Question

Imagine you are a consultant hired to convert a manual accounting system to an automated system.

Suggest the key advantages and disadvantages of automating a manual accounting system.

Identify the most important step in the conversion process.

Provide a rationale for your response.

Answer 1

Advantages of Automating the manual accouting system.

1. Under automatic system there is faster and more efficiency in processing the information since all the work is carried out by the system. It automatically detects and does the proocessing. There is minimal human intervention which takes a substantial time to process.

2. There is automatic generation of all the related accounts, documents & ledgers like invoice, cheques etc. Moreover, financial statements like balance sheet and Profit & Loss statement are also generated in a few clicks.

3. With the larger reductions in the cost of hardware and software and availability of user-friendly accounting software package, it is relatively cheaper like maintaining a manual accounting system.

4. More timely information can be generated and presented to the management.

5. Many types of useful reports can be generated for management to make decisions.

6. Also automatic system is free from biasness as it involves less human interaction.

Disadvantages

1. Hacking and leaking of the computerized data are the inherent problems of using the automatic accounting system. Any person not even having access of computer system physically can access all the crucial financial data related to the company.

2. Once data been input into the system, automatically the output are obtained hence the data being input needs to be validated for accuracy and completeness. It is usually difficult to rectify the dataonce it has been entered into system.

3. Accounting system not properly set up to meet the requirement of the business due to badly programmed or inappropriate software or hardware or personnel problems can caused more havoc.

4. Danger of computer fraud if proper level of control and security whether internal and external are not properly been instituted. As a result there should be proper internal controls in a company to establish automatic accounting system.

5. More often employees of a company are not in favour of such system as it may lead to less job security in a company.