Transferring Accounts to a Computerised Accounting System (Cambridge (CIE) A Level Accounting): Revision Note

Transferring accounts to a computerised accounting system

What is the transfer process?

• The transfer process occurs when a business moves from a manual accounting system to a computerised accounting system

• All the existing account balances and records must be transferred to the new system accurately and completely

What are the stages of a transfer process?

Stage 1 (Planning)

• Choose an appropriate accounting software for the needs of the business

• Agree a changeover date for when the new system will go live

  • All transactions up to and including the changeover date will be recorded using the old manual system

  • All transactions after that date will be recorded in the new computerised system

• Appoint a skilled person to oversee the migration

  • For example, an IT specialist or an accountant with experience of computerised systems

Stage 2 (Setting up the chart of accounts)

• A chart of accounts is the list of all nominal ledger account codes in the new system

• Recreate each account in the manual system in the new system with a corresponding code

  • No account must be omitted

  • Otherwise, balances will be lost during transfer

• The structure must reflect the same categories used in the financial statements

  • Such as non-current assets, current assets, liabilities, income, expenses, etc.

Stage 3 (Entering opening balances)

• Use the trial balance from the last day of the manual system as the source of all opening balances

• Enter each balance from the trial balance into the corresponding account in the new system

• The opening balances must be entered by an authorised member of staff only

Stage 4 (Verifying the opening balances)

• Extract a trial balance from the new system

• This must agree to the trial balance from the manual system on the same date

• Investigate any discrepancies and correct them before the new system is used to record live transactions

• An independent person should check the entries

  • This should be different to the person who entered the balances initially

Stage 5 (Parallel Running)

• Operate both the manual system and the computerised system simultaneously for a trial period

• Record transactions in both systems and compare the outputs

  • Such as financial statements and control accounts

• If the results agree, the business can be confident the new system is working correctly

• Once the directors are satisfied, the manual system is discontinued

How do businesses ensure data integrity during the transfer process?

• Data integrity means that the accounting data in the new system is accurate, complete, and consistent with the records held in the manual system

• The table shows various methods that are used to ensure data integrity

What are the consequences of poor data integrity during the transfer process?

• Financial statements might be inaccurate

  • Assets, liabilities, income or expenses may be overstated or understated

• Directors face personal liability

  • They sign the financial statements and are legally responsible for their accuracy

  • Even if errors arose during an IT migration

• Auditors may issue a qualified report

  • If auditors cannot verify figures because balances were lost, omitted, or corrupted during transfer, they cannot confirm the statements give a true and fair view

• Management decisions based on incorrect data

  • For example, reporting a higher profit than actually exists could lead to unaffordable dividend payments