Computerized Accounting

 

Data is captured in the form of Accounting Entries

• These are used to prepare Financial Statements which are based on Accounting Standards

• This data and the statements are further utilized to prepare various Financial reports

Software programs (functions include sales, purchases, receivables, payables, cash receipts and disbursements, and payroll). Generate financial statements.

 Choosing a software package

Entry-Level Software

  • Common features and benefits:
  • Easy data access and report preparation
  • Audit trail

Enterprise Resource Planning Systems

 

Advantages and Disadvantages of a Computerized Accounting System

A majority of companies use some form of a computerized accounting system. They do so because the advantages of a computerized accounting system far outweigh the disadvantages.

Some of the advantages of a computerized accounting system are as follows:

Automatic – Computerized accounting systems automatically complete many Parts of the accounting cycle. Once a user enters a transaction, the soft ware posts the transaction to the ledger and updates the financial statements. In addition, computerized accounting systems perform financial calculations such as totaling revenue and expenses and determining net income.

Timeliness – Computerized accounting systems allow companies to prepare upto- date financial reports quickly. In addition, accountants can easily locate specific transactions they want to review or investigate.

  •  Speed
  • Accuracy
  •  Low Cost in long run
  • Generation of Various Reports
  • Automatic formation of all subsidiary books and statements
  • Multiple printouts

 

Disadvantages

  • Requirement of special programs and professionals
  • Qualified Staff required for Operations
  • Costly computer peripherals and stationery
  • Data theft is easy due to easier access
  • Regular Back-Up Required
  • Threat due to computer viruses

 

 

Manuals Computerized accounting

Perform each step in the accounting cycle by hand.

Satisfactory in a company with a low volume of transactions.

Must understand manual accounting systems to understand computerized accounting systems.

 

Difference between manual and computerized accounting

difference

Need of computerized accounting

The need for computerized accounting arises from advantages of speed, accuracy and lower cost of handling the business transactions.

Numerous Transactions

The computerized accounting system is capable of handling large number of transactions with speed and accuracy.

Instant Reporting

The computerized accounting system is capable of offering quick and quality reporting because of its speed and accuracy.

Reduction in paper work

A manual accounting system requires large physical storage space to keep accounting records/books and vouchers/ documents. The requirement of stationery and books of accounts along with vouchers and documents is directly dependent on the volume of transactions beyond a certain point. There is a dire need to reduce the paper work and dispense with large volumes of books of accounts. This can be achieved by introducing computerized accounting system.

Flexible reporting

The reporting is flexible in computerized accounting system as compared to manual accounting system. The reports of a manual accounting system reveal balances of accounts on periodic basis while computerized accounting system is capable of generating reports of any balance as when required and for any duration which is within the accounting period.

Accounting Queries

There are accounting queries which are based on some external parameters. For example, a query to identify customers who have not made the payments within the permissible credit period can be easily answered by using the structured query language (SQL) support of database technology in the computerized accounting system. But such an exercise in a manual accounting system is quite difficult and expensive in terms of manpower used. It will still be worse in case the credit period is changed.

On-line facility

Computerized accounting system offers online facility to store and process transaction data so as to retrieve information to generate and view financial reports.

Scalability

Computerized accounting system are fully equipped with handling the growing transactions of a fast growing business enterprise. The requirement of additional manpower in Accounts department is restricted to only the data operators for storing additional vouchers. There is absolutely no additional cost of processing additional transaction data.

 Accuracy

The information content of reports generated by the computerized accounting system is accurate and therefore quite reliable for decision-making. In a manual accounting system the reports and information are likely to be distorted, inaccurate and therefore cannot be relied upon. It is so because it is being processed by many people, especially when the number of transactions to be processed to produce such information and report is quite large.

Security

Under manual accounting system it is very difficult to secure such information because it is open to inspection by any eyes dealing with the books of accounts. However, in computerized accounting system only the authorized users are permitted to have access to accounting data. Security provided by the computerized accounting system is far superior compared to any security offered by the manual accounting system.

 

 

 

 

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