We are living in a tech-dominated world where all our work is aided by technology and accounting is no exception. Despite affordability and abundant options in the computerized accounting system, some companies are practicing manual accounting.
There is nothing wrong with it, whether you use ledgers or laptops both give the same result. However, it is good to update the process of work with technological advancement. In this blog, we will discuss the difference between computerized accounting and manual accounting. So let’s get started.
What is computerized accounting system
The computerized accounting system is the process of systematically maintaining financial records of your organization on accounting software. Compared to conventional accounting, the computerized accounting process is quick and the chances of errors are negligible. In this system, the operator feeds the data and the entry gets adjusted automatically.
So now you know the meaning of the computerized accounting system so let’s understand its important features.
What are the important features of computerized accounting system
The following are the features signifies the importance of a computerized accounting system:
- Quick decision-making – With the help of computerized accounting software you can get financial information about your business in real-time. Thus, managers can make decisions taking into account the latest data without any delay.
- Speed – Since a computerized accounting system takes care of calculations, the speed of accountants increases.
- Accuracy – Compared with manual accounting systems, digital accounting software is more accurate as there are no manual calculations.
- Scalability – Most digital accounting systems can cater to the growing need of organizations.
- Data Security – With trusted online accounting systems like Munim comes data security. When software is hosted on reliable servers rather than local servers, data remains more secure.
- Real-time Reporting – In digital accounting software systems you get a facility of reports that are updated in real-time. This helps in making decisions without any delays.
Advantages of computerized accounting
Here are the advantages of a computerized accounting system that you should know:
- High accuracy and efficiency – Computerized accounting software is developed to make calculations automatically and record transactions with a click, thereby reducing the risk of human error.
- Automatic data backup – There is no threat of data loss in the case of a computerized accounting system because data gets stored automatically.
- Better data management – In computerized accounting software you can store large amounts of data and access or analyze the same whenever needed.
- Simplified compliance – With the implementation of computerized accounting systems, it gets easier to comply with the latest regulations laid down by the Government of India.
- Reporting in real-time – When you are using computerized accounting systems, you can access reports with real-time financial data, enabling the business to make data-backed decisions every time.
Disadvantages of computerized accounting
Following are the disadvantages of computerized accounting systems that you should be aware of:
- Chances of errors – Though a computerized accounting system is more accurate than a manual accounting method still there is potential for errors due to input errors, software bugs, or system malfunctions.
- Data security – Cloud-based accounting systems store your financial data on cloud servers so there are chances of data leaks. If your service provider uses trusted cloud servers then there is no risk.
- Initial costs – These involve the cost of buying the software and implementing it at your company.
What is Manual accounting system
In the manual accounting system, the accountants prepare paper-based accounts in a register to record and maintain financial transactions. As you can judge, the process is time-consuming, prone to errors, and needs constant human intervention. The only area where a manual accounting system is dominating computerized accounting is that it doesn’t require sophisticated computer systems.
So now you know the meaning of the system so let’s understand its importance.
Advantages of manual accounting
The following are the advantages of a manual accounting system:
- Independent of software – Manual accounting system does not have any dependency either on software or sophisticated computer systems.
- No learning curve – To learn digital accounting software and get a grip on it, takes time. While in manual accounting software, there is no such thing.
- Low initial cost – Digital accounting systems indeed incur higher initial costs than manual accounting systems.
Disadvantages of manual accounting
Following are the disadvantages of manual accounting that every entrepreneur should be aware of:
- Lagging process – Unlike computerized accounting software, here the process has limitations and is more time taking.
- Susceptible to errors – Due to human errors manual accounting system is prone to errors such as calculation mistakes, transposition mistakes, and typos.
- Scalability is restricted – When an organization grows beyond a certain limit, the manual accounting system gets inefficient.
- Lack of reporting capabilities – Manual accounting system is not as agile as a digital accounting system. Drafting a report with real-time data is difficult.
Distinguish between manual accounting and computerized accounting
|Application||Used in small companies where the number of transactions to be recorded are less.||Used in medium-sized and large corporations where the number of transactions to be recorded are more.|
|Data safety||Though it is free from cyber threats, the book can be stolen easily.||With trusted digital accounting software, chances of cyber attacks are minimal.|
|Space requirement||With time, as the number of books increases more space is required for storage.||You can store as much data as you want on the computer.|
|Automation||Automation is not possible||Process can be automated|
|Additional device||Calculator is required||No additional is needed|
|Data backup||Only option for data backup is photocopy||In cloud accounting softwares, data is stored on the cloud so there’s need as such. However, you can download the data and store it on a local drive.|
Over To You
So this was all about the difference between a manual accounting system and a computerized system. We hope after reading this blog you know everything about the difference between these systems. And if you are looking for an advanced computerized accounting system then Munim – cloud accounting software in India, is the right choice.