Accounting is a general domain in the business, finance, or economics world that refers to the activity/process of analyzing, presenting, classifying, recording, and summarizing the financial transactions of the organization. There are two different ways through which one can carry out accounting activities. One is the traditional way which is manual accounting and the other is the modern method which is computerized accounting. In this article, we will understand the complete difference between manual and computerized accounting. This blog has the following set of concepts.
You Can Also Read: Difference Between Cost and Management Accounting
Definition Of Manual Accounting
Manual Accounting, as the name suggests, is a paper-based accounting system or a method in which an accountant uses a physical register, journal, ledger, vouchers, accounts books, or paper in order to record, classify, store, and analyze the financial transactions of an organization. It is a traditional method that is often used by small businesses like sole proprietors, shopkeepers, mini stores, etc. in order to record business transactions.
Advantages Of Manual Accounting
Some three major advantages of manual accounting are as follows.
- Despite being a traditional technique, it has easy accessibility and works even when the electricity is off.
- It is much cheaper than the computerized accounting system.
- There is no chance of data hacking, corruption, or duplication while using this system.
Disadvantages Of Manual Accounting
Despite its advantages, some of the tactics of this system are still not useful.
- Human errors such as the omission of the transaction, incorrect recording of the transactions, figure transportation, etc, are more likely to occur while using a manual accounting system.
- This type of method has no internal checks and balances.
- It has no backup records in the case of loss or damage.
Definition Of Computerized Accounting
On the other hand, a computerized system, as the name signifies, refers to the accounting system in which an accountant uses accounting software or other digital technology in order to record, analyze, or store the financial data of an organization.
The two primary essentials are:
- Accounting framework- The framework consists of grouping structure and principles that help in maintaining data.
- Operating Procedure- There is a proper method for operating the system in order to store and process the data in a good manner.
Advantages Of Computerized Accounting
The three major benefits of computerized accounting are as follows.
- Since computers take less time in performing a particular task, accounting data can be performed faster using this system.
- Computerized accounting provides more precise data to the users.
- The calculations like addition, subtraction, division, etc are done automatically by the software.
Disadvantages Of Computerized Accounting
Some of the disadvantages of computerized accounting are as follows.
- The incorrect use of software may lead the accounting process to several issues.
- There are more chances for hackers to get to an organization’s financial data and use it.
Manual Vs Computerized Accounting(Table)
The following table briefly compares both manual and computerized accounting.
Key Differences Between Manual And Computerized Accounting
The major differences between manual and computerized accounting are as follows.
- Manual Accounting, as the name suggests, is a paper-based accounting system in which an accountant uses a physical register, journal, ledger, vouchers, accounts books, or paper in order to record, classify, store, and analyze the financial transactions of an organization. On the other hand, a computerized system, as the name signifies, refers to the accounting system in which an accountant uses accounting software or other digital technology in order to record, analyze, or store the financial data of an organization.
- In a manual accounting system, the accountant prepares a ledger account, trial balance, and financial statements manually. On the other hand, in computerized accounting, once the data is entered, it is processed automatically.
- The manual Accounting system is sensitive to mathematical mistakes. On the other hand, the computerized accounting system is free of such mistakes and errors.
- A manual accounting system is slower as compared to a computerized accounting system.
- The trial balance in a manual accounting system is prepared only when it is necessary. On the other hand, trial balance in computerized accounting is prepared on daily basis.
So, with the above explanations, we can conclude that both manual and computerized accounting system have their own pros and cons. While manual accounting is suitable for small businesses, computerized accounting is suitable for large companies. Hope you have understood the difference between both and manual and computerized accounting.
Learn Accounting Software: Quickbooks Course With Certification