Accounting Manual vs. Computer Accounting Systems

Accounting is importance in every company since it is a tool that is used in making decisions for the company and it’s used to reveal the performance of the organizations in terms of its financial and management information to the government and public users. Accounting is categorized in two that is the manual and the computerized system. The process of ensuring that the transactions of a business are correctly carried out is called accounting cycle.

Accounting cycle is the process whereby the transactions of a business are recognized then later recorded in the books of accounts this is a continuous process since the business carries out its activities daily. This process involves identifying a transaction, then preparing the transactions source documents such as purchase order or invoice. The accountant then analyses and classifies the transaction this is done by quantifying the transaction in monetary terms for example in shillings, identifying accounts that are to be affected and checking whether they are debited or credited.

The transactions are later prepared in journals and the general journals entries are posted to the ledger accounts. A trial balance account is used to record the debit and credit balances of the ledger accounts, incase the trial balance does not balance the errors are identified and correct transactions are entered in the trial balance. Incase of any adjustments, they done in the adjusted trial balance.

Financial statements are later prepared which include income statement, balance sheets, statement of retained earnings and cash flow statement. The closing journal entries are made for temporary accounts as revenues gains losses they are later transferred to the temporary income summary accounts and the balance is transferred to retained earnings account, the closing entries are later transferred to the ledger accounts. Reversing accounts are also prepared incase there are accruals or deferrals that were recorded as adjusting entries on last day of the accounting period.

The accounting systems are used to manage the procedures of transactions by ensuring that they enter, track, and maintain information related to an organization financial operation. This applications support the general ledger, accounts payable and the accounts payable, payroll, job and projects costing and multinational accounting. Many businesses functions as the inventory controls manufacturing management and financial reports are integrated in to the accounting systems. Needles, B.E., and Marian, P. (1998). Financial Accounting. Boston: Houghton Mifflin.

In the manual accounting system the employees perform the whole accounting cycle manually on a periodic basic they calculate trial balances, journalize transactions, and prepare financial statements and other duties while in the computerized accounting system the employees only record transactions in to the computer then it processes the other steps of accounting cycle automatically.  In the computerized computer system the tasks are done at a faster rate since it has a program that runs the computer effectively while the manual system uses a lot of time to complete tasks of the organization.

 In a manual system a qualified accounting are required to keep the record of the books of accounts which is a cheap way of operating the business ,but in the computerized system it requires an accountant, a computer program so as to run the system which is a costly exercise. A computerized accounting provides a better internal control report for any given period of time and it creates modifications to the appropriate departments while the manual control takes more time to accomplish this tasks.

Both computerized and manual accounting systems have advantages and disadvantages but they perform the same tasks and the final result is the same. The only difference is the costs, speed, and the mobility of each system.

References

http://www.netmber.com/accounting/fin/process/

http://www.oppapers.com/topics/advantages-computer/210

Needles, B.E., and Marian, P. (1998). Financial Accounting. Boston: Houghton Mifflin.

Porter, G, A., and Norton, Curtis L. (1998). Financial Accounting. Fort Worth, TX: Dryden Press.