A COMPARATIVE ANALYSIS OF SOFTWARE ACCOUNTING PACKAGE SYSTEM AND MANUAL ACCOUNTING SYSTEM

A COMPARATIVE ANALYSIS OF SOFTWARE ACCOUNTING PACKAGE SYSTEM AND MANUAL ACCOUNTING SYSTEM

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

The advancements in information technology have eventually led to the introduction of computerized accounting systems in displacement of manual accounting system in corporate reporting to help produce relevant and faithful representative financial reports for both management and external users for decision making (Greuning, 2006). The many advantages from the use of these systems have led many to conclude that Computerized Accounting Systems in corporate reporting is the engine of growth in business organizations. This was evidence with numerous advantages of computerized accounting over manual accounting system; manual accounting requires that all journal entries, invoices and other financial documents be created by hand. Computerized accounting allows users to input information into accounting software programs. Computerized accounting produces information much faster than manual accounting system. Accounting software packages, such as QuickBooks and Sage 50 Accounting, come with built-in databases that allow users to input data. Manual accounting systems are prone to mathematical errors and misplaced numbers. With a computerized accounting system, company data is automatically calculated based on numbers of input data. In a manual accounting system, company's income statement, balance sheet and statement of owner's equity are prepared by hand. Information from your journal entries helps formulate company's financial statements. Computerized accounting systems allow financial statements to be created from information stored in the database. 

The cost of computerized accounting systems can range from hundreds to thousands of dollars for large businesses. A computerized accounting system may save on man hours used for creating financial statements and other reports. For this reason, many small and mid-sized businesses use computerized accounting software. Reports are created in a timely manner when using a computerized accounting system. Reports generated from computerized accounting software allow managers to run the company in a more efficient manner. Creating reports in a manual accounting system may lead to more staff frustration and result in having to work with outdated information. 

Accounting records kept on the manual system can be lost or damaged easily, such as by coffee spills. On the other hand, records kept by a computer are likely to be safer because many systems are backed up often. If pages are lost in