Manual vs Computerized Accounting

Topics: Accounting software, General ledger, Business Pages: 4 (1216 words) Published: October 11, 2010
Manual versus Computerized Accounting

Ever since Lucas Pacioli wrote about and spread the knowledge of double entry accounting in his “Summa di Arithemetica” in 1494, modern manual accounting was born (Hendrickson, 2007), though manual accounting has existed in many forms since ancient times. In contrast, computerized accounting systems are a more modern invention, as the first computer was invented between 1943 and 1946 (“Great Events in Accounting & Business History”, (n.d.)) and Arthur Anderson first computerized the payroll of General Electric in 1953 (“Great Events in Accounting & Business History”, (n.d.)). Powerful personal computers were not readily available to the average person until the 1980’s and 1990’s.

Manual accounting, for the purposes of this paper, is the completion of the accounting cycle by hand without the use of a computerized accounting system. The accounting cycle for manual accounting is the process by which companies produce their financial statements for a specific period (Horngren & Harrison, 2007). Typically, in a manual accounting cycle the following steps are taken: Analysis of transactions, journalizing entries, posting to the ledger, preparing an unadjusted trial balance, preparing a worksheet, preparing financial statements, adjusting the ledger accounts and posting adjusting journal entries, closing the temporary accounts (posting and journalizing the closing entries), preparing a post-closing trail balance, preparing and posting optional reversing entries, and interpreting the accounting information (Yacht, 2008, p. 42). The financial statements derived from manual accounting are the summation of many individual transactions performed by hand and kept, usually in paper form, in journals and ledgers.

Many small businesses use manual accounting and manual accounting has its advantages. From my experience managing a small business, performing the accounting cycle manually gives the manager or owner of...
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