Automation,Manual &

Computerised Accounting
And their process, merits, demerits, advantages and limitations.
What is an Automated Accounting System?

• Definition:
• An automated accounting system is an information system that
allows the collection, storing and processing of financial data that are
used by decision-makers in businesses.

• To break down this definition in practical terms, an automated

accounting system exists to automate the processes that take up a lot
of time and are repetitive.
• Automated Accounting is AI-driven, which allows processing documents such as:
1.Source documentation (invoices, receipts, credit card slips)

2.Bank Statements

3.Payslips

• All these labor-intensive tasks will become a thing of a past.

• Some have referred to automated accounting as Smart Accounting or AI Accounting.

No matter how you say it automated accounting is exciting and is here to make your
life easier.
• By processing these source documents, it will be quicker and easier than ever before to
cproduce financials such:
1.Trial Balance

2.Income Statement

3.Profit & Loss Statement

It is predicted by 2020 all tasks related to tax preparation, payroll, audits, and banking will
be fully automated.

The process by which automated accounting system is used by an entity to calculate and
manage the accounts of the client is known as computerized medium of accounting.
Differentiation Between Computeerised and
Manual Accounting Process

• Given below is a scenario every accountant has to face:

• The image above shows the scenario of the timely task of getting hold of a
client to query regarding a source document while papers are being piled
on the desk. This scenario can be dealt with by using either the manual or
the automated accounting process.

• There are different stages / boundaries that each process have that demand
to be followed in order to achieve optimal results. They are drastically
different in size, excecution, time and efficiency that produce results in
inexplicably different manners.

• An aspiring accountant must identify the benefits and risks, and judge
which medium is better for integration of accountancy.
• Here is a graphical example of the manual accounting process that exists today:
• The process can be divided into 6 boundaries:

• Recieval of the documents from client

• Arrangement of documents in a particular order

(Chronological/Magnitude/other methods) for scanning.

• Scanning of documents.

• Saving of documents and rearrangement into folder in computer.

• Input of client’s accounting details into pre-existing accounting

system.
• Start preparing bookkeeping entries for proper recording of
day – to – day business transactions of the client.

• Reconcilation and balancing of bookkeeping entries.

• Comparatively, here is a graphical example of an automated accounting
system developed in recency:
• There are just 3 processes to be followed here:

• Recieval of the document (Any means permitted; whether it be mail, fax or

any other digital facility).

• Since the automated system is already coded and is stored with accounting
information, only entering the accounting information is enough for the
system to start calculating and managing the accounts of the client.

• For example, chronological recording of sales, purchases of assets, revenue,

expenses, etc. are all calculated on – the – dot by the automated system.

• Finally, bookkeeping entries are recorded and accounts are

maintained/determined.
 Comparative Chart

Basis Of Comparison Manual Accounting Computerised Accounting

Recording Recording is possible through book Data content is recorded in

of original entry. customized database.

Calculation All the calculation is performed Only data input is required, the
manually. calculations are performed by
computer system.

Speed Slow Comparatively Faster

Adjusting Entries It is made for rectification of errors Error rectification not passible

Backup Not Possible Possible

Trial Balance Prepared When Necessary Instant T/B provided on daily basis

Financial Statement It is prepared at the end of the It is provided at the click of button.
period, or quarter.
Advantages of Computerised Process Of
Accounting:

• here are the advantages of automation written below:

• 1. Less Time - Machines makes the work easier, and in less time also.
People in different factories generally package the material with machines
only its a because it makes faster in comparing with a normal human being.

• 2. Production - Once you buy a machine it will give you a good productivity
comparison to a human being, because it takes less time and it makes the
work faster so that you can get the more and more or output the less time.
• 3. Lack Of Error - Human error means a mistake which is done by human
being and it is quite common also because no one is perfect, but if you do
that work with machine there will be no error at all,  all the products will be
fully completed and furnished.

• 4. Safety – Machines also increases the safety of a  person, as most of the

work is done by the machine only so less human work is there, so it
increases the safety of a person.

• 5. Cheaper - Earlier when there was more human work so the

production was less, and the products were also costlier. But when the
system of machine came production increases day by day. And it also
makes profit.
Disadvantages Of Computerised Process Of
Accounting:

• 1. Pollution - Using machines will definitely increases pollution as it

produces harmful gases which decreases air quality, and are harmful to
nature through e – waste as well. The government, sensing this, has appealed
for a reduction in reliance on this mode of accounting, leading to doubts
about the sustainability of this medium.

• High Cost of Installation - The cost of the Computer and its accessories are
costly. Computer hardware requires lots of maintenance, repair and software
need subscription fees. After some time of purchasing a system, its new
version comes into the market and makes the old system become outdated.
• Training Cost - Operating a computer is not an easy task. A person needs to be well
trained and skilled to use a computer. Knowledge of accounting software is also
necessary to do accounting.

• Maybe Hacked - In today’s era, it is easy to hack someone’s security system. Viruses
and Malware can be entered into the system by hackers that cause danger to data. New
generation computer comes with strong security it can combat this problem

• Time-Consuming - Once there is any default in the system it takes a lot of time and
effort to restore the system. Sometimes computers work slow due to weather and
require air-conditioned room to work properly.

• Health Issues - It puts a lot of strain on the eyes. also excessive use of computers leads
to muscular pain which results in inefficiency and higher health expenses to the
employees.