When you run a business, you need to record, process and present the financial transactions that have taken place. Also, you should use those financial records to generate financial statements which can help the users of those statements to make decisions. So, how can you record the transactions and generate the financial statements?
A traditional way of recording business transactions is to do the accounting manually. An accountant will do so by using registers, vouchers, account books (Also see Facts About Books of Account) and so on. As the technology continues to develop, nowadays, the accountants all around the world, including the accountants from an accounting firm in Johor Bahru, can enjoy the speed, convenience and accuracy that computerised accounting has brought to us.
No matter whether you are doing the accounting tasks manually or by using a computerised system, the accounting principles, concepts and convention that you need to follow are the same. The only difference is the way you use, where manual accounting uses papers and pens, while conputerised accounting utilises internet, software and computer to key in the business transactions electronically.
In manual accounting, the accountants will record the business transactions by using book of original entry. Then, they need to perform the calculation manually. As against, they will record the data in a customised database if they use the computerised accounting. Then, the computer system will perform the calculations for them. Thus, obviously, time required to complete the accounting (Also see The Accounting Estimates That the Accountants Use) tasks using computerised system will be significantly shorter than the time required for manual accounting.
Another advantage of using computerised accounting is that the business owner (Also see Poor Accounting Practices That Business Owners Should Avoid) will be able to get the trial balance of his company almost instantly. However, if the company does the accounting tasks manually, it will only be able to prepare trial balance when necessary. Also, the accountants can generate the financial statements very quickly if they use the computerised system. For a company that implements manual accounting, the accountants will prepare the financial statements at the end of a quarter or an accounting period.
Although manual accounting (Also see Do You Know What Are Accounting Controls?) can be time-consuming and inconvenient, it ensures the confidentiality of the data as it is not exposed to the risk of being hacked. However, a major downside is that errors are likely to occur if a company implements manual accounting. The accountants may omit a transaction accidentally or record a wrong amount for a transaction when posting the entries. On the contrary, computerised accounting helps in minimising such risks.