Name: Aisha Iman Mohamed
Faculty of BBA
Department: Accounting and Finance
Course: Computerized Accounting
Assignment: Compare Computerized Accounting and Traditional Accounting
Assignment One
Lecturer: Mr. Orshe
Decline: 24/01/2021
Introduction to Computerized Accounting and Traditional Accounting
History of Computerized Accounting Systems
Till 1970th-80th the most common used system in accounting was “general ledger”. It was a book
with assigned pages for each account, such as cash, receivables, payables, stockholder equity.
Everyday transactions were entered by hand into a journal. After each transaction entry had to be
posted in a proper general ledger account on the assigned page (Hous). Next step was an input of
the numbers from general ledger into financial statements and preparing tax returns. All these
processes where inefficient, slow, and manual. Even a minor mistake or inaccuracy in these
processes led to long time spent for recalculations (Hous).
DEFINITION OF COMPUTERIZED ASSOUNTING
computerized accounting system consists of software designed to track all of your
company's accounting transactions, with the goal of producing financial output for
monthly reports, annual financial statements, tax return information and other report
configurations used to analyze your company’s operations, efficiency and profitability.
HISTORY OF TRADITIONAL ACCOUNTING
`traditional' accounting history research methodology is defended against three criticisms made
by Miller and Napier (1993) in the course of their advocacy of an alternative form of research
characterised as genealogies of calculation. The first criticism is directed at the domain of
accounting history research and is based on two claims: that the domain has been restricted to
double-entry bookkeeping, and that it cannot be clearly delineated. The first claim is rebutted on
the grounds that it involves special pleading and confuses the practice and methodology of
research. The second claim is shown not to pose a problem of methodology.
DEFINTION OF TRADITIONAL ACCOUNTING
Traditional accounting (also known as “accrual basis” accounting) is a kind
of accounting that calculates your profits based on when you send invoices or
when you receive them – regardless of whether you actually received or spent
money.
IMPORTANCE OF COMPUTERIZED ACCOUNTING
Computer is an important part of an accounting system. Computerized accounting systems are important
to business in various ways. Computers 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.
1) Time and cost savings
2) Organization
3) Storage
4) Distribution
5) Management reports
6) Regulatory Compliance
IMPORTANCE OF TRADITIONAL ACCOUNTING
traditional accounting system, each transaction is entered as a debit, as well
as a credit in two separate accounts. This not only helps users eliminate data
entry errors but also helps companies save time and money against
devastating business mistakes.
ADVANCES OF COMPUTERIZED ACCOUNTING
(i) Faster Processing: Computers require far less time than human beings in
performing a particular task. Therefore, accounting data is processed faster
using a computerized accounting system.
ii) Easy Availability of Information: The data can be made available to different
users at the same time. This is called data sharing.
DISADVANTAGEDS OF COMPUTERIZED ACCOUNTING
(i) Heavy Cost of Installation:
Computer hardware needs replacing and software needs to be updated from
time to time with the availability of newer versions.
(ii) System Failure:
The danger of a system crashing due to some failure in hardware can lead to
subsequent loss of work. This occurs when no back-up is retained.
ADVANTAGES OF TRADITIONAL ACCOUNTING
1. System Errors
One major advantage of a traditional accounting information system is avoiding data system
errors and file corruption. Most users don’t fully understand how computer systems store data
which is why opening the wrong file or encountering errors can ruin current data accountant’s
need to properly perform their job functions. With a traditional accounting system, a single file is
used for each account eliminating any confusion users might have with a system that offers
similar versions of the data.
2. Error Improvement
When it comes to a traditional accounting vs modern accounting system, a traditional accounting
system offers the ability for double-entry, which provides a way for users to eliminate data entry
errors. With a traditional accounting system, each transaction is entered as a debit, as well as a
credit in two separate accounts. This not only helps users eliminate data entry errors but also
helps companies save time and money against devastating business mistakes.
3. Always Available
Another huge benefit of a traditional accounting system is that when the power or internet goes
out, this won’t prevent users from accessing and working on account data. For any company that
needs to be able to access their account data, no matter what’s going on with the local power or
internet, a traditional accounting system will fit their needs best.
DISADVANTAGES OF TRADITIONAL ACCOUNTING
1. Data Entry Errors
While a traditional accounting system seeks to improve data entry errors with its multiple entry
processes, data entry errors are still much more likely with a manual system. With a traditional
accounting system, users are forced to enter data twice which is labor-intensive and time-
consuming. With an automated accounting system, though, users do not need to spend so much
time entering data and the system can help them find and eliminate errors before they become a
major issue for the company.
2. Loss of Hard Copies
Every business knows that it’s important to keep a hard copy of all important data, in case a
system error occurs and all data is deleted from the system. With a traditional accounting
information system, companies must keep a physical copy of the data, which can easily be stolen
or destroyed in a fire or flood. With an automated accounting system, though, users can store
hard copies of their data in the cloud which cuts down on time and cost of having to store
physical copies off-site in destruction-free facilities.
3. Cost
A major disadvantage of a traditional accounting system is how expensive it can be. Completing
accounting tasks with a traditional accounting system takes lots of time and is labor-intensive.
An automated accounting system not only saves users time that could be spent on making the
business more successful but also saves the company money. While a traditional accounting
system is less expensive as far as up-front cost is concerned, in the long run, an automated
accounting system is much less expensive and time-consuming while at the same time being
much safer to store critical business data.
CONCLUSION
you would have realized that although computerized accounting systems are labour -saving, it is not
without disadvantages. An accountant is not made redundant with the introduction of computerized
accounting but his job scope is redefined such that he is able to add value to the managing of the
organization concerned.