This essay compared and contrasted manual accounting systems and computerized computing system. Both categories are explained and their history is presented. Next, the advantages and disadvantages of both systems are also analyzed. The future of accounting is also considered in this essay as it argues that both are still relevant and practical.
Accounting Systems
There are many ways in accounting to get the job done right but two basic approaches give accountants a foundation to work upon. The purpose of this essay is to examine the differences between manual and computerized accounting systems. This essay will explain the history and development of both types of systems and will break down the advantages and disadvantages of them as well.
Explanation and History of the Manual ACC System
Before computer technology, everything was manual. Things were done by the methods that were available at the time. Manual accounting systems are the same way and have developed in similar fashion. Manual accounting systems are methods in which each step within the accounting process is done and cycled by hand (p.302). Since computer systems are based on manual systems, these systems are the base line information that is necessary to understand the fundamentals of accounting procedures. Manual accounting is mainly conducted on ledgers and journals in accordance with specific guidance from the firm or client.
Manual accounting procedures include several key actions. These tasks include journalizing the transactions, posting them to ledger accounts, preparing trial balance, making adjustment entries, preparing adjusted to end-of-period trial balance, preparing financial statements and appropriate disclosures, journalizing and posting the closing entries, and preparing after-closing trial balances.
The transactions are recorded in appropriate journals with transaction data, affected accounts' titles, debit and credit of each affected account and explanation specified in the journal record. These steps are necessary for each transaction. All the journal records must be posted to the ledger on a periodic basis for a given time interval which is a group of accounts put together and classified (assets, liabilities, revenue, expenses and equity). In other words general ledger summarizes all the transactions within a period of time. In addition there is a subsidiary ledger can be used, which is a more detailed source, where individual items comprised (inventory, accounts payable and accounts receivable). General ledger contains controlling accounts which summarize the content of subsidiary ledger.
Advantages of the Manual ACC System
Manual accounting systems have some distinct advantages. The most important advantage is the true understanding of how and where the money flows in an organization, the true essence of accounting. Practicing the fundamentals of accounting will make better and more accurate reports and will increase the value of any accountant. Being away from a computer also has some advantages just as a change of pace. Other advantages include a cheap workforce and resources, reliability, independence from machines, skilled workers availability
Disadvantages of the Manual ACC System
Although manual accounting systems have positive aspects, there are also considerable disadvantages to this process. The amount of time that it takes to do many of the tedious calculations may not always be the best idea if time is an issue. The work is also very repetitive and can drain a person's energy rather quickly. Human error also contributes to the negative aspect of this type of accounting.
Future of the Manual ACC System
The future of manual accounting systems requires an understanding of good accounting principles and fundamentals. Because of this, there will always be a place for this type of accounting style. The massive computer revolution in the last two decades would suggest that manual accounting systems have little value at the practical level but will provide baseline knowledge for accountants of the future.
Explanation and History of the Computerized ACC System
Computerized accounting systems are methods and processes that use computer technology to model the finances of a client or firm. These systems are usually computer software programs that synthesize the financial activities of an organization. Computerized accounting systems have evolved alongside computing power. As computers continued to rise in power and effectiveness, so did the power and effectiveness of computerized accounting. Computer software calculates faster but it does not know what you need until you can clearly explain what exactly you need. In addition good computerized accounting system can cost thousands and even millions dollars, depending on the complexity and the size of organization. Computerized accounting provides better internal control report system for any given period of time but requires people who know how to program and use the software.
Advantages of Computerized ACC System
Computerized accounting systems are very advantageous in many ways. The speed at which these systems operate is incredibly fast compared to manual accounting systems. Hundreds of thousands of man hours are saved when these systems are put into good use. These systems tend to be more accurate as well. Data can be quickly manipulated after entering it only once where on paper this cannot be done without re doing the calculations. Data can be backed up, stored and moved rather easily as well using computerized accounting systems.
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