An Introduction to Computerised Accounting.

TYPES OF COMPUTER SETUPS

  1. Mainframe – a huge single central computer with a whole lot of “dumb” terminals, each of which is simply a keyboard and monitor screen that connects to and uses the central processor and storage facilities. Cost millions and used by airlines, supermarkets and the FBI, amongst many large organisations.
  2. Minicomputer – same as the above but smaller and, at £100,000 or so more affordable for “small” businesses.
  3. Network – 2 or (many) more PCs linked together and sharing data, printers and other facilities. For home use 2 PCs can be networked by simply using Windows XP or ’98 and a couple of network cards – cards connected by cable cost a fiver each, “wireless” cards these days cost about £15. “Upgrading and Fixing PCs for Dummies” will take you through the simple process of installing the cards. You then use Windows Explorer to decide what is accessible to whom. A number of computers, sharing an organisation’s data, are known as an Intranet. Henley College is an Intranet, using hundreds of terminals and centralised PCs, known as “servers”, for storage and security - and having its own internal e-mail system. The Internet is, if you think about it, simply a larger version of the above, with longer tentacles.

BACKUP

Can be carried out on:

  1. Floppy Discs – easy and cheap but with, maximum size of 1.44mb, a bit small by today’s standards. Every computer has a “floppy disc” drive so easily available.
  2. CDs – maximum size of 650mb. CD writers are available on nearly all computers today.
  3. The computer Drive C – on a “backup” subdirectory. The problem is that if the drive dies so does the data.
  4. A second “slave” hard disc – a defunct 5 year old computer will have a 20gb disc, even a 6gb disc will be very useful and easy to use on a day to day basis. Needs a little research to set up. “The Dummies Guide to Upgrading and Fixing PCs” is not cheap at £20 but is an extremely useful guide to all sorts of things. The drive can be “partitioned” into several effective drives, each of which can be separately “formatted” or cleaned out. The Dummies book explains all of this.
  5. USB hard disc – easily portable away from the site for security. Easy to set up and use. 40gb costs about £45.
  6. USB pen drives – are pen-sizedl, portable drives which quickly (and easily) plug into a USB port and can be quickly written to, removed and re-used later on any PC. They cost from £25 for 128 megabytes to £60 for 512mb. With no moving parts these are the easiest effective backup devices.

In Henley College Drive H is your allocated backup space. After logging in you will have access to a personal, unlimited amount of disc space.

When you use any programme backup routine (eg Sage) make sure that the file is being saved to its intended location.

If using the Windows File command always use “save as” rather than “save” as this gives you the opportunity to specify the required location.

“You cannot have too many backups!” – a lesson easily learned once you have lost hours of work.

Make at least 2 backups and don’t be afraid to create a complex directory/sub directory structure to make it easy to later remember and follow the routine.

TYPES OF BUSINESS

  1. Sole Trader – simply a self-employed person – can be any size, from a window cleaner to a department store. To commence you must notify the Inland Revenue, pay a self employed “stamp”, and notify HM Customs & Excise if your turnover makes you liable to register for VAT.
  2. Partnership – 2 or more of the above jointly in business. The major disadvantage is that all partners are “jointly and severally liable” for partnership debts – which means that a creditor can sue either the partnership or each and any partner for the whole amount of the debt. It has always been said that you should “choose your partner more carefully than your wife or husband”.
  3. Limited Companies – 2 or more people can set up a business entity that is legally separate from themselves. The 19th century legal precedent of Saloman v. Saloman determined that if a company goes bust – its proprietors don’t. However, in return for this protection the Companies Acts require the filing at Companies House of details of all directors and shareholders and a copy of the company’s annual accounts.

BALANCE SHEET STRUCTURES

Sage Line 50, by default, sets up a company with a limited company structure, which must be manually amended to create the structure for a sole trader or partnership.

All Balance sheets are structured as follows:

Fixed Assets: plant, machinery, motor vehiclessay50,000

Current Assets: stock, debtors, bank current account, cash25,000

Current Liabilities: trade creditors, taxes, (15,000)
______

Net Worth: the sub total of the above60,000
______

Financed by:

Long Term Liabilities: long bank loans, hire purchase (40,000)

Capital & Reserves: what the business is worth on paper (20,000)

______

Capital Employed: (60,000)

______

It is only the layout of “Capital & Reserves” that need vary between incorporated (limited companies) and unincorporated (sole traders and partnerships) businesses:

  1. Sole Traders & Partnerships:
    Capital & Reserves
    As at start of Year (5,000)
    Capital Introduced (10,000)
    Net Profit for the Year (18,000)

Less: Drawings 13,000
______
(20,000)

Long Term Liabilities: long bank loans, hire purchase (40,000)
______
(60,000)
______

  1. Limited Companies:
    Capital & Reserves
    Share Capital (100)
    Profit & Loss Account (18,000)
    ______
    (18,100)
    Long Term Liabilities:
    Bank Loans(30,000)
    Hire Purchase(10,000)
    Directors’ Loan Account
    As at start of year (4,900)
    Introduced (10,000)
    Less: Drawings 13,000
    ______(1,900)

______(41,900)
______
(60,000)
______

Please note that in the company case the “proprietor” could have introduced money as share capital and withdrawn it as salary or dividend. Under current tax law, he could finish up paying tax and national insurance on money he had in fact simply lent the company for a few months … unless he pays an awful lot in accountancy fees to reduce the company’s share capital. This is why most small businesses use the “Directors’ Loan account” route.