Computerised accounting systems – rationale for change

Financial Accounting 1 (FA1), Financial Accounting 2 (FA2) and Foundations in Financial Accounting/Financial Accounting (FFA/FA) syllabus changes from September 2023

At ACCA we want to make sure that our qualification not only keeps up with the changing work environment that ACCA students are currently facing but also helps to prepare them for the challenges that they will face in the future. In recent times, there has been a global shift away from businesses maintaining paper-based accounting records towards the use of computerised accounting systems, including cloud-based software.

In a world where technology dominates almost every aspect of our lives, it is easy to forget that some accounting terminology is rooted in its early traditions. There are very few businesses now that maintain physical ‘books’, ‘ledgers’, ‘registers’ or ‘journals’, although these terms are still regularly used and can be included in some computerised accounting systems. For example, when generating a report which lists the sales recorded for a particular period, this might be referred to as a ‘sales day book report’ or similar. However, despite the continued use of this terminology, the days of manually transferring numbers between physical books to keep the accounting records up to date are all but over. 

Despite rapid changes in the global economy and the development of complex accounting standards such as International Financial Reporting Standards (IFRS® Accounting Standards), the underlying principles of double-entry bookkeeping have not changed since they were first developed. Therefore, traditionally, exams at the Foundations in Accountancy or Applied Knowledge level have used paper-based accounting records and ‘books of prime entry’ as tools to teach learners the fundamentals of accounting. The rationale behind this has been that the knowledge and skills gained from understanding the basic principles of a paper-based accounting system could be used directly by those learners who operate in environments where such records are still maintained but could also be transferred to a computerised accounting system.  Although some references to computerised accounting systems may have been increasingly made in syllabus documents and learning materials, the focus had remained on paper-based systems and the books of prime entry.

As paper-based accounting systems become less common, teaching ACCA students how such systems operate becomes less useful as part of the ACCA qualification and as preparation for the world of work. For this reason, from September 2023, ACCA will be removing all references to books of prime entry from the FA1, FA2 and FFA/FA syllabus documents and all exam questions for these subjects will be written with the assumption that the entity in question is using a computerised accounting system. This could be in the form of desktop-based accounting software or a system which makes use of external servers to store data (the cloud).

It is important to emphasise that these updates do not change any fundamental accounting principles or concepts. Double-entry bookkeeping is ultimately the same whether a paper-based or computerised accounting system is used. Computerised accounting systems have been developed based on traditional double-entry bookkeeping but have some obvious benefits related to streamlining how transactions are recorded and reducing the risk of errors. Indeed, such accounting systems still refer to preparing ‘journal entries’ despite a physical journal book not existing. From September 2023 onwards, candidates may still be asked to identify what ‘journal entry’ would be required for a particular transaction – the difference is simply that the accounting software would perform this entry in real time as the transaction is recorded, simultaneously updating all the appropriate ledger accounts and statements. 

In addition, manual journal entries are still required in a computerised accounting system; for example, year-end adjustments or non-routine transactions. We believe that it is important for ACCA students to understand how a computerised accounting system treats a transaction, whether that is through the transaction being recorded directly (eg through processing an invoice) or a manual journal entry being created by the accountant on the system. Having a sound knowledge of the principles of double-entry bookkeeping means that any errors can be spotted more easily, and that undue reliance is not placed on the system without understanding how it works. 

Removing references to paper-based accounting systems and books of prime entry from the FA1, FA2 and FFA/FA syllabus documents means that:

  1. Any entity referred to in an exam question will be assumed to use a computerised accounting system.
  2. All references to books of prime entry will be removed from the syllabuses.
  3. All references to ‘control accounts’ in relation to trade receivables and trade payables will be removed from the syllabuses.
  4. All references to extended trial balances will be removed from the syllabuses. Candidates will still be expected to adjust an initial trial balance before extracting a final trial balance.
  5. Manual journal entries in the form of debits and credits will still be examined, including errors which might arise from these.
  6. It will be assumed that the sales system will be integrated into the accounting system. This means that sales invoices will be generated in the accounting system and posted to the trade receivables ledger account and individual customer account automatically at the point of generating the sales invoice.
  7. It will be assumed that the purchases system will be integrated into the accounting system. This means that the details of purchase invoices will be entered into the accounting system once they have been received from the supplier. The trade payables ledger account and individual supplier account will be updated simultaneously at that point.
  8. Candidates will still be expected to understand why maintaining individual customer and supplier accounts is important and that changes made to these accounts will be replicated in the general ledger.
  9. Bank reconciliations will still be examined because an entity’s banking system may not be directly linked to the accounting system. Reconciling items will be more reflective of modern business practices (eg fewer reconciling items related to the use of cheques).
  10. Reconciliations between supplier account balances and external documents (ie supplier statements) will still be examined.
  11. Reconciliations of the trade receivables ledger account will not be examined beyond explanations of why reconciliations would not be required in a computerised accounting system.
  12. Where an exam question includes a visual representation of a general ledger account, this may be presented in the format of a ‘T-account’ to illustrate how the debits and credits would be recorded.

Any errors which must be identified and corrected will be realistic in terms of a computerised accounting system. For example, a single-sided journal entry without a corresponding debit/credit will not be examinable because a computerised system is unlikely to allow this but a single-sided journal entry which is posted with a suspense account as the corresponding debit/credit will be examinable. We have produced a separate article named ‘Process for preparing financial statements’, which outlines the system and process of entering financial information into the accounting system which will lead to the production of year-end financial statements and will be used as a basis for exam questions.

The Practice Tests, Specimen Papers, Technical Articles and other online resources available on the ACCA website will all be updated prior to the introduction of the revised syllabuses in September 2023. We hope that these updates will help to prepare candidates more fully for the world of work and will more closely reflect the systems and processes used in the modern workplace.

Changes to the FFA/FA syllabus may also have an impact on other ACCA exams. Any such impact will be communicated separately.

Written by a member of the FFA/FA examining team