Computerized Accounting should completely replaces Manual AccountingPrepared By : Ali H. Al-MuslimID#: 200628620Section# : 05SN#: 02Group#:01Word Count:1,333| 10/7/2012
Table of Contents
Table of ContentsII
1.Lack of security6
Computerized Accounting should completely replaces Manual Accounting Accounting is the backbone of every existing business. Starting with the definition of accounting: “Accounting is the art of recording, summarizing, reporting, and analysing financial transactions” (Snyder, 2008). It is clear from the definition that accounting has three main activities: recording the transactions, summarizing the accounts and analysing the financial statements. These main activities can be approached through what is called the accounting cycle which is basically what accountants do before they prepare the financial statements. Image 1 below illustrates the accounting cycle and how accountants move from one step to another.
Image 1: The accounting cycle (Glaser, 2011)
It starts from journal entries which are record the transaction in the company’s book called the general journal as debits and credits. Then these transactions are posted into the related accounts to get the balances in another book called the general ledger. After that, adjustments are made until we reach the final result which is preparing the financial statements that are the balance sheet, income statement, Owner’s equity and statement of cash flow. This procedure can be obtained either manually using pens and papers or by computer using spread sheets software like MS Excel or MS Access. Before the computer was invented, accountants used several devices for calculating the figures involved in the transactions like the abacus for instance. However, after the computer was invented, they should use it completely for the whole process in replacement of hard papers. I. 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.” ( Schreiner, ND). Some companies nowadays still use the hard papers in recording their transactions. This old way has two benefits but it also has two limitations. A. Benefits
The benefits of manual accounting can be summarized into two benefits:
1. Cost effective
An important factor is that manual accounting is cheaper to implement. What is needed are only books and pens and a place to save the files. Also it doesn’t require any skills other than the basic ones such as the skill of knowing which accounts to be affected if a transaction occurred. 2. Availability
In manual accounting, the data are available whenever it’s requested by a manger or an auditor. In addition, it’s not possible for the data to get corrupted even in the long-term. B. Limitations
The limitations of manual accounting can be summarized into two limitations:
3. Finding Errors
Since making mistakes is part of the human nature, it’s possible for accountants to make mistakes while recording the transactions or preparing the financial statements. However, finding these mistakes is the real problem. As image 2 shows it’s almost impossible to find an error even when using a magnifier and as big the company is the more transactions it has which means the bigger chance of having errors.