Core Banking Systems & Accounting in Computerized Environment | PAPER III – ACCOUNTING & FINANCIAL MANAGEMENT FOR BANKERS | MODULE B: FINANCIAL STATEMENTS AND CORE BANKING SYSTEMS
Core Banking Systems & Accounting in Computerized Environment
Meaning of Computerized Accounting
Computerized Accounting refers to maintaining accounts using accounting software like Tally, SAP, or Finacle instead of manual bookkeeping. It automates recording, classifying, summarizing, and reporting of financial transactions.
Features of Computerized Accounting
- Speed and accuracy in processing transactions
- Automated ledger maintenance
- Real-time financial reporting
- Data security and access control
- Integration with banking and inventory systems
Terms Used in Computerized Accounting
- Voucher: A document showing details of financial transactions
- Ledger: Principal books for storing accounting data
- Trial Balance: Summary of debit and credit balances
- Module: Functional unit within software like inventory, payroll
Difference between Manual and Computerized Accounting
| Manual Accounting | Computerized Accounting |
|---|---|
| Time-consuming, error-prone | Fast, accurate, and automated |
| Physical ledger books | Digital storage and processing |
| Limited reporting | Dynamic MIS and reports |
Advantages and Disadvantages of Computerized Accounting
Advantages:
- Increased efficiency
- Real-time data access
- Standardised reports
- Error reduction
Disadvantages:
- High initial setup cost
- Cybersecurity threats
- Dependence on technology and power
Functions Performed by Computerized Accounting Software
- Journal and ledger maintenance
- Inventory tracking
- Tax calculations and compliance
- Bank reconciliation
- Payroll processing
Popular Software in the Market
- Tally ERP
- SAP
- Finacle (by Infosys) for banks
- Oracle Financials
Computerization – Scope and Experiences in Banking
Computerization in banking began with basic data entry and has now evolved into complete automation with Core Banking Systems (CBS). This allows real-time transaction processing across all branches of a bank.
The Core Banking Components
- Customer Information System
- Loan and Deposit Modules
- ATM, Internet Banking, Mobile Banking Integration
- MIS and Compliance Reporting
Information Security
Information security ensures confidentiality, integrity, and availability of data. Banks adopt encryption, firewalls, and access controls to protect customer and financial information.
Internet and World Wide Web – Influence on Banking
Internet banking, mobile apps, and digital wallets have transformed banking. Customers now transfer funds, pay bills, and apply for loans online, reducing branch dependency.
Example: Automated Interest Calculation
Suppose a customer deposits ₹10,000 at an annual interest rate of 5% for 1 year. The software calculates interest as:
Interest = Principal × Rate × Time / 100
= ₹10,000 × 5 × 1 / 100
= ₹500
The software posts ₹500 as income and adjusts balances automatically at maturity.
MCQs: Core Banking Systems & Computerized Accounting
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What is the full form of CBS in banking?
- a) Central Bank System
- b) Core Banking System
- c) Computer Banking Software
- d) Core Banking Service
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Which of the following is NOT a feature of computerized accounting?
- a) Real-time processing
- b) Error reduction
- c) Manual data entry in ledgers
- d) Automated reporting
-
Which software is primarily used by banks for core operations?
- a) MS Excel
- b) Finacle
- c) QuickBooks
- d) Peachtree
-
What does encryption in information security ensure?
- a) Faster internet access
- b) Data confidentiality
- c) Real-time updates
- d) System reboot
-
In a computerized accounting environment, errors are:
- a) Frequent
- b) Reduced
- c) Ignored
- d) Increased
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What is the primary disadvantage of computerized accounting?
- a) Reduced speed
- b) Dependence on technology
- c) High error rate
- d) Less accurate reports
-
Which of the following is an example of a voucher in accounting?
- a) Payment receipt
- b) Ledger sheet
- c) Invoice print
- d) Email
-
Core Banking allows:
- a) Banking at home branch only
- b) Anywhere banking
- c) Offline transactions
- d) Paper-based processing
-
Which module handles staff salaries in computerized software?
- a) Sales
- b) Payroll
- c) Inventory
- d) Audit
-
The internet has influenced banking through:
- a) Manual passbook updates
- b) Online fund transfers
- c) Branch queuing
- d) Handwritten ledgers
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