in any firm play an important role in maintaining finance and making financial
reports. Maintaining, preparation and presentation of accounts is crucial for
business success as well as organization for effective decision making whether
it is a nonprofit making organization or profit making because they have to
report to the stakeholders of the organization through financial reports.
loss of material, records and information in accounting leads to faults and
problems in financial reporting and create complications and problems. This
report describe computerize accounting importance, its advantages and
disadvantages of computerized accounting system and demonstrates its effect on
financial reporting and managing accounts and records.
“Computerized Accounting involves making use of computers
and accounting software to record, store and analyze financial data. A
computerized accounting system brings with it many advantages that are
unavailable to analog accounting systems.”
The more complicated the financial activities of your
business are, the more likely it is that the company need a computerized
accounting system to ensure effective financial reporting.
Computerized accounting systems are software programs
that are stored on a company’s computer, network server, or remotely accessed
via the Internet.
A computerized accounting in any firm involves the computerization of
accounting information systems which is established in order to facilitate
decision making. These are associated with a numbers of benefits like speed of
carrying out routine transactions, timeliness, quick analysis, accuracy and
the introduction of computerized system of accounting, the manual systems were
inaccurate and inconsistent for many organization needs especially reporting of
financial information. There were many errors when the data was collected,
analyzed, journalized and a trial balance and balance sheet prepared from it. Early
accounting information systems were designed for payroll functions in 1970s.
And at that time the computerized system was too expensive.
As the time passes and the
huge enterprises were formed it was too difficult to handle huge accounts and
maintain their records in a sequence, the technology was improved. The new up
to date software was introducing of all that time to facilitate as much as they
And know there are many
computerized accounting and finance handling software from high standard
companies to the medium one for the purpose of ease and time management.
accounting has a great significance in this century. It make the work easier,
efficient and saves the time and cost.
It helps businesses by making their staff
efficient, productive and also save their valuable time. It helps to maintain
business and all financial information for the business is well-organized.
Some significance of computerize accounting in a firm
1) Time and cost savings:
Using a computerized accounting system saves companies time and money. The use
of computer makes inputting accounting information simple. Business
transactions are entered into the system and the system posts transactions
computerized accounting system help business to stay organized. When information
is entered into the system, it makes finding the information easy.
Storing information is very important to a business. In Computerized System
data can be stored quickly. After information is entered into the system the
information is stored indefinitely. Companies perform backups on the system
regularly to avoid losing any information.
systems allow companies to distribute financial information easily. Financial
statements are printed directly from the system and are distributed internally
and externally to those needing the information.
5) Financial Reports:
Data within the computerized accounting system is accurate and up-to-date. Management
can request online report in real-time and that makes management decisions more
reliable and timely.
accounting has a huge scope, the new advance software are establishing for ease
and time saving.
large multinationals companies which has huge platforms all over the world need
a fast, advance, direct information sending and recording source.
this field had expended so far and will expand in future as the technology and
demands are increasing.
The computerized accounting system in an
organization has huge advantages but also has some disadvantages and
It is assumed that this system is best in managing,
recording and summarizing financial data of a company but also has complexity
issues and need a train staff to manage but it is the most advance system in
any firm to be efficient in managing financial data.
And the purpose of study is to demonstrate the
important of computerized accounting in this modern era. And label its
advantages and disadvantages.
Computerized Accounting System:
Computerized accounting system is software programs
that are stored on a company’s computer, network server, or remotely accessed
via the internet.
accounting system allow you to set up income and expense accounts, such as
rental or sales income, salaries, advertising expenses, and material costs.
They can be used
to manage bank account, pay bills, and prepare budgets. Depending on the
program, some accounting system also allows you to prepare tax documents,
handle payroll, and manage project costing.
generally customize the software to meet the needs of your business. It’s
important to make sure that your stuff are trained and understand how to use
the system correctly so that your company can successfully use your accounting
computerized accounting system involves the use of computers to handle large
volume of data with speed, efficiency and accuracy.
Computerized Accounting Software:
are many advance software which has invented so far. The top computerized
accounting software are:
2.2: Widely used
Computerized Accounting Software:
technology keeps advancing, businesses still have the same basic needs from
their software. While the software’s functionally has evolved, the delivery
platform has gone through a quantum change. Applications that used to be
delivered as standard applications run on desktop and notebook computers are new frequently delivered the web browser
or run on traditional computing devices such as tablets and smart phones.
are different types of business software:.
suits like Microsoft office, apple iWork, word perfect office, Google docs or
open office combine multiple business software programs into a single package.
to facilitate communication is also crucial. Many communication application,
such as many online meeting services and web based email services, run through
Business intelligence and
businesses also used special software packages to help manage their accounting
Some use entry level programs such as QuickBooks
that perform basic accounting functions. More powerful enterprise resource
planning and business intelligence packages of a comprehensive view of your business.
While buying a license can be expensive, cloud-based versions of these programs
are affordable for much small business.
of Computerized Accounting Software
Accounting software’s are used to implement
computerized accounting system. The computerized accounting is based on the
concept of database; it is basic software which allows access to the data
contained in the database.
The following are the components of computerized
of accounting documents
Computers help in preparing accounting documents
like cash memo, bills, invoices and accounting vouchers. Here computerized
accounting systems have user defined templates which will provide faster,
accurate entry of transaction and therefore all documentation and reports can
be generated automatically.
Everyday business transactions are recorded with the
help of computer software. Every account and transactions is assigned a unique
code where the grouping of account is done at the first stage. This process
simplifies the work of recording the transaction.
Preparation of financial statements.
After recording of transactions, the data is
transferred into ledger accounts automatically by the computer. Trial balance
is prepared by the computer to check accuracy of records, with the help of
trial balance; the computer can be programmed to prepare the statement of
comprehensive income and the statement of financial position.
Advantages of Computerized Accounting:
are many advantages of computerized accounting, some of them are as follows:;
The biggest and common advantages of
computerized accounting are that it reduces human error because every entry is
managed and arrange by computers.
The computer does most steps automatically,
many errors resulting from human intervention in a
manual system, such as errors in posting or preparation of financial
statements, are eliminated.
This is very
cost-effective, and many software companies offer a variety of accounting
packages with a very reasonable price. A computerized way a person can process
an enterprise account for several hours. But in manual mode a person needs a
full day to do this work; he will need to pay more salaries.
Auto Report Generation:
Accounting software can generate a
report very quickly according to your demand. On the other hand, a human can
take many hours even some days to make a report.
Human can make mistakes while interpreting
the date. On the other hand, a computer does not make a mistake. So, in
computerized accounting system accuracy is the most important advantages of
All of the accounting software are automated
you don’t to calculate anything just entry the number. And it is very easy
rather than solving and arranging the huge data.
Any types of report or data processed by
accounting software are more reliable than manual accounting process rather
Quick Processing Time:
It provides data up to the minutes to the
users. As for example in large multinational they need time to time information
and information is the most important thing in an organization.
It can wonderfully user-friendly and very
convenient to the users. Now the complexity has reduce to very much as before
this system was little complex but now user friendly softwares are introduced.
Security of Data:
You can lose
your credential account in various ways, such as burning, loss, cascading and
can be destroyed in a few years. But the software never loses data, because it
has a different backup. Even after many years you can find your data.
Using accounting software, the whole process of preparing accounts becomes faster. In addition, data and reports can be instantly created with a single click of a button. Managers do not have to wait a few hours or even days to get an important report.
Disadvantages of Computerized Accounting:
Accounting systems are expensive not only for purchase, but also for maintenance. Software Changes There may be new versions for purchase. Operating systems also change and can be expensive, especially for small businesses. If your computer stops working, it should be fixed, incurred costs and delays in processing accounting information.
When getting a new accounting system, there is
always time and energy spent in training. After a system is bought, then about
every year new versions are released with changes that may need some extra
training getting used to.
Dependency on software:
Computerized accounting depends on the operation of other
machines and software. Quite often, if there is one wrong thing with the
computer, then there is no access to the program, and the work cannot be
performed. Then share the time and costs when running each system and software.
Other disadvantages are:
Power failure, computer viruses
and hackers are the inherent problems of using computerized systems,
Once data been input into the
system, automatically the output are obtained hence the data being input
needs to be validated for accuracy and completeness.
Accounting system not properly
set up to meet the requirement of the business due to badly programmed or
inappropriate software or hardware or personnel problems can cause more problems.
Danger of computer fraud if
proper level of control and security whether internal and external are not
properly been instituted.
Influence of Computerized Accounting on Financial
The impact of computerized accounting systems on financial statements was due to the benefits of using computer systems during financial reporting. Scheduled reports can be viewed, simplified and customized at regular intervals with ease. With the help of applied calculations, financial reporting will be easy when information can be easily created and updated in a timely manner.
With the substantial
increase in the number of transactions and increase in the need for real time
information, maintenance of accounting data on a real time basis has become
essential. This is achievable using computerized systems hence promoting the
quality of financial reporting.
The influence of
computerized accounting systems depends on the end users satisfaction.
A computerized accounting
system is a delivery system of accounting information for purposes such as
providing reliable accounting information to users, protecting the organization
from possible risks arising as a result of abuse of accounting data and system
5.1: Quality of
financial reports and analysis:
reporting as the process of presenting financial information or data about a
company’s financial position, operating performance and its flow of funds for
an accounting period.
information is very necessary if decisions are to be made accurately and
rationally by the various interested parties or users of financial information.
are broadly classified into external and internal users. Where internal users
include management and employees while the external users include donors,
shareholders, creditors, government, competitors and general public.
information is said to be reliable if it is free from material errors and bias
and represents faithfully. Comparability is another characteristic of quality
Different types of Computerized Accounting:
the least expensive computerized options are pre-developed, off the-shelf accounting software packages.
These are software packages that topically offer common functions that apply to
most business, and usually have some flexibility to customize certain feature
to meet the needs of a company. Most business, however, will find they may need
to adapt their process to match how the software works.
Benefits of Computerized Accounting System in Firm:
Computerized packages can quickly generate
all types of reports needed by management for instance budget analysis and
variance analysis. Data processing and analysis are faster and more accurate
which meets the managers need for accurate and timely information for decision
Computerized accounting system allows managers to easily
identify and solve problems instantly.
The improvement in business performance as a result
computerization of the accounting systems as it is a highly integrated
application that transforms the business processes with the performance
enhancing features which encompass accounting, inventory control, reporting and
Computerized accounting systems ease auditing and have
better access to required information such as cheque numbers, payments, and
other transactions which help to reduce the time needed to provide this type of
information and documentation during auditing.
There are many other advantages and benefits
of this system in a firm like minimize manual errors, simple posting of
transactions, improvement in business reports etc.
The study revealed that computerized accounting
system actually have an influence on the quality of financial reports, better
management of records, best arrangement of accounts and time to time updates.
accounting in any firm saves time.
It leads to easy
auditing in the firm.
There is no need
to have huge paper documentations as in manual systems.
reports can be generated quickly.
Overall computerized accounting is very beneficial
for company to do efficient finance work and timely financial reports.
With increased improvements and versions of
accounting packages, staff needs constant and continuous training by the
authorized dealers of the packages so that they remain well acquainted with the
knowledge and experience of the package.
it is important to constantly appraise the staff to
check which staff is failing the system as regards reporting unbiased financial
The computerized accounting system is prone to fraud
in cases where physical cash is involved. Without internal audit reviews, there
may arise cases of teaming and lading fraud that may pass unnoticed.
Computerized Accounting system is expending all over
the world and in large multiplatform companies it is innovated so far. As the
need for more advance, more organized and systematic computerized accounting
system is required to handle the large company information and daily base data
entries, this system is rapidly innovating and require more technology.
As the day
passing, new advance software are launching and it has a large scope in future
to be more innovative.