Part Two
Manual &
Computerized
Accounting
2.1 What Are Differences Between
Manual & Computerized Accounting?
Manual accounting requires that all journal entries, invoices
and other financial documents be created by hand.
Computerized accounting allows users to input information
into accounting software programs.
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Speed
Computerized accounting produces information much
faster than manual accounting. Accounting software
packages, such as QuickBooks and Peachtree, come with
built-in databases that allow users to input data.
Accuracy
Manual accounting systems are prone to mathematical
errors and misplaced numbers. With a computerized
accounting system, your company data is automatically
calculated based on numbers you input.
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Financial Statements
In a manual accounting system, you have to prepare your
company's income statement, balance sheet and
statement of owner's equity by hand. Information from your
journal entries helps formulate your company's financial
statements. Computerized accounting systems allow
financial statements to be created from information stored
in the database.
Cost
The cost of computerized accounting systems can range
from hundreds to thousands of dollars for large businesses.
A computerized accounting system may save on man
hours used for creating financial statements and other
reports. For this reason, many small and mid-sized
businesses use computerized accounting software.
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Reports
Reports are created in a timely manner when using a
computerized accounting system. Reports generated from
computerized accounting software allow managers to run
the company in a more efficient manner. Creating reports
in a manual accounting system may lead to more staff
frustration and result in having to work with outdated
information.
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Safety
Accounting records kept on the manual system can be lost
or damaged easily, such as by coffee spills. On the other
hand, records kept by a computer are likely to be safer
because many systems are backed up often. If you lose
pages in a paper pad, you may have to recreate the
transactions by conducting research and writing them in
again. In a computerized system, you simply restore the
latest backup and add a few transactions that were not
saved. In this area, accounting software is obviously
superior to manual systems.
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Organization
Data processed through software is organized and easy to
find. That's not the case with manual systems, where you
may have to review several pages to find what you need.
Accounting programs organize the information in one place,
classified by type. For instance, if you want to find certain
data about a vendor, you can go to the accounts payable
section of the software, usually by clicking a link or tab, and
conduct a search for the vendor. If you conduct the same
process on a manual system, you may have to go through
several pages and take your time to find what you're
looking for.
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Both the computerized and the manual accounting got the
merits and the demerits. They can be differentiated only in
terms of cost, speed and the mobility. It can be
implemented according to the size of the business. Small
and Medium sized companies prefer manual accounting
considering the low cost. They could utilize quality
accountants and carry out the day to day activity or even
they could simply offshore their accounting tasks to an
outsourcing firm. Large scale businesses completely rely
on the computerized accounting as it gives fast and
accurate results. It would be really helpful for them to have
the accounting records without any chaos.
2.2 The Importance of Information
Technology in Accounting
Generally accepted accounting principles (GAAP) and
international financial reporting standards (IFRS) require a
company to prepare full and accurate financial statements.
A company's senior management establishes adequate
computerized accounting systems to prepare accurate
operating reports.

Accounting Defined
Accounting is a business practice that helps a firm record
operating transactions in financial accounts and report
operating data at the end of each month.

Computerized Accounting
Computerized accounting involves the tools, methods and
computer software and hardware that a firm uses to
automate recording and financial reporting processes.
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Significance
Information technology plays an important role in
accounting processes because it improves financial
reporting procedures and prevents errors in financial
statements.

Time Frame
Computerized accounting activities help an accountant
perform month-end close procedures. These activities also
help a company report profit information over a period,
such as a month or quarter.
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Recording Procedures
An accountant uses computerized accounting software to
make journal entries in financial accounts, such as assets,
liabilities, revenues, expenses and equity. The accountant
debits an asset or expense account to increase its amount
and credits it to reduce the account balance. The opposite
is true for revenue, liability and equity accounts.
2.3 The significance of accounting
information
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There are various importance of accounting information to
a business entity. Getting to know what an accounting
information is and the importance (need) of it is a great
step to improving one's capital base, both from the finance
aspect to the resources (raw materials) an organisation
uses in carrying out its objectives.
An accounting information is simply the data which an
organisation/business entity is able to make known to its
users. It should be taken note that these users of
accounting are of various sections - to which a business
entity is one of.
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A business entity will require an accounting information so
as to enable it manage and control its finances and
resources. It also needs it for it to be able to improve on its
level of profit earning, should it realises it is declining in its
profitability level. It also needs to for it know the differences
between its marginal liability and its marginal assets.
There are so many importance of a business information to
a business enterprise, but the little I've been able to
highlight above are some of the vital needs of an
organisation's need of an accounting information.
2.4 The Basic Functions of an Accounting
Information System
An accounting information system (AIS) provides financial
information about a business. This information helps
managers plan and control operations and provides reports
to outside parties such as stockholders, creditors and
government agencies.
Parts of an accounting information system might include
financial reporting, cost accounting, management
accounting and enterprise resource planning (ERP). A
well-designed AIS gives a business a consistent way to
view and analyze financial information and has three basic
functions.
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Collect and Store Data
One function of an accounting information system is to
efficiently and effectively collect and store data about
business activities and transactions. The system must
capture transaction data on source documents, record
transaction data in journals to present a chronological
record of transactions, and post data from journals to
ledgers that sort the data by account type.
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Provide Information
The second function of an accounting information system is
to provide information useful for making decisions. This
information usually involves reports in the form of financial
statements and managerial reports.
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Provide Controls
The third function of an accounting information system is
to incorporate controls to ensure the accurate recording
and processing of data. The system must make certain that
the information that comes out of the system is reliable,
ensure that business activities are efficient and in line with
management's objectives and keep business assets safe.
Traditionally, bookkeepers and accountants did the work of
accounting systems by hand on paper, but today much of
the work is automated with computers. According to
Maryville University, setting up an accounting information
system requires knowledge of topics such as database
design and development, business process analysis,
accounting applications, internal control requirements,
information technology (IT) auditing and accounting
requirements.
2.5 Importance of Accounting Information
Systems
An accounting information system is typically a
computerized accounting program that keeps records for a
company. The information is entered into the system and
the system tracks and organizes the accounting
information. The accounting information system is used
also to provide detailed information about the company,
including financial statements.
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Business Transactions
An accounting information system is designed to record all
transactions of a business. An accounting clerk enters all
business transactions into the program and the
transactions automatically are posted to the corresponding
accounts. This is important because any time information is
needed, it can found on the computer and is organized.
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Accounts Payable
An accounting information system allows for easier
payments made on accounts payable. Many systems are
designed to pay all bills due with a click of a button. A date
is selected and checks are automatically made out for all
bills due. Most systems allow a clerk to unselect certain
bills if a company is not ready to pay a specific bill.
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Accounts Receivable
This type of system also allows for easier billing.
Information is recorded on the system and a clerk chooses
when to print bills. This is done daily, weekly or monthly,
depending on the business. The system generates all bills
efficiently and easily for the clerk.
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Financial Statements
An accounting information system generates all financial
reports without the clerk calculating anything. The dates for
the reports are entered into the system and the computer
generates reports for that specific period. This comes in
handy when a report from a different period is needed
immediately. The system has the capability of producing
reports for any period that the information was recorded for
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Year-End Closing
Year-end closing is often a tedious process for an
accountant. An unadjusted trial balance is created,
adjusting entries are made and recorded, an adjusted trial
balance is calculated, closing entries are made, and, finally,
a post-closing trial balance is generated. This process is
complicated and time consuming, but with an accounting
information system, the computer does most of the work on
its own.
Thanks for Your Attention