The use of computers in accounting

YouTube videoLoad YouTube video

1 Introduction

In the previous chapters we have explained the double entries for all transactions as though the recording was being done manually. It is important that you fully understand double entry bookkeeping, but in practice most bookkeeping is done using accounting software on computers. In this chapter we discuss accounting software and the benefits of using it.

2 Benefits of using computerising accounting software

• fewer errors

• faster processing and instant reporting

• backups

• integration with other accounting functions (e.g. sales invoices automatically recorded in the double entry)

• authorisation (users need passwords to be able to enter)

• transaction logging (a record kept by the computer of who entered what and when)

3 Desktop vs Cloud accounting software

Desktop software is where the software is installed on the users computers. It is a one-off purchase (although future updates may need to be installed and paid for). Backups need to be taken regularly.

Cloud software is where the software and the data are all hosted online - users access the software online over the internet. A monthly subscription is payable to the company providing it. Updates and backups occur automatically. The users can use the software over the internet from any location.

4 Data entry

Data may be entered into the software in several ways:

• manual entry

this is where a user types in the entry directly

• automatic entry

for example, inventory movements may be entered by the use of barcodes or RFID tags on each item

• database entry

selling prices, customer details etc. may be held on a database and the information then entered directly into the accounting software

• integration

when an invoice is prepared the computer can automatically post the relevant data to the relevant accounts

5 Transaction Processing System (or Software)

This is the name given to the entire accounting system. It will consist of many integrated modules that not only record the transactions into the accounts but will also have modules that (for example) calculate wages, keep records of inventory, produce reports etc..