Ways Organizations Maintain Financial Records: Manual vs

Question 4 There are several ways organisations maintain financial records. They include manual systems (hard copy) and computer-based (electronic) systems. How do computer and manual systems operate? A manual system is a bookkeeping system where records are maintained by hand, without using a computer system. Instead, transactions are written in journals, from which the information is manually rolled up into a set of financial statements.These systems suffer from a high error rate, and are much slower than computerized systems. Manual systems are most commonly found in small enterprises that have few transactions. In comparing the manual and computerized system, the difference in mechanism is the only difference that can be estimated. In the manual system, pen, paper are used to record the transaction. In a computerized system, computers and internet connection is required for recording transactions. Key Differences Between Manual and Computerized Accounting The difference between manual and computerized accounting is explained below in points: Manual Accounting refers to the accounting method in which physical registers for journal and ledger, vouchers and account books are used to keep a record of the financial transactions. On the other hand, computerized accounting implies the method of accounting, which uses an accounting software or package, to record the monetary transactions, which happen to an organization. In manual accounting, recording of the transaction can be done through the book of original entry, i.e. journal day book. Conversely, in computerized accounting, the transactions are recorded in the form of data, in the customised database. In manual accounting, all the calculations, i.e. addition, subtraction, etc. with respect to the transactions are performed manually. In contrast, in computerized accounting, there is no need to perform calculations, as the calculations are performed by the computer automatically. In manual accounting, a person remains involved all the time, with the accounts, to enter and update transactions, which is tedious and time- consuming too. As against, in computerized accounting, once the transaction is entered, it is automatically updated in all the accounts to which it relates and thus, the process is comparatively faster. One of the merits of computerized accounting which manual accounting lacks is that in manual accounting there is no way to back up all the entries and financial statements, but in computerized accounting, the accounting records can be saved and backed up.