Master Files in Computerized Accounting
Master files are the core data storage structures in computerized accounting systems. They contain permanent and fundamental information about the business, its assets, liabilities, and operations. These files are updated regularly to reflect changes in the business, but their basic structure remains constant.
Here's a breakdown of key aspects:
1. Types of Master Files:
* Customer Master File: Stores details about each customer, including name, address, contact information, credit limits, and payment history.
* Vendor Master File: Contains information about suppliers, such as name, address, contact details, payment terms, and purchase history.
* Inventory Master File: Tracks information about each inventory item, including product name, description, unit cost, quantity on hand, reorder point, and lead time.
* Employee Master File: Holds data about employees, including name, address, social security number, job title, salary, and benefits.
* Fixed Asset Master File: Records information about long-term assets, such as equipment, vehicles, and buildings, including cost, depreciation schedule, and maintenance history.
* Chart of Accounts: A critical master file that defines the structure and organization of the accounting system, including accounts for assets, liabilities, equity, revenue, and expenses.
2. Characteristics of Master Files:
* Permanent: Data in master files is not temporary or transactional. It represents the underlying structure of the business and is maintained over time.
* Detailed: Master files contain extensive information about each individual entity (customer, vendor, asset, etc.).
* Integrated: Data in different master files is often interconnected. For example, a customer's credit limit might be linked to the company's overall credit policy.
* Centralized: Master files are typically stored in a central database for easy access and consistency across the accounting system.
3. Role in Accounting Processes:
* Transactions: Master files are used as reference points for processing transactions. For example, when a customer makes a purchase, the system pulls information from the customer master file and updates the inventory master file.
* Reporting: Master files provide the foundation for generating financial statements and other reports.
* Data Integrity: Master files ensure consistency and accuracy in accounting data. Any changes to the business or its operations are reflected in the master files, maintaining a single source of truth.
4. Importance in Computerized Accounting:
* Efficiency: Master files streamline accounting processes by eliminating the need to manually enter data repeatedly.
* Accuracy: They minimize errors by providing a central repository of consistent information.
* Data Management: They simplify data storage, retrieval, and analysis.
* Scalability: Master files can adapt to changes in the business as it grows and evolves.
Master files are a cornerstone of computerized accounting systems, providing the fundamental structure and data necessary for efficient and accurate financial management.