What Is Accounting?

What are the Advantages of computerized accounting versus manual accounting?

• What are the advantages of computerized accounting versus manual accounting? What questions should I ask regarding differences between computerized versus manual accounting?

• Answer:

  Obvious .. 1) its MUCH harder to make a software accounting package "lie" .. The software will impose 'access rights' and 'permission restrictions' - typically, at least 3 people will be involved in any Payment being made .. for example, the person who enters Orders on Suppliers will not be able to enter Invoices nor issue Payments ... (the person who can enter Invoices will not be able to enter Orders or make Payments - and the person who issues Payments will not be able to enter Orders or Invoices). The system will prevent unauthorized use by 'logging out' users after some short period of inactivity (and, of course, preventing one user ID being used to log in at two different locations). Many systems will also be linked to the building security - so that users who 'clock out' of the building are automatically locked out of the accounting system until they 'clock in' again after lunch (or the following morning) .. The software also imposes a 'work-flow' (for example - a Payment must be linked to an Invoice - an Invoice must be linked to a Delivery - a Delivery must be linked to an Order - an Order must be linked to Supplier and an authorised Buyer ... ) and imposes 'checks' (for example - Payment can not exceed Order amount by more than some limited adjustment .. Payment can only be made to Suppliers Bank Account ... ) The software also reports all sorts of 'suspicious activities' (eg. Data modified outside normal working hours of individuals who's log-ins were used ... Buyer X keeps changing Order price after Deliveries ... Order, Delivery, Invoice & Payment all issued within a few hours of one another ... ) .. .. and (of course) keeps an 'audit trial' ('locked' records that can't be modified by any user i.e access is only at the 'System' level, of who/when/where i.e. who's log-in, exact time and which PC / terminal was used to enter or modify any data) 2) a computer system can generate all sorts of 'trends' and 'reports' that assist the company with making decisions (i.e. 'can we afford to invest in new equipment ?' or 'are things so bad that we have to start making people redundant ?' Only the computer illiterate (and soon to be bankrupt) company would use 'manual' accounting these days ...