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