KAMPALA INTERNATIONAL UNIVERSITY

COLLEGE OF ECONOMICS AND MANAGEMENT

COURSE UNIT : Computerized Accounting

YEAR : Two

SEMESTER : Two

SESSION : Weekend

LECTURER : Mr. Kasozi Geofrey

NAME

NO. NAME ADMISSION/REG SIGNATURE

NUMBER
1 PITUWA EMMANUEL 2021-08-06739

2 KYARIKUNDA MOREEN 20221-08-05690

3 AGASHA ELIZABETH 2021-08-95677

4 KATUSIIME BRENDAH 2021-08-05320

5 KIRUNDA ARAMAZAN SSALI 2021-08-05357

6 OGOLA ALUKA PAUL 2022-08-12090

7 NAMUGENYI SYLVIA 2021-08-07022

8 SENTALA CHARLES 2021-08-05331

9 NANKINGA RACHEAL 2021-08-06741

10 NAGITA JACKIE 2021-08-06742

11 WACHAMBE CAUTHARA 2021-04-04126

12 AMANYIRE PRIMA 2021-08-07450

Question 3.

The I formation content of reports generated by computerized accounting system is accurate and therefore
quite reliable for decision-making. In a manual accounting system, the reports and information are likely
to be distorted, inaccurate and therefore cannot be relied upon. On the contrary, online transactions have
had challenges of cyber-security, hacking into organization systems, increased development of forensic
accounting, money laundering, among others.

Assume, You are the Director of Finance in any Financial Institution of your Own choice, Write a
Report to be presented to the Board of Directors, On how you propose to shift away from the
manual accounting system to a computerized system bearing all the information Technology
challenges some of which have been highlighted above. Indicate all the security precautions you
will take to guarantee excellence of services, such as managing all ATMs countrywide.

Question 5.

Integrated Financial Management system(For Local and Governments) and Enterprise Resource
Planning(ERP for Private Organizations) systems are rapidly overtaking the Use of accounting packages
in operations despite the usefulness of the packages. Organizations are now shifting into the syndrome
of developing their customized accounting systems that can ably meet all Organizational requirements
efficiently at ago.

How best can all these systems be integrated for effective and efficient output deliverables in
organization especially in producing accurate and reliable financial reports?
 A REPORT ON HOW TO SHIFT FROM MANUAL ACCOUNTING SYSTEM TO
COMPUTERIZED ACCOUNTING SYSTEM

Accounting, by definition, is the process of identifying, recording, classifying, and summarizing financial
transactions to produce the financial reports for their ultimate analysis.

Shifting from Manual Accounting System to Computerized accounting system involves various
Procedures but first it requires understanding Manual Accounting system and Computerized accounting
system and why its important to shift from the manual accounting system to Computerized accounting
system.

Manual Accounting System

Manual accounting implies that employees perform the whole accounting cycle manually periodically
(Arcega et al., 2015). A manual accounting system is a system, which uses individual journals to
streamline the journalizing and posting procedures (Ndubuisi et al., 2017).

Manual Accounting, as the name signifies, is the paper-based accounting system, in which journal and
ledger registers, vouchers, account books are used to store, classify, and analyse financial transactions of
an organization. It is often used by small businessmen, such as sole proprietors, shopkeepers, etc. to
maintain the record of the business transactions, due to lower cost.

One of the advantages of the manual accounting system is its easy accessibility. It is also characterized
by confidentiality, which makes the sensitive information hacking free. Nevertheless, manual accounts
can only be prepared correctly if the accountant possesses good knowledge of bookkeeping and
accounting.

Computerized Accounting

Computerized Accounting can be described as the accounting system that uses the computer system and
pre-packaged, customized, or tailored accounting software, to keep a record of financial transactions and
generate financial statements, for analysis.

Differences Between Computerized Accounting and Manual Accounting System

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, all the calculations, that’s to say 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 method, if there occurs an error while entering and posting the transaction
in the books of accounts, then adjustment entries can be passed, for getting accurate results. Moreover,
adjustment entries are also made to comply with the matching principle, i.e. the expenses of the
accounting period should match the respective revenues. On the other hand, in computerized accounting,
to comply with the matching principles journal and vouchers are prepared, but adjustments entries are
not passed for rectification of error unless the error is an error of principle.

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.

As the Director of Finance of Sourire Children’s Village, We have been using Manual Accounting system
for a long time with advantages as stated below;

Advantages of Manual Accounting System

• lower upfront cost less than complex accounting software and are relatively easy to use.
• New or small businesses may not have many financial entries to make and, therefore, their
accounting needs are simple.
• Another advantage of using a manual accounting system is that you can always open up the book
and gain instant access to your records.
• There is no delay due to power or Internet outages, and there are no risks of sensitive information
being hacked online.

Despite the Above Advantages, we have also experienced Limitations to this kind of Accounting System
in Sourire Children’s Village.
Why Shifting from Using Manual Accounting System.

Its Time Consuming. Using Manual Accounting system processes that use paper journal and
ledgers or similar tools requires a lot of time to complete tasks. Accountants will need to locate accounts
and journals in the system prior to recording entries. Checking account balances and reviewing
information is also difficult. Accountants may also need to rifle through multiple documents to locate
information requested by executives. Copying this information can also be difficult hence a need to shift
from this form of accounting system.

Its subject to errors. Errors can be quite frequent in manual accounting processes. Common
errors are entering information into incorrect accounts, transposing figures or recording information
backwards. While these errors are also in modern accounting systems, manual systems have no internal
checks and balances. Accountants researching errors will often spend several hours to locate and correct
entries. Multiple accountants working in several manual accounting ledgers can exacerbate these
problems hence our desire as Sourire to shift to computerized Accounting System.

There is lack of security. A lack of security is another common disadvantage we have faced in
manual accounting. Companies may be unable to prevent employees from reviewing sensitive data in
paper ledgers and journals.

Large organizations often find manual accounting difficult due to the lack of multiple ledgers and
journals. As our Business is growing Rapidly, we also need to shift to adopt to new accounting systems
to be able to handle multiple data and Ledgers hence shifting to computerized accounting.

Manual systems put pressure on people to be always correct in all details of their work, the
problem being that people aren’t perfect, however much each of us wishes we were. With manual systems
the level of service is dependent on individuals, and this puts a requirement on management to run
training continuously for staff to keep them motivated and to ensure they are following the correct
procedures. This is very costly for Sourire Children’s Village hence our Desire to shift to Computerized
accounting.

It takes more effort and physical space to keep track of paper documents, to find
information and to keep details secure. When mistakes are made or changes or corrections are needed,
often a manual transaction must be completely redone rather than just updated. With manual or partially
automated systems information often must be written down and copied or entered more than once.
Systemization can reduce the amount of duplication of data entry.

Another impact of manual systems is on Customer service. Customer queries can be difficult
to respond to as information is stored in different places and may even require that you find the right
person before being able to respond. This is no good if they are out to lunch or only work part time.

The above Reasons have pushed us as Sourire Children’s Village to Shift from Manual Accounting
System to Computerized accounting System.

Why Computerized Accounting System?

The Reason why we should Shift to Computerized Accounting System are numerous and we love to call
all the board to adopt this system due to these Reasons stated below;

Speed: Accounting data is processed faster by using a computerized accounting system than it is achieved
through manual efforts. This is because computers require far less time than human beings in performing
a task.

Accuracy: The possibility of error is eliminated in a computerized accounting system because the
primary accounting data is entered once for all the subsequent usage and processes in preparing the
accounting reports. Normally, accounting errors in a manual accounting system occur because of repeated
posting of same set of original data by several times while preparing different types of accounting reports.
This is eliminated by the organization using Computerized accounting System.

Reliability: The computer system is well-adapted to performing repetitive operations. They are immune
to tiredness, boredom, or fatigue. As a result, computers are highly reliable compared to human beings.
Since computerized accounting system relies heavily on computers, they are relatively more reliable than
manual accounting systems.

Up-to-Date Information: The accounting records, in a computerized accounting system are updated
automatically as and when accounting data is entered and stored. Therefore, latest information pertaining
to accounts get reflected when accounting reports are produced and printed.

Automated Document Production : Most of the computerized accounting systems have standardized,
user defined format of accounting reports that are generated automatically. The accounting reports such
as Cash book, Trial balance, Statement of accounts are obtained just by click of a mouse in a computerised
accounting environment.

Scalability: In a computerized accounting system, the requirement of additional manpower is confined

to data entry operators for storing additional vouchers. The additional cost of processing additional
transactions is almost negligible. As a result, the computerized accounting systems are highly scalable.

Legibility: The data displayed on computer monitor is legible. This is because the characters (alphabets,
numerals, etc.) are type written using standard fonts. This helps in avoiding errors caused by untidy
written figures in a manual accounting system.

Efficiency: The computer-based accounting systems ensure better use of resources and time. This brings
about efficiency in generating decisions, useful information’s and reports.

Quality Reports: The inbuilt checks and untouchable features of data handling facilitate hygienic and
true accounting reports that are highly objective and can be relied upon.

Storage and Retrieval: The computerized accounting system allows the users to store data in a manner
that does not require a large amount of physical space. This is because the accounting data is stored in
hard-disks, CD-ROMs, floppies that occupy a fraction of physical space compared to books of accounts
in the form of ledger, journal, and other accounting registers. Besides, the system permits fast and
accurate retrieval of data and information.

From the Above Advantages of using Computerized accounting System, we call us to adopt the Shifting
from Manual to a new system.
HOW TO SHIFT FROM MANUAL ACCOUNTING SYSTEM TO COMPUTERIZED
ACCOUNTING SYSTEM.

Shifting from manual accounting system to computerized accounting system involves a number of
procedures such as;

i. Deciding to shift from Manual to Computerized accounting System.

ii. Selecting the Appropriate Accounting software packages.
iii. Analyzing your Present accounting System.

Decision to Shift to Computerized Accounting System. As mentioned before, there are various
advantages to shifting to Computerized and few of maintaining the manual accounting that we have been
using. The First step towards changing the accounting system is for the Board to make a decision to
change the accounting system. If the decision has been made to convert from a manual system to a
computerized one, the next step is to choose the software package best suited for your business.

Selecting the Appropriate Accounting Software Packages. This is the Next stage in shifting from
Manual accounting system to a computerized accounting system. There are many accounting packages
that one can select from. Among these include, Quick Books, Tally, FreshBooks, Pastel, etc.

These Accounting Software’s Packages may be classified as High-End or Low End Packages. The best
accounting software is dependent on the choice made by the Business.

Factors to consider when Choosing the Best Accounting Package.

Analyze Your Present System. The first step in selecting a software package is to carefully
examine your present system and list the requirements you need in your accounting system. Such
requirements might include file capacity. An accounting package which can accommodate 200 account
receivable files will not be adequate if your business has 300 accounts receivable customers. Decides on
the file capacity you need for general ledger accounts. Account receivable and accounts payable accounts,
employee records, and inventory items. Not only should present file needs be considered. But also, those
for the foreseeable future.
Hardware Limitations. Before you purchase a package, you must make sure that it will work
with your computer hardware ( if you already own a computer system). The Hard wire Requirements
such as RAM, Hard disk space, and the Processor Speed should all be considered before purchasing a
software package.

Cost. The cost of software packages varies greatly. The organization should consider purchasing
a software which is cost effective and good in quality as well. As this will be able to express the quality
of the software. Not all very expensive software are of high quality. The cost of a package should be
viewed as more than the initial purchase price of the software. You must also consider the cost of training
employees.

Customer Support (after sales services). Most packages offer customer support. Good customer
support is a very valuable part of a software package. Support can come from both the company which
produced the software and the dealer who sold the package to you. Some dealers offer help in setting up
the new system and in training your employees. These services can ensure that conversion is swift and
significantly easier.

Documentation. One of the most important factors in your purchase decision should be the
quality of the documentation supplied with the software packages. Easy to read and understand
Instruction Manuals should be provided when purchasing a software.

Controls. Any package you consider should be examined to ensure that it has adequate controls
to help prevent errors. For example, QuickBooks accounting packages will not allow you to enter a
journal entry unless it balances(debits equal credits).

Reference. Just as you would check on the references of a potential employee, so should you
carefully check the references of any accounting packages you are considering? Ask the software dealer
to provide you with the names of customers who have been using the package.

The Above is are the how to shift from manual accounting system to computerized accounting
system.

Despite the Above, there are also some limitations to computerized accounting system. These Include;

Limitations of Computerized accounting system

Cost of Training: The sophisticated computerized accounting packages generally require specialized
staff personnel. As a result, a huge training costs are incurred to understand the use of hardware and
software on a continuous basis because newer types of hardware and software are acquired to ensure
efficient and effective use of computerized accounting systems.

Staff Opposition : Whenever the accounting system is computerized, there is a significant degree of
resistance from the existing accounting staff, partly because of the fear that they shall be made redundant
and largely because of the perception that they shall be less important to the organization.

Disruption: The accounting processes suffer a significant loss of work time when an organization
switches over to the computerized accounting system. This is due to changes in the working environment
that requires accounting staff to adapt to new systems and procedures.

System Failure: The danger of the system crashing due to hardware failures and the subsequent loss of
work is a serious limitation of computerized accounting system. However, providing for back-up
arrangements can obviate this limitation. Software damage and failure may occur due to attacks by
viruses. This is of relevance to accounting systems that extensively use Internet facility for their online
operations. No full proof solutions are available as of now to tackle the menace of attacks on software by
viruses.

Inability to Check Unanticipated Errors: Since the computers lack capability to judge, they cannot
detect unanticipated errors as human beings commit. This is because the software to detect and check
errors is a set of programmes for known and anticipated errors.

Breaches of Security: Computer related crimes are difficult to detect as any alteration of data may go
unnoticed. The alteration of records in a manual accounting system is easily detected by first sight. Fraud
and embezzlement are usually committed on a computerized accounting system by alteration of data or
programmes. Hacking of passwords or user rights may change the accounting records. This is achieved
by tapping telecommunications lines, wiretapping or decoding of programmes. Also, the people
responsible for tampering of data cannot be located which in a manual system is relatively easier to detect.

Effects on Health: The extensive use of computers systems may lead to development of various health
problems: bad backs, eyestrain, muscular pains, etc.

SECURITY PRECAUTIONS OF COMPUTERIZED ACCOUNTING SYSTEM

These are the Precautions we shall put into place to ensure that the computerized accounting system is
Secure and free from any form of Disadvantages.
 Password. One of the simplest and most effective ways to prevent a hack is to frequently change
the password to your PC and your accounting system. This should be done with regularity and each time
you should use a new, unique and complex password (e.g. containing capital and lower case letters,
numbers and special symbols, at least 8-12 characters long). We shall ensure that we protect our
computers with passwords.

Keeping all Login Details secure. Do not share your log-on credentials with anyone and NEVER
email or text passwords! Do not write down your user name and password unless you keep it under lock
and key as required by the Document protection precautions.

Shredding all Documents. We shall Shred all documents that contain sensitive information, be
it financial or human resources related. This information can be used to hack our accounting systems.

Screen locks on your computers. We shall Set up our computers so that after a certain length of
time the system automatically locks the PC and requires a password to re-access. This is secure as most
government Online system uses this form of protection. For example, URA, NSSF and EFRIS.

Physical Safety. This requires not leaving your Accounting system in a place which is exposed
to the public and can easily lead to loss of confidentiality. Ensure that your computer is located in a very
secure place.

By Use of Firewall. If your computer is attached to the internet or other computers, make sure to
use a firewall to keep it safe from intrusion.

By Using Virus Protection and Keeping it up to date. Most virus software can be set to
automatically update. Keep all machines on your network protected and up-to-date with the latest virus
signatures. This helps in ensuring that the accounting systems are safe from any online viruses such as
Trojan Horse.

By Using a Virtual Private Network (VPN). Accessing the accounting system remotely, be sure
to use a VPN so all data is encrypted. This helps to avoid other users from accessing or Decrypting the
data stored on the Computer. An example of this is the system of ATM machines that use encryptions.

By Limiting outside medias. Outside medias such as Flash Drives, External Hard can be used to
spread viruses or malware. This can damage the Accounting system as precaution needs to be taken.
 By Limiting access. As simple as it may seem, be sure to limit access to your accounting system.
Make sure that anyone who uses the system has a business need and limit their access to only those areas
that are relevant to their job function.

By Keeping good backups and testing them regularly. Backing-up accounting systems. Those
back-ups should be kept in a safe, secure off-site environment. If they are backed up to the cloud, be sure
their infrastructure and security practices are very safe.

Inconclusion.

Manual accounting system is good for small business and as the business grows like this one of Sourire
Children’s Village, it requires that computerized system be adopted to record the bulk transactions but
above all to produce a report that shows the true and fair view of the Organization.
Question 5.

Enterprise resource planning (ERP) is a type of software system that helps organizations automate and
manage core business processes for optimal performance. ERP software coordinates the flow of data
between a company’s business processes, providing a single source of truth and streamlining operations
across the enterprise.

A financial management system (FMS) is the software used by organizations to manage financials —
including income, expenses, and assets. It integrates and consolidates all financial operations, data,
processes, and procedures within a single, centralized platform.

An example of IFMS include SAP Financials, Oracle Financials and Microsoft Dynamics. These systems
Help organizations manage their finances by integrating Financial Management processes such as
Budgeting, Accounting and Reporting.

Custom accounting system is a tailor-made software program designed to address your business-specific
accounting needs, such as cash flow tracking, tax calculation, internal auditing, financial transactions,
invoicing, reconciliation, business analysis, reporting, and more.

How Best can All the Above systems be integrated for Efficient and Effective output of Deliverables
especially in Producing Accurate and Reliable Financial Reports.

By managing Income, Expenses and Assets in an Organization. For Efficient and Effective output
Deliverables, the accounting system must be able to record incomes, expenses, Liabilities and also be
able to manage all the fixed asset requirements. The Accounting system that is able to manage all the
above is able to produce a reliable financial statement in form of Statement of financial position, Financial
performance.

Through Supporting Daily Financial Operations. The Purpose of financial management system is to
maximize profits and ensure Long Term Enterprise Sustainability. Customized accounting systems such
as Manager in property management helps the organization in providing efficient Reports to the stake
holders on the daily operations of the organization.

Integrated Accounting Systems should offer both core and non-core Feature modules that will help in
efficient and effective Output Deliverables of Financial Reports. Therefore, every Customized and
Integrated accounting system as stated above must have the following for Efficient and Effective output.
Ability to Record Accounts Receivables and Accounts Payables. For best output, an accounting
system should have the ability to record accounts receivables so that Debtor reports can be efficiently
Generated and the Liabilities that the company has are also easily tracked. Therefore, the above systems
can be integrated by adding the Accounts receivables and payables ledgers for financial reporting.

Through having the ability to Perform Bank Reconciliations. Bank Reconciliation is a document that
compares the cash balances of a company’s balance sheet to the corresponding bank balances. Therefore,
the Accounting system should have the ability to perform Reconciliation in order to produce efficient and
effective banak and cash Balance Report on a monthly basis.

By having the Ability to generate the General Ledger. A general ledger represents the record-keeping
system for a company’s financial data, with debit and credit account records validated by a trial balance.
It provides a record of each financial transaction that takes place during the life of an operating company
and holds account information that is needed to prepare the company’s financial statements. Transaction
data is segregated, by type, into accounts for assets, liabilities, owners’ equity, revenues, and expenses.
Therefore, all accounting systems should be integrated to have General Ledger for efficient and effective
output deliverables.

Should be able to Generate Purchase Orders. Every accounting package should be able to generate
purchase orders so that it’s very easy to deal with customers who place orders for the purchase of the
company goods.

Ability to Carry out Stock Inventory. One of the core modules of any accounting system is the ability
to perform stock taking and above all carry out Stock Inventory. This information is very useful i9n
preparing the Balance sheet of the organization that is used to show the Financial position of the
organization at a given date. Therefore all the systems can be integrated by adding in the stock Inventory
Icon for efficient and effective output deliverable of accounting Information.

Ability to Perform Billing and Bookkeeping. Billing is defined as the step-by-step process of
requesting payment from customers by issuing invoices. the importance of Billing in the Business are
helping in Inventory Tracking, Accurate book Keeping, Generating valuable insights and also acts as
Legal Evidence that a transaction took place. Hence every accounting system should have the ability to
perform the billing and Bookkeeping purposes for efficient and effective Output Deliverables.
on-core modules are optional; examples include electronic payment processing, debt collection, payroll
and time sheet management, departmental accounting and support for multi-currency or value-added
taxation. Some systems can also be connected with enterprise resource planning (ERP), inventory
management and customer relationship management (CRM) systems.

Benefit of Integrated Accounting Systems

• A key benefit of an integrated accounting system is that information is entered once and shared
with other modules, including the general ledger.
• One information database is used and accessed by all applications. Not having to re-enter data
from one system to another reduces the likelihood of human error.
• Eliminates the need to reconcile various ledgers and functions, which update automatically and
in real time.

Inconclusion,

This means the financials are always up-to-date and that sophisticated accounting operations, such as job
costing and commission calculation, are performed automatically just by processing the orders.
Additionally, maintaining one set of accounts avoids duplication of efforts and provides decision-makers
with accurate information in a timely manner.
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