Limitations of Computer System

Computer System is an electronic machine that is used to process raw data into meaningful information required by the users. It works on a set of instructions that are programmed into it in the form of software which helps them in processing the data and producing information as per the requirement. Following are the Limitations of the Computer System.

Limitations of Computer System

Although a computer system has various advantages, yet it suffers from certain limitations, which are listed below:

Has no mind: The computer system works as per the set instructions or commands were given to it. Unlike Human Beings, it does not have any common sense. So, if wrong instructions are given to it by human beings, it will work accordingly without applying its mind.

Lack of Intelligence: A computer system cannot perform a task on its own. It has to be programmed with a set of instructions to perform a particular function. Also, in case of any unforeseen condition, it cannot decide what exactly is to be done unless they are instructed to handle such a situation.

Cannot take its own decisions: As decision making involves analyzing data, comparison with already available data, and analysis of the present environment, it, therefore, requires intellectual mind, alertness, common sense, and intelligence. Since computers work on a set of instructions given, thus it lacks all the above features that are required for quality decision making.

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Interest on Capital

Any interest paid on capital is considered as an expense and is shown in the Profit and Loss Account. Treatment of interest on capital in the final accounts is as follows.

Interest on Drawings

Treatment of interest on drawings in the final accounts is as follows. Firstly, interest in drawings is shown on the credit side of the Profit and Loss Account.

What is Operating Profit?

Operating Profit can be defined as the profit earned by carrying the normal business activities. It is computed by subtracting the operating expenses from the gross profit.

Balance Sheet

The balance sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period

Profit and Loss Account

A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.

What are Adjusting Entries?

In order to incorporate adjustments in the financial statements, we pass the required Journal entries, which are termed as adjusting entries.

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