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By going through these CBSE Class 11 Accountancy Notes Chapter 16 Accounting for Not-for-Profit Organisation, students can recall all the concepts quickly.

Accounting for Not-for-Profit Organisation Notes Class 11 Accountancy Chapter 16

There are certain institution or organization which are set-up not to earn a profit, but for providing service to its members and the public in general. The main aim of these institutions or organizations is rendering service to their members and public, but not the profit as in the case of business. Such organization includes schools, hospitals, clubs, charitable institutions, religious organizations, trade unions, welfare societies, consumer-cooperatives, literary societies, etc.

These organizations or institutions are managed by a group of people known as trustees who are fully accountable to their members and the society for the utilization of funds and the objectives of the organization. So, you have to maintain proper accounts and financial statements in the form of the Receipt and Payment Account, Income and Expenditure Account, and the Balance Sheet. These financial statements help them to keep track of their income and expenditure as well as fulfill the legal requirements for maintaining records.

Meaning of Not-For-Profit Organisation:
All trading and business organizations are profit organizations since their main objective is to earn profit. Not-For-Profit Organisations are those organizations whose main aim/objective is to rendering service to their members or the society at large and not the earning of profits.

These organizations refer to the organizations that are set up for the welfare of the society, as a charitable institution, which runs without profit motive. Its main aim is to provide services to its members. The main source of their income usually is subscriptions from their members, donations, grants, income from investment, etc. These organizations keep the accounting records to meet the statutory requirements and controlling the utilization of their funds. They usually prepare them at the end of the financial year to ascertain their income and expenditure and the financial position of the organization and submit them to the statutory authority i.e. Registrar of Societies.

Characteristics of Not-For-Profit Organisation:
1. Service Motive: The main motive of these organizations is service motive. They provide service either free of cost or at a nominal cost and not to earn profit. These are formed for rendering service to a specific group or society at large such as education, health care, recreation, sports, and so on without any consideration of caste, creed, and color.

2. Organisation: Not-For-Profit Organisations are organized as charitable trusts or societies. The subscribers to such trust or societies are called its members.

3. Management: The affairs of Not-For-Profit Organisations are normally managed by a managing committee or executive committee. These committees are elected by their members or subscribers.

4. Source of Income: The main source of income of these organizations are:

1. Subscriptions from members
2. Life-membership fees
3. Endowment fund
4. Donations
5. Legacies
6. Grant-in-aid
7. Income from investments etc.

5. Capital Fund or General Fund: The funds raised by Not-For-Profit Organisations through various sources are credited to capital funds or general funds.

6. Surplus Added to Capital Fund: The surplus generated in the form of excess income over expenditure is simply added to the capital fund or general fund. It is not distributed amongst the members as in trading or business organization.

7. Goodwill: The Not-For-Profit Organisation earn their reputation or goodwill on the basis of their contribution to the welfare of the society rather than on the customers’ satisfaction or owner’s satisfaction.

8. Accounting Records: The accounting records of these organizations are totally different from the trading or business organization. They are not prepared financial statements like Trading Account and Profit & Loss Account, instead, they prepare Receipts and Payment Account and Income and Expenditure Account. The preparation of the Balance Sheet is the same in both organizations.

9. Statutory Requirement: The accounting information provided by such organizations is meant for the present and potential contributors to meet the statutory requirements.

Accounting Records of Not-For-Profit Organisations:
As we know that Not-For-Profit Organisations are not engaged in any trading or business activity normally. Their main source of income are subscriptions, donations, financial assistance or grant from the government, etc. Most of their transactions are in form of cash or through the bank. These organizations are required by law to keep proper accounting records and keep proper control over the utilization of their funds.

For maintaining accounting records these organizations usually keep a cash book to record all receipts and payments and maintain ledger accounts of all income, expenses, assets, and liabilities. In addition, they maintain a stock register to keep records of all fixed assets and consumables.

In place of the capital account, they maintain a capital fund or general fund that goes on the increase due to surpluses, life membership fees, donations, legacies, etc. received from year to year.

Final Accounts or Financial Statements of Not-For-Profit Organisation:
As they are non-profit making entities, so they are not required to make Trading and Profit & Loss Account but instead of these accounts to know whether the income during the year was enough to meet the expenses or not they prepare

1. Receipts and Payment Account,
2. Income and Expenditure Account, and
3. Balance Sheet.

For the preparation of these financial statements, the general principles of accounting are fully applicable. The statements provide the necessary financial information to members, donors, and to the Registrar of Societies.

Along with all these, Not-For-Profit organizations also prepare a trial balance for checking the accuracy of ledger accounts. The trial balance also facilitates the preparation of accurate Receipts and Payment Account as well as the Income and Expenditure Account and the Balance Sheet.

Receipts and Payment Account:
A Receipts and Payment Account is a summary of cash transactions. It is prepared at the end of the accounting period from the cash receipts journal and cash payment journals.

“Receipts and Payment Account is nothing more than a summary of the cash book (Cash and Bank transactions) over a certain period, analyzed and classified under the suitable heading. It is the form of account most commonly adopted by the treasurers of societies, clubs, associations, etc. when preparing the results of the year’s working.” – William Pickles

In other words, Receipts and Payment Account simply is a summary’ of cash and bank transactions under various heads. On the debit side, it begins with an opening balance of cash and bank and records all the items of receipts irrespective of whether they are of capital or revenue nature or whether they pertain to the current or past or future accounting periods.

The payments are recorded on the credit side without making any distinction between items of revenue and capital nature and whether they belong to the current or past or future accounting period(s). It may be noted that this account does not show any non-cash item like depreciation. At the end of the period, this account is balanced to ascertain the balance of cash in hand or cash at the bank. The annual totals of various items of receipts and payments are found from their respective accounts in the ledger or from the cash book and are then entered in the Receipts and Payment Account.

Salient Features of Receipts and Payment Account:
1. Real Account-It is a real account, so the rule of real account. e. ‘Debit what comes in and credit what goes out is followed. Thus receipts are recorded on the Debit side and the payments are recorded on the Credit side.

2. Summary of the Cash Book: It is a summary of the cash book. Its form is similar to cash book (without discount and bank column) with debit and credit sides.

3. Shows amount irrespective of period: It shows the total amount of all receipts and payments irrespective of the period to which they pertain.

4. No distinction between nature (Capital or Revenue nature): It includes all receipts and payments whether they are of capital nature or of revenue nature.

5. No distinction between the mode of the transaction (Cash or Bank): No distinction is made in receipts/payments make cash or through the bank. With the exception of the opening and closing balances, the total amount of each receipt and payment is shown in this account.

6. Do not show non-cash items: Non-cash items like depreciation, outstanding expenses, accrued income, etc. are not shown in this account.

7. Opening and closing balances: The opening and closing balances in it respectively mean cash in hand or cash at the bank in the beginning and at the end. The balance of receipts and payment account must be debit being cash in hand or cash at the bank unless there is a bank overdraft.

8. Does not reflect net income or net loss: This account does not tell us whether the current income exceeds the current expenditure or vice versa or in other words, it does not give any information of net income or a net loss.

Steps in the Preparation of Receipt and Payment Account
1. Put the opening balance of cash in hand and cash at the bank at the beginning on the Receipt side. If there is a bank overdraft at the beginning, but the same in the Payment side of the account.

2. Enter the total amounts of all receipts (either cash or cheque) in the Receipt side (Dr. side) irrespective of their nature (whether capital or revenue) and whether they pertain to past, present, and future periods.

3. Enter the total amounts of all payments (either cash or cheque) in the Payment side (Cr. side) irrespective of their nature (whether capital or revenue) and whether they pertain to past, present, and future periods.

4. Do not enter the non-cash item like depreciation, outstanding expenses, accrued income, etc.

5. Find out the difference between the total debit side and the total credit side of the account and enter the same on the credit side as the closing balance of cash or bank balances.

But, if the total of credit side is more than of debit side, show the difference on the debit as bank overdraft and close the account.

Examples of Important Receipts and Payments Items

Format of Receipts and Payments Account
Receipts and Payments Account


There will be either of the two amounts i.e. cash at a bank or bank overdraft, not both.

Limitations of Receipts and Payments Account:

1. It does not show expenses and incomes on an accrual basis.
2. It does not show whether the organization is able to meet its day-to-day expenses out of its income.

Income and Expenditure Account:
it is a nominal account of Not-For-Profit Organisation equivalent to the Profit & Loss Account of the grading concerns. The terms profit is substituted by the words excess of income over expenditure (surplus) and the loss is expressed as an excess of expenditure over income (deficit). It reveals the surplus or deficit arising out of the organization’s activities during an accounting period.

This account is prepared on an accrual basis and includes only items of a revert ie nature. All the revenue items placing to the current penned shop in the account, the expenses and losses on the expenditure side (debit side), and incomes and gains on the income side (credit side) of the account. It shows the net operating result in the form of surplus or deficit, which is transferred to the capital fund is shown in the balance sheet.

Salient Features of Income and Expenditure Account:
1. Nominal Account: It is a nominal account, therefore the ride of nominal account i.e. “Debit all expenses and losses and credit all incomes and gains” is followed.

2. Ignore Items of Capital Nature: In this account, only items of revenue nature are to be considered and all the items of capital nature should be ignored.

3. Prepare from Receipt and Payment Account: It is generally prepared from a given Receipts and Payments Account and other information after making necessary adjustments.

4. No Opening and Closing Balances: In this account, no opening and closing balances of cash and bank are recorded.

5. Same as Profit & Loss Account: This account is prepared in the same manner in which a Profit & Loss Account is prepared, considering, all adjustments relating to the current year.

6. Exclude Past and Future Items: It excludes all the items of income and expenditure which do not pertain to the current period.

7. End-balance of this Account: The end-balance of the Income and Expenditure Account, which may be either “excess of income over expenditures’ or ‘excess of expenditure over income’ would be added to or deducted from, as the case may be, the capital fund, on the liabilities side of the Balance Sheet.

Steps in the Preparation of Income and Expenditure Account:
1. From the Receipts and Payments Account exclude the opening and closing balance of cash and bank as they are not an income.

2. Exclude the items of capital nature as these are to be shown in the balance sheet.

3. Take out the revenue receipts only for the current year to be shown on the income side of the Income and Expenditure Account. These are adjusted by excluding the amounts relating to the preceding and the succeeding periods and including the amounts relating to the current year not yet received.

4. Take out the revenue payments only for the current year to be shown on the expenditure side of the Income and Expenditure Account. These are adjusted by excluding the amounts relating to the preceding and the succeeding periods and including the amounts relating to the current year not yet paid.

5. Make the adjustments to non-cash items like
(a) Depreciation on fixed assets.
(b) Provision for doubtful debts, if required.
(c) Profit or Loss on sale of fixed assets etc.

For determining the surplus/deficit for the current year.
So, we can also prepare the Income and Expenditure Account with the help of the following methods after considering the Receipt and Payment Account and information given

Income and Expenditure Account for the year ended………..


Format of Income and Expenditure Account
Income and Expenditure Account for the year ended…………..


The distinction between Income and Expenditure Account and Receipt and Payment Account


Balance Sheet:
Not-For-Profit organizations prepare a Balance Sheet at the end of an accounting period to ascertain the financial position of the organization. The preparation of their Balance Sheet is the same as that of the business or trading entities. It is prepared in the usual way showing assets on the ‘right-hand side and the liabilities on the ‘left-hand side. However, the term capital is not to be found.

Instead, there will be a capital fund or a general fund, or an accumulated fund, and the surplus or deficit as per the Income and Expenditure Account shall be added to or deducted from this fund. Some capitalized items like legacies, entrance fees, and life membership fees directly (added) in the capital fund.

Sometimes it becomes necessary to prepare a Balance Sheet at the beginning of the year in order to find out the opening balance of the capital/general fund.

Steps in the Preparation of Balance Sheet:
1. Find out the Capital fund as per the Opening Balance Sheet and add surplus from the Income and Expenditure Account. Then, add capitalized items like legacies, entrance fees, and life membership fees, etc. received during the year.

2. Put all the fixed assets (from the opening balance sheet) with additions (from Receipts and Payments Account) after charging depreciation (as per Income and Expenditure Account), on the assets side of the balance sheet.

3. Compare items on the receipts side of the Receipts and Payments Account with the income side of the Income and Expenditure Account to find out the amounts of
(a) Subscription due but not yet received,
(b) income received in advance,
(c) Sale of fixed assets made during the year,
(d) Items to be capitalized etc.

4. Compare items on the payment side of the Receipts and Payments Account with the expenditure side of the Income and Expenditure Account to find out the amount of
(a) Outstanding Expenses,
(b) Prepaid Expenses,
(c) Purchases of a fixed asset during the year,
(d) Depreciation on fixed assets,
(e) Stock of consumable items like stationery in hand,
(f) Closing balance of cash in hand and cash at bank etc.

Format of Balance Sheet
Balance Sheet of…………………
as on ………………….


Some important items relating to Not-For-Profit Organisations
1. Subscription: It is the amount paid by the members of the organization periodically so that their membership is not canceled. This is the main source of income of Not-For-Profit Organisations.

Treatment:
1. The total amount of subscriptions received during the accounting period is shown on the receipt side (Dr. side) of the Receipt and Payment Account.

2. Subscription related to the current period shown in the income side (Cr. side) of Income and Expenditure Account. The amount of subscription to be shown in the Income and Expenditure Account is calculated as follows :

Table Showing Calculation of Subscriptions

Or
Subscription Account

3. Subscription Outstanding at the end of the year is shown on the assets side of the Balance Sheet and subscription received in advance in the current year for the next year is shown on the liabilities side of the Balance Sheet.

2. Donations: It is a type of gift in cash or in property received from some person, firm, or company. The donation can be for specific purposes or for general purposes.

Both the donation received appears on the receipts side of the Receipts and Payments Account.
1. Specific Donations: If the amount received as the donation is for a specific purpose such as a donation for extension of the existing building, donation for the library, for construction of new computer laboratory, etc., it is capitalized and is shown on the liabilities side of Balance Sheet.

2.. General Donations: Such donations are to be utilized to promote the general purpose of the organization. It is of two types:
(a) General Donation of Big Amount: It is shown on the liability side of the Balance Sheet because it is non-recurring in nature as the donations of huge amounts cannot be expected every year.

(b) General Donation of Small Amount: These are treated as revenue receipts as it is a regular source of income hence, it is taken to the income side of the Income and Expenditure Account of the current year.

3. Legacies: It is in the nature of a gift, received in cash or in the property as per the will of a deceased person. It is not treated as an income because it is not of recurring nature. Such receipts come very rarely and therefore it is of a capital nature and is shown on the liabilities side of the Balance Sheet. It appears on the receipt side of the Receipts and Payments Account and is directly added to Capital Fund in the Balance Sheet. However, legacies of the small amount may be treated as income and show on the income side of the Income and Expenditure Account.

4. Life Membership Fees: In order to become a member of an organization for the whole of the life, some members pay the fee in lump sum i.e. once in their lifetime. It is a receipt of non¬recurring nature since the members will not be required to pay the fees regularly. It is shown on the receipt side of the Receipt and Payment Account and added to the Capital Fund in the Balance Sheet. It should not be credited to the Income and Expenditure Account.

5. Entrance Fees: The entrance fee also known as the Admission Fee is paid only once by the member at the time of becoming a member.
1. In the case of organizations like clubs and some charitable institutions, where the membership is limited and the amount of Entrance Fees is quite large, it is treated as the non-recurring item and added directly to Capital Fund in the Balance Sheet and also shows in the receipt side of the Receipt and Payment Account.

2. For some organizations like educational institutions the entrance fee is a regular income and the amount is quite small. So it is treated as the recurring item and shown in the income side of the Income and Expenditure Account. It is also shown on the receipt side by the Receipt and Payment Account.

From the examination point of view, if there is no specific instruction about Entrance Fees, it should be treated as Capital Receipt and directly added to Capital Fund in the Balance Sheet.

6. Sale of Old Assets: Receipt from the sale of the old asset appears in the receipt side of Receipt and Payment Account. Only the profit or loss on the sale of a fixed asset is credited or debited, as the case may be, to the Income and Expenditure Account. In the Balance Sheet, the book value of the asset sold should be deducted from the relevant asset.

7. Sale of Periodicals: Receipts from the sale of periodicals shown in the receipt side of Receipt and Payment Account. It is an item of recurring nature and shown in the income side of the Income and Expenditure Account.

8. Sale of Sports Materials: The sale of sports materials like old bats, old nets, etc. is a regular feature with any sports club. It is treated as revenue income on the assumption that their book value is zero. It is therefore shown in the income side of the Income and Expenditure Account. It is also shown on the receipt side of the Receipt and Payment Account.

9. Payment of Honorarium: It is the payment made to a person for his specific services rendered by him, not as a regular employee. This is an item of expense and is shown in the ‘debit or expenditure side’ of the Income and Expenditure Account.

→ Endowment Fund: “It is a fund arising from a bequest or gift, the income of which is devoted for a specific purpose.” – Eric L. Kohler

Thus, Endowment Fund is a capital receipt and is shown on the liabilities side of the Balance Sheet.

→ Government Grant: Some organizations like schools, colleges, public hospitals, etc. depend upon Government grants for their activities.

It is shown on the receipt side of the Receipt and Payment Account:

1. The maintenance grant is a recurring grant. It is treated as a revenue receipt and shown on the income side of the Income and Expenditure Account.
2. Grants such as building grants are treated as capital receipts and transferred to the building fund account.

→ Cash subsidy: Some Not-For-Profit Organisations receive cash subsidies from the Government or Government agencies. This subsidy is also treated as revenue income for the year in which it is received.

→ Special Funds: Not-For-Profit Organisation creates some special funds for a specific purpose such as ‘prize funds’, ‘match fund’ and ‘sports fund’ etc. The amount of such fund is invested in securities and the income earned on such investment is added to the respective fund, not credited to the Income and Expenditure Account. Similarly, the expenses incurred on such a specific purpose are also deducted from the fund.

→ Stationery (or some consumable items): Expenses incurred on Stationery (or some consumable items) are charged to the Income and Expenditure Account.

If the opening or closing stock of stationery is given, then the amount of stationery consumed during the year will be shown in the Income and Expenditure Account and the closing stock in the Balance Sheet.

The calculation for Expenses for the Current Year

Total Amount paid shown in Payment side of Receipt and Payment Account. Outstanding experiences at the end of the current year shown in the Liabilities side of the Balance Sheet and prepaid at the end shown in the Assets side of the Balance Sheet.

The calculation for Income for the Current Year

Total Amount Received shown in Receipt side of Receipt and Payment Account. Accrued income at the end of the current year shown in the assets side of the Balance Sheet and Income received in advance at the end of the current year shown on the liabilities side of the Balance Sheet.

By going through these CBSE Class 11 Accountancy Notes Chapter 15 Accounting System Using Database Management System, students can recall all the concepts quickly.

Accounting System Using Database Management System Notes Class 11 Accountancy Chapter 15

A Database Management System (DBMS) is essentially a collection of inter-related data and |set of programmes to access this data. This selection of data is usually called the database. It can be regarded as an electronic filing cabinet. Relational Database Management System (RDBMS) enables us to manipulate data in a more sophisticated way. RDBMS avoids redundancy in data and defines the relationships between sets of data. The data stored in each table can be retrieved and updated based on data in another table.

MS ACCESS is a Database Management System (DBMS) that help in managing data that is stored in a computer database. Like the majority of database management systems in use today. Access is a relational database management system. Access database help in storing and managing information.

Access is Database Management System that allows the user to create and manipulate the database. Access is software that enables its user to perform various functions such as create, modify, delete and create data in tables of the database.

With Access, we can perform the following tasks:

• Organize data into manageable related units.
• Enter, locate and modify data.
• Extract subsets of data based on specific criteria.
• Create custom forms and reports.
• Automatic common database tasks.
• Graph data relationships.

In Access, the term database refers to a single file that contains a collection of information. A database consists of the following objects:

→ Tables: Tables store data in a row-and-column format similar to spreadsheets. Every table in a database focuses on one subject, for example, products, customers, students etc. Each row or record in the table is a unique instance of the subject of the table.

→ Queries: Queries extract data from a table on user-defined criteria. They enable us to view’ fields from more than one table.

→ Forms: Forms display and print data from a table(s) or a query based on a user-defined custom format. Forms enable us to view, edit and print data.

→ Reports: Reports display and print data from a table(s) or query based on a user-defined custom format.

→ Pages: Pages can be posted on a website of an organisation using the internet or sent via email to someone on the organisation network.

→ Macros: Macros automate common database action based on user-specified commands and events.

→ Modules: Modules automate complex operations and give a programme more control than macros. Modules are procedures written in Visual Basic or Application Programming Language.

→ Capabilities of MS Access: Access has certain capabilities, which bring it closer to an ideal Database Management System.

These capabilities are

• Storing the data in an organised manner.
• Enforcing data integrity constraints.
• Representing complex relationship among data.
• Providing for persistent storage of database object.
• Restricting unauthorised access to the database.
• Allowing fast retrieval of data with or without processing by using SQL.
• Flexibility to create multiple user interfaces.
• Providing for data showing and multi-user transaction processing.
• Supporting multiple views of advanced information. A new database can be created with the help of a computer wizard or without the help of a wizard.

Creating of Table in Access shows three columns i.e. Field Name, Data Type and description, which define the schema of a table is created. Field name refers to the column name of the table being created. Access supports different data types like Text, remove, Number, Date/ Time, Auto Number, Yes/No, OLE object and Hyperlink.

Access allows the designer to define the two types of properties of each column which are General properties and Lookup properties. General properties are Field size, format, Decimal places, Input Mask, Caption, Default value, validation Rule and Text, required and induced and Allow-zero length. Look up properties used by a field to find its values in another table, query or from a fixed list of values.

Forms are a way to view table data. We create the link between the form and its record source by using graphical objects called controls. We can use forms for a variety of purpose, for example, create a data entry form to enter data into a table or create a custom dialogue box to accept user input, and then carry out an action based on that input. The first step in designing a form is to create the table(s) or review the design of the tables. A forms problem often can be attributed to improperly designed table(s).

• Forms offer several advantages:
• Forms can display a complete record at a time, usually in vertical format.
• Forms allow us to customize the appearance in much more detail than a table with fonts, colours and graphics.
• Forms can display fields that the user cannot edit and can edit.
• Forms enable us to rearrange the field.
• Forms provide special field display functions, for example, drop-down list, word wrapping in fields and calculated fields.
• Forms enable us to automate tasks and display custom menus.

Every form control is complete objects with its independent set of properties, which determine the shape, size, behaviour and functionality of the object. Properties of these objects are of three types: Format, Data and other.

Format Properties:

1. Format
2. Decimal Places
3. Caption
4. Visible
5. Layout Properties (Left, Top, Width, Height)
6. Back Colours and Style
7. Special Effects
8. Border Properties (Style, Colours, Effect)
9. Fore Colour
10. Font Properties (Name, Size etc.)
11. Text Align
12. Margins (Left, Right, Top, etc.)
13. Line Spacing
14. Display When
15. Scroll Bars

Data Properties:

1. Control Source
2. Input Mask
3. Default Value
4. Validation (Rule and Text)
5. Enabled and Locked

Other Properties:

1. Name
2. Status Bar Text
3. Enter Key Behaviour
4. Allow AutoCorrect
5. Vertical
6. Default
7. Tab Stop
8. Tab Index
9. Shortcut Menu
10. Control Tip Text
11. Help Context ID

Access provides for a number of controls and more can be added using the added-in-manager in Tools of the menu bar. Bound, Unbound and Calculated are three types of control.

Some of the common controls important for designing a form are:

1. Label
2. Text Box
3. List Box
4. Combo Box
5. Sub-Form
   (a) Source Object
   (b) Link Child Fields
   (c) Link Master Fields
6. Option Group
7. Command Button
   (a) Record Navigation
   (b) Record Operation
   (c) Form Operation
   (d) Report Operation
   (e) Application
   (f) Miscellaneous
8. Control Wizard

Creation of Form can be done by
(a) Design,
(b) Wizard.

One of the most useful features of modern database applications is the query, which provides us with a way to question our database. The result of the query can then .be printed or viewed on-screen.

A query is a statement that communicates to Access the kind of information we need to extract from one or more table. Queries can be used as a source of information for forms and reports. Access executes the query each time we open the form of the object or the report.

For each type of query, we can specify the query parameters that prompt the user to specify the query criteria before the query executes.

There are several types of queries in Access that are used to generate information:
(a) Simple Query
(b) Parameter Queries
(c) Summary Queries

There are three methods by which any of the above queries can be created in Access:
(a) Wizard Method
(b) Design Method
(c) SQL view Method

An accounting reporting capability is incomplete as reporting is one of the main purposes for which an accounting system is designed and operated upon. The output of the accounting system takes the form of accounting reports.

Accounting report display information that is acquired from data processing and transformation in an organised manner. Reports sent to reduce the level of uncertainly associated with decision-makers and also influence their positive actions. The output of the computerised is accounting reports. Financial accounting Reports such a Cash Books, Bank Book, Ledger and Trial Balance may be generated in Access by adhering to the report generation process.

Generating accounting reports in Access involves three steps:

1. Designing the report
2. Identifying accounting information queries
3. Using the record set o final SQL

There are two types of formats for presenting information through a report:

1. Columns Report Format
2. Tabular Report Format

A report in Access is designed using seven sections which taken together constitutes the structure of report design.

1. Report Header
2. Page Header
3. Group Header
4. Details
5. Group Footer
6. Page Footer
7. Report Footer

The Report can be created by using any of the following methods:
(a) Auto Report Method
(b) Wizard Method
(c) Design View Method

The design of the report created by any of the methods may be improved upon by making the following addition and modification to the report.

1. Adding Dates and Page Number.
2. Adding and Deleting Report Contbls
3. Conditionally Formatting Report Control
4. Grouping Levels and Sorting Order

The design and a generated report ai saved for future use and reference. The generated report may also b exported for use by others.
(a) Saving and Exporting Report ejects in Access
(b) Saving as Snapshot
(c) Exporting to Excel
(d) Exporting to MS WORD
(e) Printing a Report
(f) E-Mailing a Report

Financial Accounting Reports such as Cash Book, Bank Book, Ledger Accounts and Trial Balance may be generated on Access by adhering to the report generation process.

By going through these CBSE Class 11 Accountancy Notes Chapter 14 Structuring Database for Accounting, students can recall all the concepts quickly.

Structuring Database for Accounting Notes Class 11 Accountancy Chapter 14

As we know that the working and success of any business is based on lots of information. Every business enterprise needs ready answers to lots of its queries. For this, it requires a proper system that readily provides an accurate and prompt answer to its queries. Numerous techniques and devices have been developed to manage and organize the information.

Before the development of computers, people used to store and process data with the help of papers, file folders, etc. Now-a- days, computers are playing a significant role in performing these tasks. They have replaced all old techniques. The advantages of the computer over the other tools are that it is faster, more accurate, and more reliable than other methods.

In today’s information society, it is often said that information is power. Due to the rapid growth of information technology, all organizations have realized the value of information as a resource.

As we know that computerized accounting involves identifying, storing, and retrieving the data content of transactions. This requires a technique to record and store data in such a way that it allows Its user, easy and convenient retrieval as and when required. This can be achieved by designing a suitable database for accounting. Such a database consists of inter-related data tables that are structured in a manner that ensures data consistency and integrity,

Data can be anything such as a number, a person’s name, images, sounds, etc. So, it is a set of isolated and unrelated raw facts, N represented by values, which have little or no meaning. They have little or no meaning because they lack a context for evaluation. When data is processed and converted into a meaningful and useful form, it is known as information. It is a set of organized and validated collections of data.

Database: Database is a collection of related data. A database is an integrated and logical collection of data. Data is collected and stored in such a way that a common and controlled approach is sufficient in adding new data and modifying and retrieving existing data within the database. A database system is an integrated collection of related files along with details of the interpretation of the data contained therein.

Basic Concept; of Database System of Accounting: Data Processing Cycle Data processing involves the technique of collecting, sorting, relating, interpreting, and computing data items in such a manner as to provide meaningful and useful information for decision making. Data capturing, inputting, processing, and generating information available to the user are the basic steps of the data processing cycle.

In the context of accounting, the data process cycle involves the following steps:

1. Source documents
2. Input of data
3. Data storage
4. Manipulation of data
5. Output of data

Designing Database for Accounting:
A definite data structure for storing the accounting data is required by both computerized and computer-based A.I.S.

Process of Database Designing:

Entity-Relationship (ER) Model:
It is a popular conceptual data model, which is mostly used in database-oriented applications. Even though ER model describes the physical database model, it is more useful in the design and communication of the logical data model.

The model is best depicted with the help of ER symbols. While preparing ER diagram, the following symbols are used to represent the different types of entities, attributes, identifies and relationships:

Anything in a real-world with independent existence is called an entity. Accounting data is captured through entities. Some properties of interest that describe the entity are called attributes.

Types of Attributes:

1. Composite and simple attributes
2. Single-valued and multivalued attributes
3. Stored and derived attributes
4. Null value
5. Complex attributes
6. Entity types and entity sets
7. Value sets of attributes

Almost every entity type has one of its attributes, which contains unique values for identifying the entity instance. Relationship among two or more entity types represents an interaction among their respective entities. Entity types, which do not has key attributes of their own are known as weak entity types.

ER Presentation of Accounting Reality
1. Accounting database

2. An entity type accounting database

3. An entity type ‘voucher’ with Vno. as a key attribute

4. An entity type accounts type

5. An entity type support

Database Technology:
Database Technology is the technique used for designing a database. Concepts that are crucial to the creation of structure and development of the database designs are:

1. Reality
2. Data
3. Database
4. Information
5. DBMS
6. Database System

Reality is some aspect of the real world. It consists of an organization, people facilities, etc., and the environment in which the organization exists arid operates. The continuous interaction with the environment in which it works results in real-world transactions.

Data are known facts that ora be recorded and which have implicit meaning. It represents concerning people, places, objects, entities, events, concepts, etc., it may be quantitative and qualitative or they may be of financial character or Nora-financial character.

A database is a collection of related data. It Is a shared collection of interrelated -data tables, files, or structures, which are designed to meet the varied information needs of an organization.

It has two properties:

1. it is Integrated,
2. It Is Shared.

An accounting database is a collection of related accounting data to -represent some -aspect of accounting information in a system.

The raw data processed In accordance with decision usefulness becomes information, Information is a date that has -been processed arad refilled, and then presented in a format for decision making purpose.

DBMS i.e., Database Management System is essentially a collection of Interrelated data, and a set of programs to access this data. This collection of data is usually called the database. It can be regarded as an electronic filing cabinet Database systems are designed to maintain large volumes of data.

Management of data involves:

• Defining the structures for the storage of data.
• Providing fie mechanisms for the manipulation of data.
• Providing for fie security of the data against unauthorized access.

The DBMS is a general-purpose software system that facilitates the process of defining, constructing, and maintaining databases for various applications. A database management system is a collection of programs that enables the user to create and maintain a database.

Defining a database involves specifying the data types, structures, and constraints or the data to be stored in a database. Constructing the database is the process of storing the data itself on some storage medium that is controlled by the DBMS. Manipulating a database includes some functions as query tug Ac database to receive specific data, updating the database to retrieve specific data, updating the database to reflect changes in reality, and generating the reports from the data.

Database Processing for an application

Relational Data Model (RDM):
Relational database stores and organizes information in table rows and columns where rows of a table represent records and columns represent fields. A relational database is one that is built and operated in accordance with the Relational Model of Data proposed by E.F. Codd (1970).

Relational Model provides a simple and intuitive method for defining a database,.storing and updating data in it, and submitting queries of arbitrary complexity to it. It also provides a firm, sound, and consistent foundation for all the other topics that database management systems must commonly embrace, such as security and authorization database integrity, transaction management, reeord&bility and distribution of data.

The relation model is based on the concept of an entity and attribute. An entity is like a name, person, place, or event and an attribute is a property. of an entity. In a relation a table is also called ‘relation’: Each (able is made up of records. Horizontal rows known as records and vertical columns known as attributes.

A domain is a collection of all possible values from which values for a given column or attribute are drawn. The domains are defined for every attribute in the table. The number of attributes determines the degree of the relation. The number of types in a relation is known as the cardinality of the relation. Each table can be identified by a unique name.

Relational Databases and Schemes:
It is a set of related schemes and a set of integrity constraints. A relational database state is a state of relation states such that even/ relational database state satisfies the integrity constraints specified on relational database scheme.

Constraints and Database Schemes

1. Domain constraint
2. Key constraint
3. Entity integrity constraint
4. Referential integrity constraint

Operations and Constraint Violations

These operations must enforce integrity constraints specified OR relational database schemes. Retrieval operations do not cause violation of any integrity constraints.

Designing Relational Database Scheme
To transform ER design into Relational Data Model design the following steps should be taken:

1. Create a relation for every strong entity.
2. Create a separate relation for each weak entity type.
3. Identify entity types participating in binary 1: N relationship type.

Example: It is based on modified example reality that uses Credit and Debit Vouchers.

Interacting with Database
Query language enables the users to ask specific questions to the database. Database query languages are not universal such as procedure-oriented languages. Each database may have its own query language with a unique rules instruction format. The most popular query language is a structured query language (SQL), which has an industry-wide standard.

The name SQL stands for Structured Query Languages which was originally called Sequel (Structured English Query Language) developed by IBM in 1970. It has statements for data definition, query, and update. It has the capability to define user-oriented views of the database, specify security and authorization, define integrity constraints, and various other operations. DQL, Data Query Language, is a sub-set of SQL that is widely used. A basic set of queries.

Select-From-Where Structure

• Select: Specify the data or information that is described to answer the query.
• From: Specify the source of data for answering the query.
• Where: Specify the conditions that are used to narrow down the choice of data.

By going through these CBSE Class 11 Accountancy Notes Chapter 13 Computerised Accounting System, students can recall all the concepts quickly.

Computerised Accounting System Notes Class 11 Accountancy Chapter 13

Accounting is called the language of business. It communicates financial information to a variety of users by preparing financial reports. It is considered as a system that collects and processes financial information of an enterprise and reports that information to users to enable them to make appropriate decisions.

Accounting helps to summarise a lot of financial transactions and events and enables accountants to convey economic information to their users. According to AiCPA, American Institute of Certified Public Accounts, accounting is ‘‘the art of recording, classifying and summarizing in a significant manner and its terms of money, transactions, and events, which are. in part at least. of a financial character and interpreting the results thereof”

Accounting, as an information system is a process of identifying, measuring, and communicating the economic information of an organization to its user who needs the information for decision-making. It is based on the following:

It is very important that accounts of different enterprises are prepared on a uniform basis and an enterprise maintains consistency in the preparation of financial accounts over a period of time. To have uniformity and consistency in the preparation and presentation of financial accounts, accounting operates within a framework of ‘Generally Accepted Accounting Principles (GAAP).

The term GAAP is used to describe rules developed for preparations of financial statements and are variously called concepts, conventions, axioms, postulates, principles modifying principles, etc. Accounting standards are the policy documents issued by the regulatory accountancy body, relating to various aspects of measurements, treatment, and disclosure of accounting transactions and events with a view to harmonize and standardize accounting policies.

So, accounting is a systematic but flexible exercise. It includes entering the transactions, preparation of vouchers, preparing books of accounts, drawing trial balances, and thereafter, preparing the trading account, profit and loss account, and balance sheet. It includes calculations relating to multiplication, addition, and subtraction. It is quite a monotonous job as transactions in the business are quite repetitive in nature.

On the basis of the record, the profit has to be ascertained based on some principles. The first part is monotonous and at times boring, whereas, the second part is more challenging and at times very interesting, when the records are kept manually, it is referred to as manual accounting.

When accounts are maintained with the help of computers, it is called computerized accounting. Most of the computer programs help in the proper basic recording of business transactions. Nowadays computer is being widely used in the field of accounting. It itself can do the calculation, collects and process accounting data and presents the results in the form of proper reports to the management for decision-making purpose. It also performs the function of recording, posting, classification, summarization, and interpretation of the results.

A computerized accounting system is an accounting information system that records and processes the accounting transactions and events and produced the reports as per the requirement of the user, according to Generally Accepted Accounting Principles (GAAP). Every accounting system whether manual or computerized works under a framework of well-defined principles i.e. accounting principles and in a user-defined network for maintenance of records and generation of reports.

Operating Environment: The framework of storage and processing of data in a computerized accounting system is called the operating environment.

The operating environment of a computerized accounting system consists of hardware and software of the computer system. Hardware and software are both dependent on each other. The type of software determines the structure of hardware whereas the selection of hardware depends upon the type and number of users, size of the organization, network and working of the organization, extent of working, etc.

In a small business where the number and variety of transactions are small, the number of customers and suppliers are less, a personal computer with the standard software may be perfect. But in an organization, whose business is spread over large area i.e., in different parts of city or country or world, a number of transactions are very large with variety, some powerful computer system with sophisticated software needed to maintain the voluminous data. For this purpose multi-user systems such as Unix, Linux, etc. are used.

Modern accounting systems use the concept of database. It is implemented using a DBMS i.e. Database Management System. Every’ computerized accounting system need two things:

1. Accounting Framework
2. Operating Procedure.

Requirements of database-oriented application of computer system:

1. Front-end Interface
2. Back-end Database
3. Data Processing
4. Reporting System.

Thus, a computerized accounting system based on database applications is a system where data is collected, stored, processed, and interpreted to generate reports for the decision-making purpose of management.

Comparison between Manual and Computerised Accounting

As we know that the accounting is the art of identifying, recording, classifying, and summarising financial transactions to produce the financial statements, so we can also compare the working of manual accounting and computerized accounting on the basis of the following heads:

1. Identifying financial transactions
2. Recording of these transactions
3. Classification of the recorded transactions
4. Summarising
5. Adjusting Entries
6. Preparation of Financial Statement
7. Closing of books of accounts.

All the above functions, under the manual accounting system done according to the principle of accounting and by preparing vouchers, journal, ledger, trial balance, etc., manually and in a computerized system, all this work is done by some standard database software automatically. In both systems the accounting process is identical but the technology used is different.

Advantages of Computerised Accounting System

1. Record and process a large volume of transactions
2. Timely reporting
3. Lower cost
4. Less paperwork.
5. Provide flexible reports
6. Scalable to handle the growing transactions
7. Secured
8. Accurate
9. Fast
10. Reliable
11. Up-to-date information
12. Automatic
13. VIIS reporting
14. Storage and retrieval at ease
15. Motivate the employees.

Limitations of Computerised Accounting System

1. Huge training cost
2. Opposition from staff
3. Loss of work time
4. The danger of system failure
5. Ill effect on health
6. Inability to check unanticipated errors
7. Breaches of security.

Sourcing of Accounting Software:
Today there is a number of readymade software packages that are available in the market. Since the applications in the area of accounting are standard, the difference is in the number of features provided by an individual package. The most popular software used in India is Tally and Ex. Accounting software is an integral part of the computerized accounting system. It is the people, who are responsible for accounting, not the computer, so before acquiring the accounting software it is very important to analyze the expertise level of the people who would use it.

The need of acquiring software arises in two following situations:

1. When the organization replaces the manual system of accounting with the computerized system of accounting.
2. When the organization replaces the current accounting software with the new accounting software according to the recent changes.

Accounting Packages and Their Types
Since the application in the area of accounting is standard, every computerized accounting system is implemented to perform recording, classifying, storing, and summarizing of accounting data and generates reports according to the requirements of the user. So there is a difference in the number of features provided by an individual package.

The accounting packages are classified into the following categories:

1. Ready to use
2. Customized
3. Tailored.

Considerations before Sourcing an Accounting Software

1. Cost of installation and maintenance
2. Size of organization
3. Flexibility
4. Adaptation and training needs
5. Level of utilities/MIS reports
6. Level of secrecy
7. Vendor reputation and capability
8. Exporting/Importing data facility.