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The Advantages of Manual Vs.

Computerized Accounting
by K.A. Francis

Accounting is a necessary function for any business. All businesses must keep a record of their income
and expenses, and the records should be as detailed as possible. For some, the idea of spreadsheets,
general journal books and ledger sheets is frightening. For these people, computerized accounting could
be a welcome relief. Conversely, others enjoy the manual process of posting to ledgers, journals and
worksheets. The process you choose is completely up to you.

Manual Accounting

A manual accounting system requires the acting accountant or bookkeeper to post business transactions
to the general journal, general ledger and worksheet by hand. This process can be completed by either
using actual paper journal and ledger sheets or by creating these sheets in a computer program such as
Excel. It is considered manual because each transaction is entered into the system individually.

Computerized Accounting

A computerized accounting system allows the user to enter the transaction into the program once, and
all accounts are updated as necessary. For example, if your business buys $1,000 worth of office supplies
with a combination of $500 cash and $500 credit, instead of going to each accounting and posting the
transaction, with a computerized system you would check office supplies, cash and the selected account
payable account and the transactions automatically would post to the accounts.

Speed and Accuracy

Computerized accounting programs are quicker as far as entering information is concerned. However,
even with the built-in error detection of computer programs, sometimes it is easier to cross-check
journals ledgers in a manual system since you can flip to the pages you need, and even spread the books
out on a table if needed.

End-of-Period Reports
Computerized accounting packages will automatically pull all relevant ledger entries for the period
reports. Manual accounting takes longer, but can help a bookkeeper better understand the posting and
end-of-period process. This is one reason why accounting students cannot take a computerized
accounting course until beginning and intermediate accounting classes are completed.

Data Manipulation

With a computerized accounting system, information for a particular period of time can be compiled
quickly. With a manual system, it can take time to locate the information from each book and compile it
into a report.

Things to Consider

If you are not good with figures and accounting frightens you, and hiring a bookkeeper or accountant is
not an option, a computerized system will make record keeping easier. For people who are comfortable
working with an accounting system, either a manual or computerized system would be fine, but the
computerized system offers the benefit of speed. If you are old-fashioned and just prefer having the
actual paper books, you can use a computerized accounting system just to print out the journal and
ledgers, creating the best of both worlds.

http://smallbusiness.chron.com/advantages-manual-vs-computerized-accounting-4020.html

Differences Between Manual & Computerized Accounting


Systems
by Sheila Shanker

Accounting is an intrinsic part of any business, large or small--owners and other interested parties want
to know whether they are making a profit or not. Many small businesses do their accounting manually
and they are happy with this setup. Others may be considering using a computerized system, since
accounting software is so affordable these days. Manual and computerized accounting systems perform
basically the same processes; the accounting principles and concepts are the same with differences lying
in the mechanics of the process.

Speed
The main difference between manual and computerized systems is speed. Accounting software
processes data and creates reports much faster than manual systems. Calculations are done
automatically in software programs, minimizing errors and increasing efficiency. Once data is input, you
can create reports literally by pressing a button in a computerized system.

Cost

Another difference between manual and computerized systems is cost. Manual accounting with paper
and pencil is much cheaper than a computerized system, which requires a machine and software. Other
expenses associated with accounting software include training and program maintenance. Expenses can
add up fast with costs for printers, paper, ink and other supplies.

Backup

A third difference between manual and computerized systems is the ease of backup of a computerized
system. All transactions can be saved and backed up, in case of fire or other mishap. You cannot do this
with paper records, unless you make copies of all pages--a long and inefficient proces

http://smallbusiness.chron.com/differences-between-manual-computerized-accounting-systems-
3764.html

Manual Accounting Versus


Computerized Accounting
By
Victoria C.

As many professional accountants and auditors state – accounting is a language of business which is
accepted in all developed and developing countries.
Every company applies accounting because it is generally accepted that companies have to reveal
certain financial and management information to the government and public users and of course
because accounting is indispensable tool in business decision-making process. With the development of
information technologies there were developed many computer products (software) that make
accounting as easy as ABC for those who uses them. From this point accounting can be divided into two
basic categories: those which apply manual accounting and those which prefer computerized accounting
systems. This paper is targets the main features of manual and computerized accounting, their benefits
and shortcomings, and their comparison.

From the accounting theory it is known that accounting cycle includes the following steps: 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 balance at last.
From the first look it is not very difficult and it is so indeed, but when there are thousands or millions of
transactions the situation dramatically changes. Lots of transactions that must be processed in the
accounting cycle make this process routine and even a little mistake or inaccuracy can cause all the cycle
from the very beginning in order to find and correct the mistake. So as to shed some light on the matter
lets examine accounting cycle more thoroughly.

Every transaction (event that change the financial resources or obligations of the company) must be
recognized, classified and documented; in addition there must be corresponding accounts identified and
changed. The transactions are recorded in appropriate journals (general journal, sales journal etc) with
transaction data, affected accounts’ titles, debit and credit of each affected account and explanation
specified in the journal record. The above procedure is used for each transaction. All the journal records
must be posted to the ledger on a periodic basis (daily or weekly), 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.

At the end of accounting period with the help of general ledger there is a trial balance calculated to
make sure that debit and credit are in balance (if they are not equal it means that there is an error
somewhere). Then there must be appropriate adjustments made like depreciation and income tax
expenses, adjusted records posted to the ledger and adjusted trial balance calculated. After this there
are financial statements should be prepared, which include balance sheet, income statement, statement
of retained earnings and statement of cash flows. Then journal entries of temporary accounts are closed
to permanent accounts and posted to the ledger, and at last after-closing trial balance can prepared.
In order to stay on top companies have to analyze the performance of all organizational cells (starting
from unskilled workers and operating personnel, and finishing with top managers and other key
personnel) and discover all the deviations from the plan, their causes, and finally companies’
management has to take corresponding measures to avoid such deviations in the future. These
procedures are called internal controls and include the following five elements: control environment,
risk assessment, monitoring, information and communication, which are assessed separately and put
together a single rate of organization’s performance. Control environment means the way of
organization’s internal control–which manager controls the employees, how and whom does that
manager reports next about the plan performance etc. Risk assessment implies measures to determine
all the potential risks in advance, their causes, probabilities and counter-measures to avoid and manage
them; how can those risks influence company’s performance and financial state; how to minimize the
costs of facing financial risks etc. Monitoring implies quality control of company’s operations and
personnel.

Information and communication element means the control over communication flow and the quality of
information flow within the organization in order to minimize the time of communication and
information losses. Internal control procedures allow to keep companies’ assets from dissipation and
control productivity and usefulness of all departments.

Let’s return to the main issue of the paper. Manual accounting implies that employees perform the
whole accounting cycle manually on a periodic basis: they calculate trial balances, journalize
transactions, prepare financial statement reports and other routines. Of course it takes much time,
resources and effort in large organizations. Computerized accounting implies that the only thing that
employees do is recording transactions into the computer which processes the other steps of accounting
cycle automatically or by a request. But this is a very simplified view on the computerized accounting
because transaction is a complex category which includes not only sales or acquisitions, but
depreciation, premiums and wages calculation, dividends etc. So computers provide accurate
calculations and smart reports but it takes much time, resources and effort too and it’s difficult to assess
which accounting type is more fast and economic. If manual accounting requires qualified accountants
to keep a record of business transactions, computerized requires accountants which can use specific
software and thus they cost more. 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 (computer can control thousands indicators simultaneously and create notifications to
the appropriate departments or workers if some indicators do not correspond to the normal state),
while manual control takes more time.
Among the advantages of manual accounting there are:

comparatively cheap workforce and resources, reliability, independence from machines, skilled workers
availability; the disadvantages include: reduced speed, increased effort of accountants, relatively slower
internal control reporting, routine work and some others.

Among the main advantages of computerized accounting there

are: high speed and mobility of reporting, reliability, no routine work, increased accuracy, internal
control system of increased productivity, easy back up and restoration of records; the disadvantages
include: extremely high costs on developing, introducing and using the system, special trainings for
personnel, increased personnel costs, dependence on machines etc.

Obviously both computerized and manual accounting have advantages and disadvantages but they
perform the same task, and the final result is the same. The main differences between them are the
costsHealth Fitness Articles, speed and mobility.

Thus small and medium businesses usually prefer manual accounting without detriment to quality while
large corporations apply complex accounting systems which cost millions dollars but the effect from
their application exceeds all the expectations.

Alex is a professional freelance writer at custom essays writing service: custom-essay.net Now he is a
technical writer, advertising copywriter, & website copywriter for Custom Essay Network.

June 29, 2017

https://www.experience.com/advice/professional-development/manual-accounting-versus-
computerized-accounting/
The Advantages of Using Computerised Accounting
Software
Let me start this article by saying I am a qualified accountant who has taught accounting at a
variety of levels for over 18 years. I have also worked extensively as a business consultant for
small and medium size enterprises. I am continually amazed when I come across a business
either not using a computerized accounting package or using spread sheets to do their
accounts. Therefore I decided to write a short article on the benefits of using a computerized
accounting package. The package I use for our small to medium business is MYOB (Mind Your
Own Business) accounting software.

Small and medium sized businesses can now buy ‘off the shelf’ accounting programs at
remarkably low cost. Larger businesses will often have customized programs made for their
business. The accounting programs carry out functions such as invoicing, dealing with
payments, paying wages and providing regular accounting reports such as trading and profit
and loss accounts and balance sheets.

The introduction of computerized accounting systems provide


major advantages such as speed and accuracy of operation, and,
perhaps most importantly, the ability to see the real-time state of
the company’s financial position. In my experience I have never
seen a business that has upgraded to a computerized accounting
system return to paper based accounting systems. A typical
computerized accounting package will offer a number of different
facilities. These include:

- On-screen input and printout of sales invoices


- Automatic updating of customer accounts in the sales ledger
- Recording of suppliers’ invoices
- Automatic updating of suppliers' accounts in the purchases
ledger Recording of bank receipts
- Making payments to suppliers and for expenses
- Automatic updating of the general ledger
- Automatic adjustment of stock records
- Integration of a business database with the accounting program
- Automatic calculation of payroll and associated entries

Computerized accounting programs can provide instant reports for management, for example:

- Aged debtors’ summary – a summary of customer accounts showing overdue amounts


- Trial balance, trading and profit and loss account and balance sheet
- Stock valuation
- Sales analysis
- Budget analysis and variance analysis
- GST/VAT returns
- Payroll analysis

When using a computerized accounting system the on computer, input screens have been
designed for ease of use. The main advantage is that each transaction needs only to be
inputed once, unlike a manual double entry system where two or three entries are required. The
computerized ledger system is fully integrated. This means that when a business transaction is
inputed on the computer it is recorded in a number of different accounting records at the same
time.

The main advantages of a computerized accounting system are listed below:

Speed – data entry onto the computer with its formatted screens and built-in databases of
customers and supplier details and stock records can be carried out far more quickly than any
manual processing.
Automatic document production – fast and accurate invoices, credit notes, purchase orders,
printing statements and payroll documents are all done automatically.
Accuracy – there is less room for errors as only one accounting entry is needed for each
transaction rather than two (or three) for a manual system.
Up-to-date information – the accounting records are automatically updated and so account
balances (e.g. customer accounts) will always be up-to-date.
Availability of information – the data is instantly available and can be made available to
different users in different locations at the same time.
Management information – reports can be produced which will help management monitor and
control the business, for example the aged debtors analysis will show which customer accounts
are overdue, trial balance, trading and profit and loss account and balance sheet.
GST/VAT return – the automatic creation of figures for the regular GST/VAT returns.
Legibility – the onscreen and printed data should always be legible and so will avoid errors
caused by poor figures.
Efficiency – better use is made of resources and time; cash flow should improve through better
debt collection and inventory control.
Staff motivation – the system will require staff to be trained to use new skills, which can make
them feel more motivated. Further to this with many ‘off-the-shelf’ packages like MYOB the
training can be outsourced and thus making a particular staff member less critical of business
operations.
Cost savings – computerized accounting programs reduce staff time doing accounts and
reduce audit expenses as records are neat, up-to-date and accurate.
Reduce frustration – management can be on top of their accounts and thus reduce stress
levels associated with what is not known.
The ability to deal in multiple currencies easily – many computerized accounting packages
now allow a business to trade in multiple currencies with ease. Problems associated with
exchange rate changes are minimized.
In summary if you have not computerized your accounting you should seriously consider doing
so. I chose to train in MYOB after reviewing all the small to medium business accounting
packages on the market. In my view MYOB was the best overall package. A free 90 day trial
version of MYOB accounting software can be downloaded from your own country’s MYOB
website. This trial version is the full version but any business set up with it can only have
entries entered for 90 days; after that, purchase of the software is required. I strongly
recommend you download a version and take a look.

About the author – Gary Hadler B.Ec, Dip.Ed, MBA is a qualified accountant and a registered
teacher in Hong Kong and Australia. Gary has taught accounting and computerized accounting
software for over 18 years.

Click here to find out more about the MYOB training courses offered by ITS.

http://www.itseducation.asia/computerized-accounting.htm

Advantages & Disadvantages of Manual Accounting Systems


by Kevin Johnston

You must do accounting for your small business. That does not mean you must buy expensive
accounting software and a computer with a lot of memory. You can actually keep a paper ledger if you
choose. Manual accounting on a paper ledger has advantages over computerized accounting, but is also
has disadvantages.

Learning Curve

If you are learning to do business accounting for the first time, manual accounting can teach you the ins
and outs of balancing debits and credits and keeping up with things such as depreciation costs and
overhead expenses. This hands-on experience helps you to understand accounting transactions if you
computerize your accounting later.

Time

One of the disadvantages of manual accounting is the amount of time you must put into it. Because you
don't have a computer categorizing and totaling figures, you must do this yourself. It takes more hours
to do manual accounting than it does computerized accounting.
Routine Work

Manual accounting can seem much more tedious than computerized accounting. You have to add
columns accurately, double-check your work and physically write in numbers. These routine tasks are
handled efficiently by computerized systems.

Cost

One of the strongest advantages of manual accounting is cost savings. Accounting software can be
expensive. If you are just starting a business, you can save money by doing the accounting in a paper
ledger. If you do the work yourself, you even save the expense of having a bookkeeper.

Freedom from Machines

With manual accounting, you are free from computers. You can do this type of accounting anywhere,
including at home or during a bus or train commute. This can actually free up some of your workday.
Also, you don't have to worry about computer glitches and software crashes.

http://smallbusiness.chron.com/advantages-disadvantages-manual-accounting-systems-23862.html

The persistence of manual bookkeeping


Taxwise or Otherwise

By Revelino R. Rabaja, 12 March 2015

EVEN WITH the latest technology at our fingertips, many businesses, particularly small-
and medium-sized enterprises (SMEs), may still maintain manual books of account.

It must be noted that in practice, actual manual recording in the books is no longer done
since accounting records are usually maintained and generated in some sort of electronic
format,like Excel. Printouts of the accounting records are simply pasted onto the registered
manual books of account and are then used to prepare the company’s financial
statements. These same books are also presented to external auditors which the latter use
for their audit.

The issue is that it remains unclear whether this practice is considered substantially in
compliance with the bookkeeping requirements of the Bureau of Internal Revenue (BIR)
under Revenue Regulations (RR) V-I or RR V-1.

As one of the oldest known revenue regulations still generally applicable today, the
“Bookkeeping Regulations” embodied in RR V-1 were issued in 1947 when the Philippines
was still recovering from the devastation of World War II. They govern the keeping of
books of account, records, registers, as well as, issuance of invoices, receipts, tickets and
other supporting papers and documents by persons subject to internal revenue taxes.

Understandably, at that time, manual books of account were the only means available to
taxpayers for recording business transactions.

To keep up with the changing times, various regulations and directives amending RR V-1
were subsequently issued, although for several decades, manual recording of entries
remained an acceptable mode of maintaining accounting records.

In 1982, in response to the clamor of multinational companies doing business in the


Philippines to allow them to adopt the global accounting system of their foreign parent
companies, the BIR issued Revenue Memorandum Circular (RMC) No. 13-82 which
authorized the use of loose leaf books of accounts, records, invoices and receipts for
recording business transactions.
Soon after though, accountants and computer programmers recognized a downside to
storing data: around 2000, when “millennium bug” concerns were at their peak, the need
for tedious reconciliation put businesses to the test. Perhaps the challenge posed by the
electronic storage of data left taxpayers thinking that manual recording remained a viable
and safe option for keeping accounting records, though they kept looking for a more
efficient way to do it.

Whatever the doubts, the adoption of information and communications technology (ICT)
forges ahead. To promote the universal use of electronic transactions in the public sector,
Republic Act (RA) 8792, otherwise known as the Electronic Commerce Act of 2000, was
passed, mandating that all government offices, including the BIR, perform government
functions by electronic means.

In August 2006, the Department of Finance (DoF) issued Revenue Regulations (RR) No.
16-2006, which laid down guidelines for the submission of books of account and other
records in electronic format, specifying among others:
 the manner and format in which such computerized accounting books/records shall be created, retained, filed and
issued;
 when and how such computerized accounting books/records have to be signed or authenticated;
 the appropriate control processes and procedures to ensure integrity, security and confidentiality of computerized
accounting books/records;
 other attributes required of computerized accounting books/records; and
 the full or limited use of the documents and papers for compliance with the requirements of the BIR.
It’s worth noting that in the regular audit of taxpayers’ books, Revenue District Offices
(RDOs) refuse to accept accounting records where printouts of electronically processed
entries are pasted on the manual books of accounts, and still demand the presentation of
accomplished manual books of account with manually written accounting entries. At times,
taxpayers would prefer to pay the penalty instead of engaging a bookkeeper to update the
manual books of account since this may take time and may cost them more.

SMEs keeping manual books of account may not be able to afford pricey software systems
that handle accounting functions. In order to keep up with the changing times and maintain
efficiency, they often use simple computer programs such as Excel spreadsheets to record
and store their transactions. In managing sizable chunks of data, manual jotting down of
entries no longer proves to be a practical and effective mode of bookkeeping.

Recently, the BIR ordered the mandatory implementation of the Electronic BIR Forms or
eBIRForms by issuing RR No. 6-2014. The eBIRForms system was developed to provide
taxpayers, particularly the Non-Electronic Filing and Payment System (Non-eFPS) filers,
with accessible and convenient service through easy preparation and filing of tax returns.
The use of eBIRForms improves the BIR’s tax return data capture and storage, thereby
enhancing efficiency and accuracy in the filing of tax returns. The efforts of the BIR to
embrace technology and continuously look into efficient measures for easy preparation and
filing of tax returns have been commendable. Will freeing taxpayers from having to keep
manual books of account follow?

Given the constant influx of technology in business, the BIR should be flexible and
consider computer-generated spreadsheets as compliant with RMC 13-82. In essence,
computer-generated printouts function in the same manner as manual or registered loose
leaf records, thus conforming to the BIR’s objectives of efficiency and accuracy.

It would be timely for the BIR to issue a clarificatory circular allowing taxpayers to use
computer-generated printouts as an acceptable method of recording entries in the manual
books of account. Such a circular could also apply retroactively to cover Excel-formatted
accounting records submitted to the BIR during tax audits of the past taxable years.

The BIR could consider imposing a one-time penalty for those years that books were not
manually filled but fully supported by electronic spreadsheet printouts -- a compromise that
would be less onerous for SMEs.

https://www.pwc.com/ph/en/taxwise-or-otherwise/2015/the-persistence-of-manual-bookkeeping.html

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