Manual Vs. Computerized Accounting Systems

Accounting for the financial transactions of a business is an important function of daily operations. Developing and using a proper accounting system will ensure all transactions are recorded correctly and accurately on the company's general ledger. Technological advances ease the accounting process for many businesses.

Manual Accounting

Manual accounting systems utilize several paper ledgers to record financial transactions. Companies have separate ledgers for each part of the accounting system, such as accounts payable, accounts receivable and sales. Accountants then consolidate these ledgers into one general ledger, providing the balance for each ledger. The general ledger notebook assists in creating financial statements.

Manual Accounting Benefits

While tedious and time consuming, manual accounting systems offers some benefits. The ledgers are easy to review and accountants can make simple changes if necessary; individual accounts are easily reconciled because information is in a systematic order through each ledger. Accountants also have the benefit of physically handling each ledger and creating notes in customer accounts regarding any issues that need clarification or corrections.

Computerized Accounting

Spreadsheets and accounting information systems require accountants to enter financial data into them, and then mathematical algorithms compute the information into the necessary ledgers and financial statements. Computerized systems also allow accountants to create trending analysis and report any variances quickly and accurately. Additionally, transactions from all company divisions are accessible through computerized accounting systems, giving accountants better access to financial information.

Computerized Accounting Benefits

Computerized accounting offers several more benefits than manual accounting; accountants process more information quicker, formulas verify calculated totals and errors are less common. Accounting systems also are customizable by industry, allowing accountants the opportunity to use preset templates for their general ledger. Accountants also can store several years of financial information with relative ease, giving them the opportunity to review previous year's information without sorting through stacks of paper ledgers.

Best Method

Most companies will use a computerized accounting system for recording and presenting their financial information. This system allows companies to record business transactions accurately and generate financial reports quickly for management review.

While the functions of manual accounting have changed, it will never go away completely. Accountants must review the information presented on financial reports from the accounting system and ensure that it is accurate and valid. Accountants must also ensure that all financial information follows the Generally Accepted Accounting Principles and any other guidelines from regulatory agencies.

References

• Business Town: Components of the Accounting System