a) What is accounting?
b) What are the main reasons for keeping the accounts for a business? Explain
c) Who are the users of the financial information of a company and why? Explain
d) What are the advantages and disadvantages of the computerized accounting system?
e) List some of the computerized accounting programmes available in the market and discuss why they are preferred.

Accounting is the systematic recording, reporting and analysis of financial transactions of a business. The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulation, such as General Accepted Principles. Accounting allows a company to analyze the financial performance of the business, and look at statistics such as net profit

b) The main reasons for keeping the accounts for a business: The most important reasons for keeping good records is that it's a legal requirement. By law, you must keep business records: * for five years after they prepared, obtained or the transactions completed, whichever occurs latest. * in English or in a form that we can access and understand in order to work out the amount of tax you are liable to pay.

You will have to keep records for longer if you use information from those records in a later tax return- for example, if you claim a loss carried forward from a business activity in an earlier year. Under these circumstances, you must keep the records until the end of any period of review for that later return. You may also need to keep records relating to assets for capital gains tax purpose for a longer period. You can issue and store records in either paper or electronic form. There are penalties for not maintaining the required records and for not keeping them for five years. Keeping good records will help you avoid these penalties.

Other reasons for keeping good business records are to: * make it easier to complete your activity statements and prepare your annual income tax and fringe benefits tax returns. * monitor the health of your business and be able to make sound business decisions- for example, by keeping track of debtors and creditors. * help you to manage your cash flow so you can pay your tax when it fails due. * demonstrate your financial position to banks and other lenders, and also to prospective buyers of your business. * make best use of your tax adviser. Rather than paying them to sort through a shoebox of paperwork, give your tax adviser well prepared records and pay them instead to help you with your business and financial planning. * show the basis for any amendments you need to make to activity statements of tax returns you have already lodged.

c) The users of the financial information of a company Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently." There are different kinds of users of financial statements. The users of financial statements may be inside or outside the business. The users of financial statements use financial statements for a large variety of business purposes and their ability to understand and analyze financial statement helps them to succeed in the business world.

Classification of Users of Financial Statements
The various users of financial statements are classified and detail as follows:

Internal Users Internal users of financial statements are individuals who have direct bearing with the organization. They may include: * Managers and Owners - For the smooth operation of the organization, the managers and owners need the financial reports essential to make business decisions. So as to provide a more comprehensive view of the financial position of an organization, financial analysis is performed with the information supplied in the financial statements. The financial statement is used to formulate contractual terms between the company and other organization. A variable of the financial statement like the current debt to equity ratio is important in deciding the amount of long term capital that would be required to be raised. The financial statement of other companies can also provide investment solutions to different companies. Sometimes it becomes difficult to decide the right field in which financial resources may be channelized. In such situations the financial statements of other companies provide the appropriate guideline. * Employees - The financial reports or the financial statements are of immense use to the employees of the company for making collective bargaining agreements. Such statements are used for discussing matters of promotion, rankings and salary hike.

External Users External users comprise of institutional investors, financial institutions, government, vendors and general mass and media * Institutional Investors - The external users of financial statements are basically the investors who use the financial statements to assess the financial strength of a company. This would help them to make logical investment decisions. * Financial Institutions - The users of financial statements are also the different financial institutions like banks and other lending institutions who decide whether to help the company with working capital or to issue debt security to it. * Government - The financial statements of different companies are also used by the government to analyze whether the tax paid by them is accurate and is in line with their financial strength. * Vendors - The vendors who extend credit to a business require financial statements to assess the creditworthiness of the business. * General Mass and Media - The common people as well as media also make part of the users of financial statements.

Brief List of Users of Financial Statements
1. Existing equity investors and lenders, to monitor their investments and to evaluate the performance of management.
2. Prospective equity investors and lenders, to decide whether or not to invest.
3. Investment analysts, money managers, and stockbrokers, to make buy/sell/hold recommendations to their clients.
4. Rating agencies (such as Moody's, Standard & Poor's, and Dun & Bradstreet), to assign credit ratings.
5. Major customers and suppliers, to evaluate the financial strength and staying power of the company as a dependable resource for their business.
6. Labor unions, to gauge how much of a pay increase a company is able to afford in upcoming labor negotiations.
7. Boards of directors, to review the performance of management.
8. Management, to assess its own performance.
9. Corporate raiders, to seek hidden value in companies with under priced stock.
10. Competitors, to benchmark their own financial results.
11. Potential competitors, to assess how profitable it may be to enter an industry.
12. Government agencies responsible for taxing, regulating, or investigating the company.
13. Politicians, lobbyists, issue groups, consumer advocates, environmentalists, think tanks, foundations, media reporters, and others who are supporting or opposing any particular public issue the company's actions affect.
14. Actual or potential joint venture partners, franchisors or franchisees, and other business interests who need to know about the company and its financial situation.

d) The advantages and disadvantages of the computerized accounting system

The advantages of the computerized accounting system are: * Speed - The system processes data rapidly. Once the information is keyed into the related module such as payroll or accounts payable, the system processes and stores it instantly. * Automatic Generation - The majority of computerized accounting systems have features such as order-entry and generation of associated invoices. The employer can create accounts for their clients, storing their names, addresses, orders and invoices for as long as necessary. A computerized system also allows the employer to make and print account statements. Further, many accounting systems have a payroll feature, which enables complete payroll processing, including the generation and printing of checks and reports. * Timeliness - The employer is able to print and reprint customer orders, invoices, and all other accounting transactions as required. He can also easily find employees' payroll data such as current address and pay amount without having to search through filing cabinets to locate personnel files. * Eradicates Manual Processing - A computerized accounting system eliminates manual processing. The latter involves processing and recording the company's incomes, expenses, profits, losses, and reconciliation by hand, creating much room for error. Payroll transactions and the business' tax transactions are also recorded manually. With a computerized accounting system, the employer has a smoother record-keeping and balancing process. * Staff Motivation - A computerized accounting system often requires the staff to undergo training to learn new skills, making them feel motivated. Further, the employer can outsource training to a representative from the software company, creating less pressure on staff members to administer the training themselves. * Simplifies Audits - If the federal or state government decides to audit the company, a computerized accounting system simplifies the process. Normally, before the audit takes place, the auditor notifies the employer by mail about the specific documents required for the audit. Depending on the nature of the audit, documents may include tax statements, payroll registers and chart of accounts. A computerized accounting system can store many years of information. If the audit requires it, the employer can access information dating from many years back. If, during the audit, the auditor spontaneously requests an accounting document, the employer can quickly retrieve it from the system instead of rummaging through storage boxes to locate hard copies. * Reduces Embezzlement - A computerized accounting software makes it difficult for employees to steal money from the company. For example, if a payroll employee tries to pay herself more than the allowed amount, her theft will most likely be discovered because the accounting system stores all saved transactions.
The disadvantages of the computerized accounting system are: * Expense - Accounting systems are expensive not only to purchase, but also to maintain. Software changes and there may be new versions to purchase. Operating systems also change and they can be expensive, especially for a small business. If a computer stops working, then it needs to be fixed, incurring costs and delays in processing accounting information. * Training - When getting a new accounting system, there is always time and energy spent in training. After a system is bought, then about every year new versions are released with changes that may need some extra training getting used to. Some folks are just not "computer people" and takes them lots of time to be able to use a system. Many times pencil and paper are just faster. * Dependency - Computerized accounting is dependent on machines and other software to work properly. Often enough if one thing is wrong with the computer, then there is no access to the software and work cannot be done. Then time and expense are involved in getting all the system and software up and running. But then, maybe the printer stops working. There are many inter-dependent pieces in this puzzle of a computerized accounting and reliance on it 100% of the time is not realistic.

e) List some of the computerized accounting programmes available in the market and discuss why they are preferred.