The following are the points of distinction between a Manual Accounting System and a Computerized Accounting System.
Difference between Manual and Computerized Accounting
|Basis of Difference||Manual Accounting System||Computerized Accounting System|
|Identifying||The identification of transactions is based on the application of accounting principles.||The identification of transactions in computerized accounting is also based on the application of accounting principles.|
|Recording||The recording of financial transactions is done through the book of original entry, i.e. Journal.||The data of financial transactions are stored in a well-designed database.|
|Summarising||By ascertaining the balance of various accounts, transactions are summarised to produce a Trial Balance. Consequently, the generation of ledger accounts becomes a necessary condition.||The originally stored transactions data is processed to give out the list of balances of various accounts to be finally shown in the Trial Balance report. Thus, the generation of ledger accounts is not a necessary condition.|
|Classification||Transactions recorded in the books of original entry are further classified by posting into ledger accounts. Thus, the data can be duplicated.||In order to produce ledger accounts in this system, the stored data is processed to appear as classified, such that no data is duplicated.|
|Adjusting Entries||Adjusting entries are recorded to match the expenses and revenues generated in the accounting period. So, these entries are made to stick to the principles of cost-matching revenue.||No adjusting entries for errors and rectification are made. Thus, journals and vouchers are prepared and stored to follow the principles of cost matching revenue.|
|Financial Statements||The preparation of financial statements assumes the availability of a Trial Balance.||The preparation of financial statements does not require the availability of a Trial Balance.|
|Closing the books||After preparing financial reports, the accountants prepare books for the following accounting period, which is done by posting closing entries and reversing the closing Journal entries.||To create and store the opening account balances in the database, year-end processing is used.|
Any interest paid on capital is considered as an expense and is shown in the Profit and Loss Account. Treatment of interest on capital in the final accounts is as follows.
Treatment of interest on drawings in the final accounts is as follows. Firstly, interest in drawings is shown on the credit side of the Profit and Loss Account.
Operating Profit can be defined as the profit earned by carrying the normal business activities. It is computed by subtracting the operating expenses from the gross profit.
The balance sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period
A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.