Manual and computerised accounting follow the same principles and rules. The main difference is that while a manual system employs a pencil and paper, computerised accounting uses a machine to process transactions. Computers and accounting programs have become very affordable and easy to use, making computerised accounting a popular choice for many firms, including small businesses.
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An obvious difference between manual and computerised accounting is speed. Accounting software can process transactions and compile reports at high speeds that cannot be matched by a manual system. If you want to compile a report in accounting software, you literally press a button and get it immediately. To do the same in manual systems, you will have to wait for someone to manually calculate numbers and put them in a professional format--this can take hours or even days.
Computerised accounting is more accurate than manual because most of the calculations are performed by the program. For example, you could use software to do your billing, and that software will calculate any sales taxes, subtotals and other items automatically, minimising the risk of mistakes, such as transposition of numbers.
If a mistake is made in a computerised system data entry, you can run reports to pinpoint the error and correct it. Reports can be processed right away with corrected information. In the manual system, a mistake is much harder to find, with an accountant reviewing many pages full of numbers. Once corrected, reports cannot be processed immediately--it takes time.
Data processed through software is organised and easy to find. That's not the case with manual systems, where you may have to review several pages to find what you need. Accounting programs organise the information in one place, classified by type. For instance, if you want to find certain data about a vendor, you can go to the accounts payable section of the software, usually by clicking a link or tab, and conduct a search for the vendor. If you conduct the same process on a manual system, you may have to go through several pages and take your time to find what you're looking for.
Costs for a computerised system are higher than for a manual one, even when the prices of hardware and software are low. Pencil, paper and calculator cost less than computerised accounting. Computers and peripherals, such as printers, use electricity, so expect a jump in your utilities bill. If you select an online accounting program, then you will pay Internet access fees as well.
Accounting records kept on the manual system can be lost or damaged easily, such as by coffee spills. On the other hand, records kept by a computer are likely to be safer because many systems are backed up often. If you lose pages in a paper pad, you may have to recreate the transactions by conducting research and writing them in again. In a computerised system, you simply restore the latest backup and add a few transactions that were not saved. In this area, accounting software is obviously superior to manual systems.
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