NCERT Notes for Class 11 Accountancy Chapter 12 Application of computers in Accounting Meaning and elements of computer

Class 11 Accountancy Chapter 12 Application of computers in Accounting Meaning and elements of computer

NCERT Notes for Class 11 Accountancy Chapter 12 Application of computers in Accounting Meaning and elements of computer, (Accountancy) exam are Students are taught thru NCERT books in some of state board and CBSE Schools.  As the chapter involves an end, there is an exercise provided to assist students prepare for evaluation.  Students need to clear up those exercises very well because the questions with inside the very last asked from those. 

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NCERT Notes for Class 11 Accountancy Chapter 12 Application of computers in Accounting Meaning and elements of computer

Class 11 Accountancy Chapter 12 Application of computers in Accounting Meaning and elements of computer


Application of computers in Accounting Meaning and elements of computer

A computer is an electronic device which is capable of performing a variety of operations as directed by a set of instructions. This set of instruction is called a computer programme.

Elements of computer system

A computer system is a combination of six elements.

1- Hardware

The physical components of a computer are known as hardware. Keyboard, mouse, monitor and processor.

2- Software

  • A set of programmes which governs the operation of a computer system is called software or a set of programme which is used to work such hardware.
  • A coded set of instructions stored in the form of circuits is called firm ware. There are six type of software

1. Operating system

Operating system is the software that acts as an interactive link between the user and the computer hardware. Dos, windows, linux etc.

2. Utility programme

There are set of computer programme which are designed to perform certain supporting operations such as programme to format disk, duplicate a disk etc.

3. Application software

These are user oriented programme designed and developed for performing certain specified task. Pay roll accounting, Tally, financial accounting etc.

4. Language processors

This software used to translate source programme in to machine language.

5. System software

System software is a set of programme which control internal function such as reading data, transmitting processed data to output devices etc.

6. Connectivity software

Connectivity software is a set of programmes which creates and control a connection between computer and server.

3- People or live ware

People interacting with the computers are called the live ware of the computer system. Eg. Programmers, system analysts (who design data processing system), operators.

4- Procedures

The procedure means series of operations in a certain order or manner to achieve desired result.

A. Hardware oriented procedure

To provide details about components and their methods of operation.

B. software oriented procedures

To provide set of instructions required to using software of computer. c. c c c.

c. Internal procedure system

To issue smooth flow of data to computer

5- Data

  • Data is row unorganised fact that need to be processed.
  • When data is processed, organised and presented in a meaningful it is called information.
  • Data is an input which creates information for decision making.
  • Data are entered in to computer and are being stored in its memory.
  • As and when required the data stored in the memory are retrieved and processed to get the required information.

6- Connectivity

It is a manner in which a particular computer system is connected other devices like telephone line, satellite link etc.

Capabilities of computer system

A computer system has certain special features which in comparison to human being become its capabilities.

1- High speed

A computer can process data at a high speed than human beings. Modern powerful computers are capable of performing 100 million calculations per second.

2- Accuracy is very high

Accuracy means the degree of exactness compared to human beings. Computers can perform calculations at a very high rate of accuracy

3- Versatility

It means the ability to perform multiple task. Computers are capable of performing variety of task.

4- Large volume of data can be stored

Computers can store large volume of data and information for a long time. It requires only a very small physical space for such storage. The data stored can be accessible at any time and can be used for processing.

5- Reliability

It refers to the ability with which the computers remain functional to serve the user. Computer systems are well adapted to performing repetitive operations. They are free from tiredness, boredom or fatigue. Therefore they are more reliable than human beings.


  1. Lack of decision making skills
  2. Computers have no IQ
  3. No feelings
  4. Lack of common sense.

Components of a computer

1- Input units

Input unit is a device which is used to provide data and information to the computer. The commonly used input devices are key board, mouse, magnetic tape , magnetic disk, light pen, optical scanner, magnetic ink character recognition (MICR) , optical character recognition (OCR), Bar code Reader, Optical mark reader (OMR), smart card reader, touch screen, track ball, floppy disc, joystick etc.

2- Central processing Unit

CPU is the main part of computer. It accepts data from input devices, stores it, process it according to instructions received and provide the result through output devices. CPU consists of three parts.

A- Memory unit

Memory unit of CPU is used to store the data and instructions.

B- Arithmetic and Logic unit (ALU)

AlU is used to perform all arithmetical and logic operations.

C- Control unit

3- Output units

Output device is used to communicate information to the user. The output devices are monitor (VDU), printer , plotter, speech synthesiser, speaker, Fax, sound card etc.

Computerised accounting

  • The chance of errors in manual accounting is more and it is time consuming.
  • The increase in the volume of transactions made it difficult to keep books of accounts properly.
  • Therefore mechanised system of accounting was introduced in business.
  • The accounting machine was the first type of equipment used in mechanised accounting.
  • The advent of computers has made a significant change in business field.
  • Modern computers are capable of processing very large volume of business transactions with a great speed and accuracy.

Information and decision

  • As a system, every organisation accepts inputs and transforms them into outputs.
  • Information is input and decision is output because information is the basis of decision.
  • Information is the most important organisational resources.
  • Every organisation has a wellestablished information system that is meant to generate the information required for decision making.
  • With the increasing use of information systems in organisation, Transaction Processing System (TPS) have started for supporting business operation.

Transaction processing system

  • TPS is the first stage of computerised accounting system.
  • The purpose of TPS is to record, process, validate and store transaction that occur in the various functional areas of a business for subsequent retrieval and usage.
  • TPS system has three components input, process, and output.
  • A simple computerised accounting system accepts the complete transaction data as inputs stores such data in computer storage media and retrieve the accounting data for processing as and when required.
  • TPS is an information system for business transaction involving the collection, modification and retrieval of all transaction data.

Steps of TPS

1- Data entry

The data must be entered in the system before it is processed. There are number of input devices to enter data. Key board, mouse, touch screen etc.

2- Data validation

It ensures the accuracy and reliability of input data by comparing the same with some predetermined standards or known data.

3- Processing and revalidation

Once the accuracy and reliability of data are validated the data are ready for processing. There are two ways to process the transaction online and batch mode.

Batch processing

Batch data processing is an efficient way of processing high volume of data where a group of transaction is collected over a period of pay roll and billing system.

Real time processing (RTP)/ online transaction processing (OLTP)

  • It provides online outcome in the form of information and reports without time lag between the transaction and its processing.
  • Data must be processed in a small time period.
  • Radar system, customer services, bank ATMs are examples.

4- Storage

The processed action is stored in transaction data base. Only valid transactions are stored in the data base.

5- Information

The stored data is processed using the query facility to produce desired information.

6- Reporting

Reports can be prepared on the basis of the required information.

Features of computerised accounting system

  1. Data is inputted and stored online
  2. Accounts, transactions and records get unique codes for identification
  3. Users can print statements like bills and invoices
  4. Financial statements can be produced instantly and automatically

Management Information system and Accounting information system

  • MIS is a system that provides the information necessary to take decisions and manage an organisation effectively.
  • It is the study of people, technology, organisations and the relationship among them.
  • The initial concept of MIS was to process data from the organisations and presents it in the form of reports at regular intervals.
  • Accounting information system identifies collects, process and communicates economic information about an entity.
  • Every accounting system essentially a part of the AIS.
  • AIS is a part of MIS.
  • AIS is a collection of resources designed to transform financial and other data in to information. .

Designing of accounting reports

  • Data when processed becomes information.
  • When the related information is summarised to meet a particular need it is called a report.
  • The content and design of the report is expected to vary depending upon the level to which it is submitted and division to made on the basis of report.
  • A report must be effective and efficient to the user and should substantiate the decision making process.

A report must be able to fulfil the following criterion

a- Relevance

b- Timeliness

c- Accuracy

d- Completeness

e- Summarisation

The accounting related MIS reports are

1- Summary reports

Summary reports summarises all activities of the organisation and present in the form of summary. eg. P/l a/c, balance sheet

2- Demand report

This report will be prepared only when the management request them. eg. Bad debt reports for a given product, stock valuation report etc.

3- Customer / supplier report

According to the specification of management it will be prepared. eg. Top ten customers report, interest on customers account etc.

4- Exception report

According to the conditions / exceptions the report is prepared. eg. Inventory report in short supplies, stock status query, overstocked status etc.

5. Responsibility reports

it specifies the premises of management responsibility.

Steps for designing accounting report

1- Definition of objective

The objective of the report must be clearly defined.

2. Structure of report

It includes the information to be contained and the style of presentation.

3- Querying with data base

The accounting information queries must be clearly defined and the methodology to be adopted while interacting with the data base.

4- Finalising the report


Data interface between the information system

Accounting information system is important component of the organisational MIS in an organisation. It receives information and provides information to the other functional MIS. The relationship and data interface between AIS and various components of MIS are

  1. AIS , Manufacturing Information System and human resources information system
    • Hiring employees as per requirements
    • Evaluating performance of the worker
    • Enrolling employee in benefit
    • Payment of wages
  2. AIS and marketing information system
    • Inquiry
    • Contact creation
    • Entry of orders
    • Despatch of goods
    • Billing to customers
  3. AIS and manufacturing information system
    • Preparation of plans and schedules
    • Issue of material requisition forms
    • Issue of inventory
    • Issue of orders for procurement of raw materials – Payment to vendors.

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