided into two, namely electronic and manual data validation. Explain them

citing thre examples of each. 16. What are the tools that can be used to prevent invalid data entry into the computer? 17. Which type of signaling scheme represents data sent as discrete signals? a. Digital signaling b. Analog signaling c. Asynchronous d. Synchronous 18. Which type of signaling scheme represents continuously changing data? a. Digital signaling b. Analog signaling c. Asynchronous d. Synchronous 19. Which type of bit synchronization transmission requires both a start bit and a stop bit for clocking purposes? a. Digital signaling b. Analog signaling c. Asynchronous d. Synchronous 20. There is a timing process that signals the beginning and ending of data so it can be correctly measured. This process is called what? a. Digital signaling b. Analog signaling c. Bit synchronization d. Asynchronous e. Synchronous

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6.0 Computer Application in Accounting and Finance A computer is a device that accepts information (in the form of digitalized data) and manipulates it for some result based on a program or sequence of instructions on how the data is to be processed. Because of the minute by minute change in accounting and finances, accurate record keeping is critical resulting in computerizing business’s general ledger, payroll, and other accounting tasks increases office efficiency. With a computer, one can request and receive an in house balance sheet, an income statement, or other accounting reports at a moment’s notice. The following are some of the application of computer in accounting and finance: (i) Spreadsheets for record keeping: A typical integrated double entry accounting system will contain some

or all of the following components: accounts receivable, accounts payable, general ledger, inventory, order entry, payroll, time, and billing. Spreadsheet programs are much faster, more accurate, and easier to use than traditional accounting techniques. The programs are widely used on personal computers for keeping sales, expense and inventory records, and for budgeting and forecasting future sales and expenses. As a result of these and many other applications, computer spreadsheets have become the most important of all software tools for modern businesses.

(ii) General Ledger: General Ledger is a labor saving device for the preparation of financial statements and for establishing multiple income and cost entries.

(iii) Accounts Receivable: Accounts receivable, when computerized, can get bills out the same day one has performed a service. An accounts receivable module prepares invoices and customer accounts, adds credit charges where appropriate, handles incoming payments, flags ones attention to customers that are delinquent, and produces dunning notices. It allows daily cash control, get out the bills on time, yet avoiding errors such as billing a customer twice for the same item. The further advantage is that debits and credits are posted automatically to the general ledger, order entry, and in some instances inventory, once they are entered in accounts receivable.

(iv) Accounts Payable: Accounts payable, when computerized, will provide for purchase order control, invoice processing, payment selection and handling, cheque writing and control and cash-requirements, forecasting. It will also double-check the accuracy of the vendor’s invoice, and some software systems will cross-check it against the purchase order and the inventory module.

(v) Inventory Control : Inventory Control module has multiple functions, including tracking inventory for both costing and tax purposes, controlling purchasing (and the overall level of expenditure) and minimizing the investment in inventory (and subsequent loss of cash flow).

(vi) Payroll: The payroll module prepares and prints payroll cheques, including all itemized deductions. (vii) Point of Sale: Point of sale module captures all sales information at (or in place of) the cash register,

including salesperson, date, customer, credit information, items, and quantity sold. It can produce sales slips or sales invoices, plus it reports on items, customer, and salesperson activity.

(viii) Purchasing and Receiving: Purchasing and receiving module can represent an invaluable addition. It can generate purchase orders and track their fulfillment, which can help to ensure that vendors are delivering on time and saving the expense of having to follow up on partial and incomplete orders.

(ix) Time and Billing Modul e: Time and billing module reduces manual and clerical work, simplifies the billing process, prompts one and his partners to bill on time, reduces unbilled work-in progress, minimizes unreported time, reduces unbilled time, measures and analyzes non-chargeable time and provides criteria to analyze staff performance.

(x) Cash flow forecasts: Widely used by finance departments to help manage cash flow, for bank reconciliations and in credit control. Any department holding a budget for expenses and/or revenues would typically use a spreadsheet to help create the budget in the first place, and then to monitor incomes and expenditure and any variances.

(xi) Credit control : As businesses typically buy from and sell to other businesses on credit terms, it is essential to have up to date and accurate information about which creditors need to be paid, and when money is due from debtors.

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(xii) Banking & payments: Businesses are able to take advantage of electronic banking which allows them to check their bank account records in real time – saving time and helping ensure that payments due have been made and received, and also to operate the bank account within any agreed overdraft limit. Large and overseas payments can be made quickly and securely with on-line banking, as long as the business has its own security checks to protect against theft by staff or by anyone else who managed to obtain account details and passwords.

(xiii) Cash flow Analysis and Cash budget (xiv) Working Capital Management (xv) Securities analysis and portfolio management (xvi) Allocation of scarce resources using linear programming (xvii) Bank reconciliation

Study Questions 1. What are the applications of computer in accounting and finance? 2. How would you have imagined accounting today without the computer? 3. What do you envisaged as the future impact of computer on accounting and finance functions? 4. How relevant is the application of computer in accounting and finance?

7.0 Transaction Data, Master Data, Payroll and Accounting System 7.1Transaction Data: Transactional data describe an internal or external event or transaction that takes place as an organization conducts its business. A transaction, in this context, is a sequence of information exchange and related work (such as database updating) that is treated as a unit for the purposes of satisfying a request. Transactional data can be financial (invoices, payments, sales orders, invoices, purchase orders, shipping documents, credit card payments, and insurance claims), work-related (plans, activity records) or logistical (deliveries, storage records, travel records, etc.) involving everything from a purchase order to shipping status to employee hours worked to insurance costs and claims. These data are typically grouped into transactional records, which include associated master and reference data. Reference data are sets of values or classification schemas that are referred to by systems, applications, data stores, processes, and reports, as well as by transactional and master records. Examples include lists of valid values, code lists, status codes, state abbreviations, demographic fields, flags, product types, gender, chart of accounts, and product hierarchy. Standardized reference data are key to data integration and interoperability and facilitate the sharing and reporting of information. Reference data may be used to differentiate one type of record from another for categorization and analysis, or they may be a significant fact such as country, which appears within a larger information set such as address. Organizations often create internal reference data to characterize or standardize their own information. Reference data sets are also defined by external groups, such as government or regulatory bodies, to be used by multiple organizations. Master Data: Master data refers to the key organizational entities that are used by several functional groups and are typically stored in different data systems across an organization. Additionally, master data represents the business entities around which the organization’s business transactions are executed and the primary elements around which analytics are conducted. Master data is typically persistent, non-transactional data utilized by multiple systems that defines the primary business entities. Master data describe the people, places, and things that are involved in an organization’s business. Examples include people (e.g., customers, employees, vendors, suppliers), places (e.g., locations, sales territories, offices), and things (e.g., accounts, products, inventory, assets, document sets, sites). Because these data tend to be used by multiple business processes and IT systems, standardizing master data formats and synchronizing values are critical for successful system integration. Master data tend to be grouped into master records, which may include

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associated reference data. An example of associated reference data is a state field within an address in a customer master record. Analytical Data Analytical data are the numerical values, metrics, and measurements that provide business intelligence and support organizational decision making. Typically analytical data is stored in Online Analytical Processing (OLAP) repositories optimized for decision support, such as enterprise data warehouses and department data marts. Analytical data is characterized as being the facts and numerical values in a dimensional model.

Transactional data supports the daily operations of an organization (i.e. describes business events). Analytical data supports decision-making, reporting, query, and analysis (i.e. describes business performance). While master data represents the key business entities upon which transactions are executed and the dimensions around which analysis is conducted (i.e. describes key business entities). Payroll Payroll is a company's financial record of their employees' salaries, wages, bonuses, net pay, and deductions. In an organization, payroll is the sum of all of the financial records of employee salaries, wages, bonuses and deductions. In accounting, the term payroll indicates the amount paid out to employees for the work they have done for the company over a certain period of time. Wages are payments for employee services at an hourly rate or a project basis whereas salaries are payments for employee services at a monthly or yearly rate. Salaried employees often are professional, administrative, executive, managerial, supervisory, computer, or outside sales employees. The amount paid to employees, however, is less than gross earnings because employers are required by law to withhold certain amounts of taxes, which employers directly send to government agencies. Payroll is also, of course, very important to its recipients: the employees. Employees can be very wary of payroll errors and irregularities, so a company must disburse payroll in a timely and accurate manner. It is important that all employees are paid accurately and timely with the correct withholdings and deductions, and for a company to ensure that any withholdings and deductions are submitted in a appropriate manner. This includes salary payments, tax withholdings, and paycheck deductions. Payroll accounting applies only to employees of an organization. Independent contractors are not considered to be employees, and hence, they are not accounted for under a payroll system. Generally speaking, independent contracts render services for a fee and are not under supervision or control of the company. Examples of independent contractors may include: construction workers, CPAs (Certified Public Accountants), lawyers, advertising agents, etc.

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Computerized payroll accounting takes advantage of one of the things computers do best: computing. If one runs a business with employees that you need to be paid, such a program can simplify accountant’s work considerably. Computerized payroll accounting systems allows the Accountant to process all the normal payroll tasks via a computerized system, rather than by hand. Essentials like name, address, pension number and withholding tax rate for each employee are automatically filled in for every pay period until you make an employee’s record inactive. By keeping all an organization’s payroll accounting records in a computer, it is easy to put reports together for the company and for your employees. For example, you can pull together analyses of how many hours are being worked, and at what rates of pay, by employees throughout the company, allowing one to tweak efficiency. Instead of having to constantly battle with numbers, computerized payroll accounting only requires the Accountant to enter numbers correctly once. From there, the payroll program does any necessary mathematical equations for tasks like taking out taxes and other deductions. This allows less room for human error, and greater accuracy. A computerized payroll accounting system also takes up less storage space than a lot of bulky binders or files. It is also an easier solution to doing payroll if one has a habit of working remotely from outside the office. Accounting System A system is a set of two or more interrelated components that interact to achieve a goal. Systems are almost always composed of smaller subsystems, each performing a specific function supportive of the larger system. An accounting system is a collection of components that work together to realize the objectives of data capturing, record keeping and reports preparation and communication to various stakeholders. Accounting is an information system, whose primary objective is to provide information useful to decision makers. An accounting information system (AIS) consists of: people, procedures, data, software and information technology infrastructure. The functions of AIS are to: (i) collects and stores data about activities and transactions; (ii) processes data into information that is useful for making decisions; and (iii) provides adequate controls to safeguard the organization’s assets. Proper understanding of AIS is important for better understanding of how the accounting system works with a view to knowing how to collect data about an organization’s activities and transactions, how to transform that data into information that management can use to run the organization and how to ensure the availability, reliability, and accuracy of that information. Similarly, auditors need to understand the systems that are used to produce a company’s financial statements and tax professionals need to understand enough about the client’s AIS to be confident that the information used for tax planning and compliance work is complete and accurate. Study Questions

1. Clearly differentiate with relevant examples between transaction, master and analytical data? 2. Which of these data is the most important and why? 3. What is a payroll? What are the advantages of computerizing the payroll system? 4. Clearly differentiate between salaries and wages. 5. What is an accounting system? What are its basic components? 6. What are the benefits of proper understanding of AIS?

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8.0 Sales process applications (POS and online sales processing) Sales Process Application Professional salespeople go through seven steps when helping a customer make a purchase.

(i) Approaching the customer (ii) Determining needs (iii) Presenting the product (iv) Overcoming objections (v) Closing the sale (vi) Suggestion selling (vii) Relationship building

Point of Sales (POS): POS or PoS is an abbreviation for Point of Sale (or Point-of-Sale, or Point of Service). The term is applicable to a retail shop or store, the checkout/cashier counter in the store, or a location where such transactions can occur in this type of environment. POS is the place where a retail transaction is completed. It is the point at which a customer makes a payment to the merchant in exchange for goods or services. At the point of sale the retailer would calculate the amount owed by the customer and provide options for the customer to make payment. The merchant will also normally issue a receipt for the transaction. The POS in various retail industries uses customized hardware and software as per their requirements. Retailers may utilize weighing scales, scanners, electronic and manual cash registers, EFTPOS terminals, touch screens and any other wide variety of hardware and software available for use with POS. A transaction processing system can be defined as a set of policies, procedures, equipment and technology designed to facilitate transactions at the point of sale. Transaction processing systems have evolved alongside advances in technology to add convenience, reliability and security to business transactions. Just like the point of sale itself, transaction processing systems can take a variety of forms. For example, a complex software package that connects digital cash registers, credit card processors, inventory databases and accounting software. For every point of sale there must be a transaction processing system to accompany it. The correlation is so close that software-driven transaction processing systems are often referred to as POS (point of sale) terminals. Different point of sale situations call for different transaction processing systems, and new transaction processing systems emerge to facilitate new point of sale types. An online retailer, for example, would be unwise to use a hand-operated cash register to process transactions over the phone; instead, online retailers often rely on software transaction processing systems.

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Online Sales Processing Creating a successful online sales process can be accomplished by making sure that you represent and court your visitor through the five levels of the sales process on your site. Anyone who has studied any marketing at all knows that there are psychological needs that must be met in order for a person to be persuaded to purchase a product or service. If is a product a company is selling is it represented to solve a specific problem or meet a specific need? If it is a service the company is selling is it getting in touch with the pain of your potential client to draw their interest into what the company offers? There are steps that one can take to effectively do that and in response witness the successful sales process over and over in the virtual world. That is why an Internet marketing strategy is a necessity not an option. Before getting to the sales process let’s take a quick look at the buying process a customer goes through on their way to a purchase.

(i) Identifying need or want (ii) Determining requirements (iii) Evaluating options (iv) Purchasing (v) Evaluating Decision

Customers first identify a need or want and then begin to define the requirements necessary to satisfy that need or want. They next begin to gather information and evaluate the options that are available to them to meet their requirements. Once they know their options they will look to make a purchase which will include shopping for or negotiating the best price they can get. Once they have made their purchase they test the product or service and evaluate whether or not they made a good decision.

These five levels of the sales process are the core components that will move the company’s website viewer from visitor to customer or client. By representing each level that is mentioned below and courting the potential client or customer through those levels the company will have the power to move its site from failure to success.

(i) Prospect: Marketing/prospecting to the target market and audience. To prospect a firm does not just offer products. If the firm is selling the Palm Treo do not just market the site as one that sells cell phones. Target the keywords ‘Palm Treo’ or even better ‘Palm Treo 650.’ Even more make sure anyone who clicks on the ‘Palm Treo 650′ link is taken directly to a page about Palm Treo 650’s.

(ii) Rapport: Build credibility and trust because the viewer of the site needs this to move forward. The instant a potential customer lands on the firm’s site it begins to build a rapport with him/her. The speed at which the site downloads builds rapport, the aesthetics of the site build rapport, the navigation builds rapport. Everything about the site will begin a dialog with the customer and firm’s goal should be to build its trust from that very first moment. Every aspects of the site are therefore important.

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(iii) Quality : Escort and court the buyer through the process by meeting his/her needs at least 7 out of 10 may want to buy. The firm tries to understand what the customer is really looking for and then lead him/her exactly where he/she can find it. Of course on the site the firm cannot directly ask them what they want, but it can make it easy for them to find it on their own. Here is where your navigation can come into play by making it as easy as possible for visitors to the site to find what they are looking for. The way the firm organize its content and page structure is therefore important..

(iv) Present: Present the Product or service that meets their needs. Qualifying and presenting go together on the website. When the firm presents it is providing options for its customer so that they can identify the ones that best fit their needs. As with qualifying the navigation and organizational structure is important. The firm needs to give them detailed information about each and what the benefits of each phone is. The firm can also present by displaying alternative products to them. While they are looking over that Palm Treo let them know you also carry the Kyocera Smartphones. Show them a listing of related products or customers who purchased this also purchased that display.

(v) Close: Successfully close the sale. The customers have found what they want and are ready to buy, but they are still not quite sure. This is where the site needs to close the sale. It can help convince the customer to go through with their purchase by providing them with the firm’s privacy policy and guarantees. Let them know they can always return what they buy within 30 days and they will feel much better about making that purchase. Let them know you the firm would not give out their personal information and it will find them more willing to give them to it. Make the checkout process as easy as possible. Do not ever confuse the customers or they will eave just as they were about to pay. Help them fill out the checkout forms by filling in the information where you can. If they give their zip code give them back their city. If their shipping and billing address is the same do not make them fill it out twice. Reduce the amount of pages in the checkout process and make it easy every step of the way.

Study Questions

1. What do you understand by online sales processing? 2. What are the seven steps of sales process application? Which do you think is the most important

among them? 3. What do you understand by POS? How does a manual-POS differs from an on-line POS? 4. List and explain the five steps of making a purchase 5. What are the five levels of sales process? Explain any two of them.

9.0 System Analysis and Design System Analysis Systems analysis is "the process of studying a procedure or business in order to identify its goals and purposes and create systems and procedures that will achieve them in an efficient way". Systems analysis is a process of collecting factual data, understand the processes involved, identifying problems and recommending feasible suggestions for improving the system functioning. This involves studying the business processes, gathering operational data, understand the information flow, finding out bottlenecks and evolving solutions for overcoming the weaknesses of the system so as to achieve the organizational goals. System Analysis also includes subdividing of complex process involving the entire system, identification of data store and manual processes. The major objectives of systems analysis are to find answers for each business process: What is being done, How is it being done, Who is doing it, When is he doing it, Why is it being done and How can it be improved? It is more of a thinking process and involves the creative skills of the System Analyst. It attempts to give birth to a new efficient system that satisfies the current needs of the

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user and has scope for future growth within the organizational constraints. The result of this process is a logical system design. Systems analysis is an iterative process that continues until a preferred and acceptable solution emerges. Common stakeholders for IT projects are Architecture office

i) Testing & certification office ii) Records management team iii) Application support group

Once stakeholders have been recognized, the gathering and analysis of the requirements can begin. Requirement gathering must be related to business needs or opportunities. Requirement analysis involves capturing requirements and analyzing requirements. Capturing requirements is communicating with stakeholders to agree on what the requirements are. Analyzing requirements is using standard tools to produce a baseline of the requirements. Once the stakeholders concur on the requirements, the baseline is created and becomes the formal requirement source. Within this analysis phase, the analyst is discovering and fact finding. Along with meeting with stakeholders, the analyst must meet with end users to understand what the user's needs are and to learn about problems that affect the current system in order to assist with designing a new and more efficient system. There are several activities that must occur within the analysis phase:

i) Gather Information ii) Define the new system's requirements iii) Build prototypes for the new system iv) Prioritize requirements v) Evaluate alternatives vi) Meet with management to discuss new options

System Design Systems design is the process of defining the architecture, components, modules, interfaces, and data for a system to satisfy specified requirements. The design phase is concerned with the physical construction of the system. Included are the design or configuration of the network (hardware, operating system, programming, etc.), design of user interfaces (forms, reports, etc.), design of system interfaces (for communication with other systems), and security issues. It is important that the proposed design be tested for performance, and to ensure that it meets the requirements outlined during the analysis phase. In other words, the main objective of this phase is to transform the previously defined requirements into a complete and detailed set of specifications which will be used during the next phase. Some of the activities that need to take place during the design phase are:

(i) Design the application (ii) Design and integrate the network (iii) Design and integrate the database (iv) Create a contingency plan (v) Start a Maintenance, Training and Operations plan (vi) Review the design (vii) Articulate the business processes and procedures (viii) Establish a transition strategy (ix) Deliver the System Design Document (x) Review final design

Based on the user requirements and the detailed analysis of the existing system, the new system is designed. This is the phase of system designing. It is the most crucial phase in the developments of a system. The logical system design arrived at as a result of systems analysis is converted into physical system design. Normally, the design proceeds in two stages namely preliminary or general design (at this stage, the features

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of the new system are specified, costs of implementing and these features and the benefits to be derived are estimated) and structured or detailed design (at this stage, the design of the system becomes more structured). Study Questions

1. What is system analysis? What are its processes?

2. Who are the common stakeholders for IT projects Architecture office?

3. What are the several activities that must occur within the system analysis?

4. What is system design? What are its processes?

5. What are the common activities that take place during system design?

6. What are the two stages of system design? How do they differ from one another?

Week 15: Revision Exercise This week is meant for revision of topics and subtopics that have been discussed in the last fourteen (14) weeks. Students are expected to ask any question related to the course to facilitate better understanding. The last continuous assessment will be conducted after the revision. Study Questions: (All questions from the first to the last topic)

ACC 2306 (Application of Computer in Accounting)

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