Computers have become indispensible for almost all industries and companies and that is the reason why in today’s world accounting is done on computers and not in papers. Computerised accounting refers to that system where all major functions of accounting like recording of transactions, preparation of trial balance, profit and loss statement and balance sheet and analysis of these statements is done electronically through computers. Given below is the complete overview of computerised accounting.
Features of Computerised Accounting
1. Computers are far more accurate than human beings and therefore they can process tons of data without any error, take the example of a bank branch which is having daily 1000 cash transactions if it was done manually then chances of errors would be more whereas by using computers error relating to calculation is eliminated.
2. It is more economical because computer can perform the task of many people and that is the reason why a company using compuetised accounting needs less number of people than a company which is using manual accounting and thus it results in saving of employee costs for the company.
3. Speed is another feature of computerised environment, gone are the days when preparing financial statements like balance sheet and profit and loss account at the end of financial year used to take weeks now one can easily feed all the data and financial statements are ready.
Advantages of Computerised Accounting
- The biggest advantage of computerised accounting is that company can have accurate set of accounting records free from arithmetical errors and that too at very low cost resulting in efficiency for the company.
- Company using this system can generate various reports at any time and also according to its need, so if company wants to know profit from sales for particular product for a month or for special marketing campaign can do it without much effort which was not possible in manual accounting.
- In manual accounting the accountant has to record transactions first in journal then post it into ledge and then prepare trail balance and balance sheet while in case of computerised accounting one has to enter transaction only one time and the rest of the task is done by computer.
Disadvantages of Computerised Accounting
- In case of computers the biggest risk is that if company using computers for accounting do not have back up of data, and if computer crashes then it can lead to big problem because unlike manual accounting there is no record in papers and it would be very difficult to retrieve the data lost.
- The initial cost associated with computerised accounting is high because computers and its accessories are expensive and also the company has to train the staff and develop the software according to its need which again is expensive and hence small companies prefer to use manual accounting then computerised accounting.
- It is easier to manipulate accounting entries and figures in computersied accounting than manual accounting and hence chances of frauds happening in computerised accounting increases and if the company does not have proper mechanism to check these type happenings then it can lead to massive loss for the company in monetary terms.