Features of CAS and grouping of accounts

Why do businesses like CAS? Its salient features:

• Simple and integrated: it is user-friendly (anyone who knows accounting can use it), and it joins sales, finance, purchase, inventory and manufacturing in one system, so accounts and stock are kept together.
• Transparency and control: day-to-day operations are recorded openly and can be checked.
• Accuracy and speed: the computer does not make arithmetic slips, and user-definable templates make data entry quick.
• Scalability: it grows with the business. A sole trader, a partnership firm or a large company can all use it.
• Reliability: work done by a machine can be trusted more than hand-written work, because the chance of error is much smaller.

As transactions grow, accounts must be grouped: accounts of a similar nature are brought together in one place. In CAS the grouping comes from the accounting equation: Assets = Liabilities + Capital.

Profit or loss changes what the owners are owed, so the equation widens to Assets = Liabilities + Capital + (Revenues − Expenses). Revenue is the inflow from normal sales; expenses are the resources used up to earn it.

So the groups follow the equation:

• Equity and Liabilities: shareholders' funds, non-current liabilities (such as long-term borrowings) and current liabilities.
• Assets: non-current assets (fixed assets, investments...) and current assets (inventories, trade receivables, cash and cash equivalents...).
• Revenues: sales and other income.
• Expenses: materials consumed, salaries and wages, depreciation, interest, administrative and selling costs.

Groups split into sub-groups, and sub-groups hold the accounts, so the whole chart of accounts forms a hierarchy.