What Three Components Form a Computerized Accounting System?

Accounting is defined as the reporting, recording and analysis of the financial data of a business. A computerized accounting system includes a program or a software package that replaces a manual system, or accountant, in recording and processing financial transactions. It allows managers and other end users to analyze the financial health of a business and take necessary actions in the light of that information. Computerized accounting systems are designed to be fully customizable, but the primary components remain the same across different types of systems.

Software is the core of a computerized accounting system. The software component consists of modules, or smaller, stand-alone programs. Each individual module performs a different function. The modules can include production, customer, general ledger, human resources, asset management, financial management, or purchasing and inventory management modules. All modules link with one other for data sharing. A typical accounting process integrates all the modules of a computerized accounting system, with each one maintaining data for specific activities and entities.

Hardware refers to the physical components of a system. According to the book “Accounting Principles,” all physical equipment associated with a computerized accounting system is referred to as hardware. Computerized accounting systems are installed on computers with the capacity to run the systems. Large-scale accounting systems consist of numerous modules and commonly require computers with fast processors and large storage capacity. Other hardware components that are essential in a computerized accounting system include printing and scanning devices, as well as other peripherals, such as mouse, keyboard and external data storage devices.

While computerized accounting systems are designed to function independently of manual intervention, they typically require a certain element of supervision. Human operators are required to feed in the financial data, which is then worked on by the computerized system. According to the book “Fraud Auditing and Forensic Accounting,” other key personnel in a computerized accounting system include skilled change control, database managers, security personnel and management. Collectively, these elements work to ensure the smooth functioning of the computerized system and provide troubleshooting capabilities when the need arises.