Difference Between Manual Accounting And Computerized Accounting

Manual accounting is recording and processing financial transactions by hand, while computerized accounting uses software to automate these tasks. Simply put, manual accounting is paper-based and time-consuming, while computerized accounting is efficient and accurate. The article talks about manual and computerized accounting and covers the difference between manual accounting and computerized accounting in detail.

In accounting, finances and income are recorded, processed, and analyzed to generate financial statements, which are useful for businessmen and their decision-making. Thousands of companies use an automated accounting record system worldwide, while many continue with the traditional way. There are many differences between manual accounting and computerized accounting, which we have discussed in this article.

One of the most remarkable differences between manual and computerized accounting is the support. While manual accounting uses physical books and papers, computerized accounting uses electronic devices. Computers and storage disks are their support, although they can also resort to printed papers and physical receipts.

Content

• What Is Manual Accounting?
• What Is Computerized Accounting?
• Difference Between Manual Accounting And Computerized Accounting
• Conclusion

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What Is Manual Accounting?

As its name indicates, manual accounting is the paper-and-pencil accounting system where daily records, vouchers, and account books are kept. It is used to store, classify and analyze a company’s or SME’s financial transactions.

Small entrepreneurs, self-employed, warehouse, and bazaar merchants often use it to keep track of business transactions because the cost is lower.

One of the advantages of the manual accounting system is its easy accessibility. It is also characterized by confidentiality since the information is only in the accounting book. However, manual accounts can only be adequately prepared if the accountant has good bookkeeping knowledge. In addition, human error is likely to occur, such as incorrect transaction registration, omission, etc.

What Is Computerized Accounting?

Computerized accounting is an accounting information system that processes financial transactions and events according to Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Computerized accounting tracks a company’s accounting transactions to produce financial reports, tax return information, annual financial statements, and other financial reporting setups that analyze a company’s efficiency, profitability, and operations.

The two primary essentials of a computerized accounting system include the following:

Operating procedure: A well-defined operating procedure combined with the operating environment of the organization system for storing and processing data.

Accounting Framework: Consists of principles, coding, and grouping for record keeping.

Businesses with computerized accounting software can customize the software to suit business entities in different areas, multiple currencies, and their branches that sell various products.

The benefits of computerized accounting include fewer errors, better efficiency, lower operating expenses, and better output.

Difference Between Manual Accounting And Computerized Accounting

There are many more differences between manual accounting and systematized accounting. One of the advantages of the latter system is that it involves less effort to keep the books updated and up-to-date. Other differences include the following: 

Direct calculation

In computerized accounting, the program is designed to do the necessary mathematical operations related to a transaction. In manual accounting, the accountant must do all the calculations individually. 

Basic support

In Manual accounting, every accounting detail is logged in a daily book, a detailed transaction record. On the other hand, the database is the origin of computerized accounting.

Time spent

Another crucial difference between manual and computerized accounting is that, in the former, the accountant needs to work on each transaction individually, thereby spending a lot of time recording it in the related books and processes. on the other hand, in computerized accounting, a transaction is entered and updated to all related books automatically, consuming less time. 

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Endorsements

The only possibility of making backups in manual processes is duplicating the books, another difference between manual and computerized accounting. In contrast, this process can be done immediately in computerized accounting. 

Instantaneous financial statements

Another notable difference between manual and systematized accounting is that financial statements are prepared once a year. In automated accounting, they can be instantly obtained at any given time. 

Trial Balance

In manual accounting, the trial balance is prepared only when required, while in digital accounting, the instant trial balance is provided daily.

Financial Statement

In a manual accounting system, the financial statement is prepared at the end of the period, that is, the financial year. On the contrary, in the digital accounting system, the financial statement is provided at the click of a button.

Conclusion 

As the number of business transactions increases, it is difficult to manage accounts manually, as it takes a long time to update a single transaction across all the accounts it corresponds to. 

In digital accounting, a series of limitations of manual accounting have been eliminated. Each time a transaction occurs, the entry is automatically updated in all corresponding accounts. Growing businesses are advised to invest in digital accounting for proper management and to eliminate possible errors.

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