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Computers and accounting.

Computers and Accounting

I recently attended a seminar on education in accounting. It was sponsored by a publisher of accounting textbooks and attended primarily by college accounting instructors. The lunchtime discussion as well as part of the program concerned the use of computers and computer software in accounting offices. Of course, there were all the usual pro's and con's, but one fact seemed certain: computers, if not already there, will soon be a major-component of any accounting practice. And accountants are finding that their clients are making extensive use of computers in their businesses, so here again it becomes essential to have a knowledge of computers and computer usage. With these facts in mind, let's take some time to compare manual and computerized accounting systems.

In manual accounting systems, all entries are handwritten and all records are prepared by hand, although admittedly with the aid of a calculator. Initial transactions such as sales and payables are recorded in specialized journals and then posted manually to the subsidiary journals and/or to the appropriate general ledger accounts. At the end of an accounting cycle, whether monthly, quarterly or annually, worksheets are set up, adjusting entries are made, and financial statements and reports are prepared.

In a computerized accounting system, the same basic components must exist. There will be receivables, payables, inventory, payroll and depreciation, all of which must be recorded and properly processed to give the same end product--reliable financial statements and reports. An individual must make the initial entry whether it is handwritten or keyed into a computer. So just what is the difference, and what are the advantages?

A major and very significant difference is "integration." When a transaction is entered in the computer, it is then carried to all parts of the system. For example, to record a sale, the invoice amount is posted to a sales journal, to a subsidiary accounts receivable ledger and to the general ledger. This information will be used to update sales reports, accounts receivable reports and client billing statements as well as the financial statement. In a manual system, this figure would have to be entered several times. In a computerized system, only one entry is needed and the computer would carry the figure to all the necessary components of the system.

The second major advantage of a computerized accounting system is one of time and accessibility of information. A computer can post information immediately so that accounts are always current. Financial statements and reports can be obtained with more frequency and are therefore more useful to the client. Another key advantage to using a computer is flexibility. Information can be handled by computers in a very simple and straightforward manner, or the computers can be used to produce very sophisticated reports. The use depends totally on management and its needs.

One other area in an accounting firm for which computers can be used is practice management. Computers can readily keep track of client files, employee files and billing and work assignments. Word processing software can be used to prepare billing or informational letters to clients. Standard report and engagement letters can be kept and readily modified using a word processor. Client information such as filing dates and type of work (i.e. payroll) can be kept in data bases and sorted for scheduling purposes. Data bases can be used to select types of clients for specialized mailings and to prepare the labels for those mailings. As you can see, computers can do a great deal for you and for your practice, but only if you understand them and can make really good use of them. To complicate matters further, there are a great variety of computers and computer software programs. If you would like to become familiar with what is currently available for use in accounting and learn more about computers, spreadsheets, data bases and their application to your practice, be sure to attend the NSPA Super Computer Accounting Seminar, June 1-4, in either Orlando, Florida, or Anaheim, California.
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Author:Schwartz, Marlyn A.
Publication:The National Public Accountant
Article Type:column
Date:May 1, 1990
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