Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes Notes: Introduction to data processing

  • Part of accounting involves data processing or processing data
  • Data-refers to raw and unprocessed information for example a transaction event such as the sale of goods bought for resale in exchange for cash
  • Information- is a term that is used to refer to data:
    • That is timely and accurate
    • Specific and organised for a specific purpose
    • Presented in a way and context that gives it meaning and relevant
    • Is arranged in a meaningful way that aids understanding
  • In short information is processed data
  • An example of information in accounting are the financial statements which are yielded after processing data in the form of transaction
  • The net profit figure at the end of the accounting period is an example of a piece of useful information
  • Although the exact steps taken in data processing vary all the steps can be grouped into the following steps:
  • Data Collection- this involves the gathering of data e.g. in receipts and other source documents. It is important to make sure that data is complete and accurate at this stage otherwise the information obtained in the end will also be inaccurate
  • Preparation– the collected data is analysed and prepared for input, this might involved summarizing transactions and preparing for double entry
  • Input- the data is entered into records including books of original entry and ledgers, here data has to be in strict accounting format
  • Data Processing- is the manipulation of items of data to produce meaningful information
    • Operations are performed on a given set of data to extract the required information in an appropriate form such as diagrams, reports, or tables
    • In accounting terms this involves balancing off accounts
    • Extracting the balances and preparing a Trial Balance
    • Preparing the Financial Statements
  • Output and interpretation– this is when the processed information is presented and interpreted
  • This often comes in the presentation of financial statements and the accompanying notes
  • The final accounts are often compared to past performance, industrial average performance or against competitors
  • Storage– the information is then stored for further usage and retrieval as and when needed
  • Data processing can be done using manual methods or
  • Increasingly through electronic methods
  • Often though both manual processing and electronic processing are used

NB

To access more topics go to the Principles of Accounting Notes.