Information Technology · Ch 3 — Computerised Accounting with GST
Manual vs Computerised Accounting
Manual vs Computerised Accounting
From the ledger book to the computer
Accounting is the process of recording, classifying, summarising, and interpreting a business's financial transactions. It can be done in two ways.
In manual accounting, every transaction is written by hand — first in a journal or subsidiary book, then posted to ledger accounts, then totalled to make a trial balance, and finally arranged into a profit-and-loss account and balance sheet. Each of these steps is a separate, repetitive task done by a person.
In computerised accounting, the same transactions are entered once into accounting software as vouchers. The software then does the posting, totalling, and statement preparation automatically. The person records the transaction; the computer does the arithmetic and the paperwork.
Why businesses prefer computerised accounting
| Advantage | What it means |
|---|---|
| Speed | Thousands of entries are posted and totalled instantly, instead of by hand. |
| Accuracy | The computer never makes an arithmetic mistake in adding or posting; totals always agree. |
| Automatic posting and totalling | One voucher entry updates every related account at once — no separate posting step. |
| Instant reports | A trial balance, profit-and-loss account, balance sheet, or GST report can be produced at any moment. |
| Storage and retrieval | Years of records are kept on disk in a small space and any account or bill can be found in seconds. |
| Security | Access can be protected by passwords and user rights; data can be backed up against loss. |
| Neat, standard output | Invoices, statements, and reports are printed in a clean, uniform format. |
| Handles tax easily | GST, discounts, and other calculations are applied automatically to each bill. |
The limitations to be aware of
No system is perfect. Computerised accounting also has some limitations:
- Cost — buying software, computers, and training people costs money, which can be heavy for a very small business.
- Training needed — staff must be trained to use the software correctly.
- Dependence on power and hardware — a power cut or a machine failure can halt work. …
Recording and processing financial transactions by hand in physical books of account (journal, ledgers, trial bala …
The principle that a computer's output is only as good as its input — a wrong entry produces a wrong result, however p …