| As many professional accountants and auditors | | | | environment, risk assessment, monitoring, |
| state - accounting is a language of business | | | | information and communication, which are |
| which is accepted in all developed and | | | | assessed separately and put together a single |
| developing countries. | | | | rate of organization's performance. Control |
| | | | environment means the way of organization's |
| Every company applies accounting because it | | | | internal control - which manager controls the |
| is generally accepted that companies have to | | | | employees, how and whom does that manager |
| reveal certain financial and management | | | | reports next about the plan performance etc. |
| information to the government and public | | | | Risk assessment implies measures to determine |
| users and of course because accounting is | | | | all the potential risks in advance, their |
| indispensable tool in business | | | | causes, probabilities and counter-measures to |
| decision-making process. With the | | | | avoid and manage them; how can those risks |
| development of information technologies there | | | | influence company's performance and financial |
| were developed many computer products | | | | state; how to minimize the costs of facing |
| (software) that make accounting as easy as | | | | financial risks etc. Monitoring implies |
| ABC for those who uses them. From this point | | | | quality control of company's operations and |
| accounting can be divided into two basic | | | | personnel. Information and communication |
| categories: those which apply manual | | | | element means the control over communication |
| accounting and those which prefer | | | | flow and the quality of information flow |
| computerized accounting systems. This paper | | | | within the organization in order to minimize |
| is targets the main features of manual and | | | | the time of communication and information |
| computerized accounting, their benefits and | | | | losses. Internal control procedures allow to |
| shortcomings, and their comparison. | | | | keep companies' assets from dissipation and |
| | | | control productivity and usefulness of all |
| From the accounting theory it is known that | | | | departments. |
| accounting cycle includes the following | | | | |
| steps: journalizing the transactions, posting | | | | Buy custom essays |
| them to ledger accounts, preparing trial | | | | |
| balance, making adjustment entries, preparing | | | | Let's return to the main issue of the paper. |
| adjusted to end-of-period trial balance, | | | | Manual accounting implies that employees |
| preparing financial statements and | | | | perform the whole accounting cycle manually |
| appropriate disclosures, journalizing and | | | | on a periodic basis: they calculate trial |
| posting the closing entries, and preparing | | | | balances, journalize transactions, prepare |
| after-closing trial balance at last. From the | | | | financial statement reports and other |
| first look it is not very difficult and it is | | | | routines. Of course it takes much time, |
| so indeed, but when there are thousands or | | | | resources and effort in large organizations. |
| millions of transactions the situation | | | | Computerized accounting implies that the only |
| dramatically changes. Lots of transactions | | | | thing that employees do is recording |
| that must be processed in the accounting | | | | transactions into the computer which |
| cycle make this process routine and even a | | | | processes the other steps of accounting cycle |
| little mistake or inaccuracy can cause all | | | | automatically or by a request. But this is a |
| the cycle from the very beginning in order to | | | | very simplified view on the computerized |
| find and correct the mistake. So as to shed | | | | accounting because transaction is a complex |
| some light on the matter lets examine | | | | category which includes not only sales or |
| accounting cycle more thoroughly. | | | | acquisitions, but depreciation, premiums and |
| | | | wages calculation, dividends etc. So |
| Buy custom written essay & term paper | | | | computers provide accurate calculations and |
| | | | smart reports but it takes much time, |
| Every transaction (event that change the | | | | resources and effort too and it's difficult |
| financial resources or obligations of the | | | | to assess which accounting type is more fast |
| company) must be recognized, classified and | | | | and economic. If manual accounting requires |
| documented; in addition there must be | | | | qualified accountants to keep a record of |
| corresponding accounts identified and | | | | business transactions, computerized requires |
| changed. The transactions are recorded in | | | | accountants which can use specific software |
| appropriate journals (general journal, sales | | | | and thus they cost more. Computer software |
| journal etc) with transaction data, affected | | | | calculates faster but it does not know what |
| accounts' titles, debit and credit of each | | | | you need until you can clearly explain what |
| affected account and explanation specified in | | | | exactly you need. In addition good |
| the journal record. The above procedure is | | | | computerized accounting system can cost |
| used for each transaction. All the journal | | | | thousands and even millions dollars, |
| records must be posted to the ledger on a | | | | depending on the complexity and the size of |
| periodic basis (daily or weekly), which is a | | | | organization. Computerized accounting |
| group of accounts put together and classified | | | | provides better internal control report |
| (assets, liabilities, revenue, expenses and | | | | system for any given period of time (computer |
| equity) - in other words general ledger | | | | can control thousands indicators |
| summarizes all the transactions within a | | | | simultaneously and create notifications to |
| period of time. In addition there is a | | | | the appropriate departments or workers if |
| subsidiary ledger can be used, which is a | | | | some indicators do not correspond to the |
| more detailed source, where individual items | | | | normal state), while manual control takes |
| comprised (inventory, accounts payable and | | | | more time. |
| accounts receivable). General ledger contains | | | | |
| controlling accounts which summarize the | | | | Among the advantages of manual accounting |
| content of subsidiary ledger. | | | | there are: comparatively cheap workforce and |
| | | | resources, reliability, independence from |
| At the end of accounting period with the help | | | | machines, skilled workers availability; the |
| of general ledger there is a trial balance | | | | disadvantages include: reduced speed, |
| calculated to make sure that debit and credit | | | | increased effort of accountants, relatively |
| are in balance (if they are not equal it | | | | slower internal control reporting, routine |
| means that there is an error somewhere). Then | | | | work and some others. |
| there must be appropriate adjustments made | | | | |
| like depreciation and income tax expenses, | | | | Among the main advantages of computerized |
| adjusted records posted to the ledger and | | | | accounting there are: high speed and mobility |
| adjusted trial balance calculated. After this | | | | of reporting, reliability, no routine work, |
| there are financial statements should be | | | | increased accuracy, internal control system |
| prepared, which include balance sheet, income | | | | of increased productivity, easy back up and |
| statement, statement of retained earnings and | | | | restoration of records; the disadvantages |
| statement of cash flows. Then journal entries | | | | include: extremely high costs on developing, |
| of temporary accounts are closed to permanent | | | | introducing and using the system, special |
| accounts and posted to the ledger, and at | | | | trainings for personnel, increased personnel |
| last after-closing trial balance can | | | | costs, dependence on machines etc. |
| prepared. | | | | |
| | | | Obviously both computerized and manual |
| In order to stay on top companies have to | | | | accounting have advantages and disadvantages |
| analyze the performance of all organizational | | | | but they perform the same task, and the final |
| cells (starting from unskilled workers and | | | | result is the same. The main differences |
| operating personnel, and finishing with top | | | | between them are the costs, speed and |
| managers and other key personnel) and | | | | mobility. Thus small and medium businesses |
| discover all the deviations from the plan, | | | | usually prefer manual accounting without |
| their causes, and finally companies' | | | | detriment to quality while large corporations |
| management has to take corresponding measures | | | | apply complex accounting systems which cost |
| to avoid such deviations in the future. These | | | | millions dollars but the effect from their |
| procedures are called internal controls and | | | | application exceeds all the expectations. |
| include the following five elements: control | | | | |