Introduction
In a company, it is crucial for them to record their daily transaction in order to control the flow of the money in the company. During the pass, most of the companies are doing manual record by using ledgers, journals, and cash books. As the technologies getting more and more advance nowadays, there are a lot of off-the-shelf computerized accounting packages available in the market. Besides that, company may hire a programmer to create a unique and customized system which fully matched with the needs of the company. By having software system, it makes work become easier and more systematic. In this report, it will discuss on how computerizes package being build. Besides that, advantages and disadvantages will be discussed too as well as the controls to the system.
Explains how a computer based accounting packages is organized.
Ordinarily, companies are recording their daily accounting transactions and accounting related work manually by using ledgers, journals and cashbooks. But nowadays, as the technologies getting more and more advance, there are a lot of computerized accounting software systems available in the market such as MYOB, UBS, Peachtree and others. Basically, accounting packages works the same as manual system. But it carries the most significant different that is the time usage in recording.
In a system, chart of accounts will be created first before do any posting. All the accounts use different codes to differentiate each others. When there is a new account or vendor, users need to create a new code through the system which represents the account. Besides that, different type of invoice transaction such as purchase order, credit note and others will be recorded in different posting method which also being differentiate by codes.
Next, by using computerized system, posting will be recorded in the system by either debiting or crediting the account and automatically the other side of account will be created. For example, in accounts payable team, when invoice processor post an invoice to the system by crediting the transaction to the vendor, the debit account will be created at the same time. If there are changes occur, by changing one side of the account, changes will be done simultaneously on the other side of account. After posting, the transaction will flow to payment team to make payment and net off the account. And finally after done all the payment, the transaction will flow to general ledger team to balance off all the transaction and stored in the system.
During end of each month, the system will generate profit and loss account, balance sheet and other relevant information. The system will extract relevant information from the system, for example, if users need the information for January 2010, by filtering the system, the correct information will pop up and users can print it out for reference.
In conclusion, computerized system helps in reducing the workload of the workers as it will automatically arrange and stored the information tidily.
Identifies the advantages and disadvantages of a computerized package compared to a manual system of accounting.
As compared with manual system of accounting, obviously there are much more advantages shown in computerized accounting system. Firstly, the most visible advantages are the speed and the accuracy in making entries. To record an entry, there must be both debit and credit entry. As compared to manual system, by using computerized system, by key in the debit side of the entry, the system will automatically create an entry at the credit side. Besides that, by using computerized system, it also helps in preventing duplicate entries. For example, in a company which has a thousand of transaction a day, the chance of duplicate entries will be higher if manually entry. While using a system, it may detect whether the entry had been entered before by filter the invoice number, invoice date and amount of the invoice that stored in the system. (<http://simplestudies.com/advantages-of-computerized-accounting.html>, 2010).
Next, it is more legibility as compared to manual recording with hand writing. In manual system, all the information will record on a book of paper with pen, as time passed, it may become not clear and people can hardly view the information. Besides, if the accountant has a bad handwriting, it also will be a difficulty for people to read the entries in later time. While on the other hand, if the entries are recorded electronically, there will not have this problem because no matter who record the entries, the outcome will appear the same and arranged accordingly. (JosephK, 2010).
Record entries using computerized system also help in reducing the usage of physical spaces. By recording entries electronically, it helps in save the usage of papers and also the spaces to stores those information sheet (JosephK, 2010). Besides that, as computerized system reduce a lot of work load in a company, it motivated staff. It helps in running a company smoothly and also takes less time in compiling reports (<http://simplestudies.com/advantages-of-computerized-accounting.html>, 2010).
Although there are a lot of advantages in computerized system, there are some disadvantages too. To run a system, it needs computers to run. If there is virus infected the computer, the information might lose and the system might get affected as well (<http://basiccollegeaccounting.com/what-are-the-advantages-and-disadvantages-of-computerised-accounting-systems-part-2/>, 2006).
Next, to own a system, it might costly in some circumstances. If a company needs a very advance features kind of system, it might cost a lot as it might need to build up a team to create the system and provide maintenance over the system in order to make sure the system operate under the best condition. Besides that, training also needed to be given for the staff which incurred a lot of cost (Sheila Shanker, 2010).
Discusses the ways in which such a package maintains control over systems
Using computerized system might bring a lot of benefit, but there is still some hidden risks. To avoid the risks happen and bring problems to company, the company may carry out some controls over the system. There are a lot of controls available which a company can use to set up control for the system. (Tony Boczko, 2007, p.697, 698).
In the accounting system, it might provide some controls which help in managing the security and the information of the system. This also may consider as the application controls. There are 3 levels of controls applicable: input control, process control and output control (Nancy et. al, 2010, p395). Input is when data being collected and be prepared to be entered into the system. During this stage, the system may detect whether the data insert are correct and there is no duplication in the system. When the data had been key into the system, the posting will be blocked and ask for reconfirmation (Nancy et. al, 2010, p396).
After the data being inserted, it will be further process such as make payment or money collection. Conduct a good control in this stage is to contribute to a good audit trail. It is crucial to have a good audit trail so that it is easy to trace and correct errors, provide full documentation for future review, and help in reporting. One example of process control is attaching relevant information to the posting. This will provide a full reference in future (Nancy et. al, 2010, p400). And lastly, output control is to make sure all the outputs are done in a correct, valid and complete way. There are 2 action can be done, firstly, validation of the result needed to be made and printed output needed to be used under regulation. (Nancy et. al, 2010, p402).
Besides application controls, technical controls also can be use in controlling the user’s privileges (Tony Boczko, 2007, p.698). Company can control via the use of computer account and limited access of employee. Each of the workers had their very own account and unique password to access the system. Every time the user log on, the system will check the password against the master list of account to confirm the owner of the specific account then only allow the user access to the resources which assigned from the company (Nancy et. al, 2010, p383). Besides that, the system allows users to restrict the level of system usage. Different level of employee may have different access to the function of the system. For example, for an invoice processor, user might just able to post invoices only. If there is a mistake occurs, to delete the posting, it might need the help of an employee with a higher position. (Nancy et. al, 2010, p383-384).
It is important for a company to make controls on their system to make sure that all information are stored in a secure environment and also make sure there is no disorder of system in a long run.
Conclusion [104]
After the discussion in above, the conclusion is computerized system had a more stable and organized way in making transaction recording. Computerized recording system is more advance and organized as compared with manual recording. Record using computerized system helps in reducing time and space as well. But there are some circumstances users need to take in caution. In order to make sure the system not to become disorder, controls needed to be done. Besides that, providing control also is to make sure the information stored in the system is complete and accurate.
