Question

Compare and contrast a manual accounting system with a computerized accounting system for processing vendor transactions. What uses are there for using the Vendor Balance Summary and A/P Aging Summary Reports? Why is the balance in Merchandise Inventory different than the balance in Accounts Payable? Include at least one reference from an online resource.

Answer 1

Mannual accounting V/S Computerized accounting

Accounting is a necessary function for any business. All businesses must keep a record of their income and expenses, and the records should be as detailed as possible. For some, the idea of spreadsheets, general journal books and ledger sheets is frightening. For these people, computerized accounting could be a welcome relief. Conversely, others enjoy the manual process of posting to ledgers, journals and worksheets

Manual Accounting:

A manual accounting system requires the acting accountant or bookkeeper to post business transactions to the general journal, general ledger and worksheet by hand. This process can be completed by either using actual paper journal and ledger sheets or by creating these sheets in a computer program such as Excel. It is considered manual because each transaction is entered into the system individually.

Computerized Accounting:

A computerized accounting system allows the user to enter the transaction into the program once, and all accounts are updated as necessary. For example, if your business buys $1,000 worth of office supplies with a combination of $500 cash and $500 credit, instead of going to each accounting and posting the transaction, with a computerized system you would check office supplies, cash and the selected account payable account and the transactions automatically would post to the accounts.

Speed and Accuracy:

Computerized accounting programs are quicker as far as entering information is concerned. However, even with the built-in error detection of computer programs, sometimes it is easier to cross-check journals ledgers in a manual system since you can flip to the pages you need, and even spread the books out on a table if needed.

End-of-Period Reports

Computerized accounting packages will automatically pull all relevant ledger entries for the period reports. Manual accounting takes longer, but can help a bookkeeper better understand the posting and end-of-period process. This is one reason why accounting students cannot take a computerized accounting course until beginning and intermediate accounting classes are completed.

Data Manipulation

With a computerized accounting system, information for a particular period of time can be compiled quickly. With a manual system, it can take time to locate the information from each book and compile it into a report.

Things to Consider

if you are not good with figures and accounting frightens you, and hiring a bookkeeper or accountant is not an option, a computerized system will make record keeping easier. For people who are comfortable working with an accounting system, either a manual or computerized system would be fine, but the computerized system offers the benefit of speed. If you are old-fashioned and just prefer having the actual paper books, you can use a computerized accounting system just to print out the journal and ledgers, creating the best of both worlds.

****Using of A/P aging & vendor summary report:

If you’re a small business owner, you probably make purchases for your business on credit. Sometimes, it’s hard to know when money is owed to different suppliers. To organize business debts, use an accounts payable aging report.

What is accounts payable aging report?

An accounts payable aging report shows the balances you owe to others. The debts consist of inventory, supplies, and services you buy to operate your business. The aging of accounts payable tracks who your creditors are, how much you owe, and how long you’ve owed debts.

An AP aging report is a tool that organizes your business’s accounts payable (AP) balances. Accounts payables are amounts you owe to vendors. You incur payables when you receive a good or service on credit. The supplier invoices you, and then you pay them on a later date.

An accounts payable aging report helps you visualize amounts you owe. The report is the opposite of an aging of accounts receivable report. An AR aging report shows the balances of money owed to your business. Accounts receivable includes credit you extend to customers when they buy from you.using an accounts payable aging report gives you an easy way to handle your debts

**** Why do the Balance Sheet (merchandise inventory) and Accounts Payable Aging not agree?

If you have a Balance Sheet and A/P Aging report that do not agree, it might be the result of future payments against current bills. The Aging report and other A/P detail reports do not pull bills with a status of "paid." The Balance Sheet is correct, as are the detail reports, because the bill is no longer open.

If you need a Vendor/Supplier Balance report that agrees with the Balance Sheet, customize the Vendor/Supplier Balance report to run as of the Balance Sheet Date and customize it to change its Aging method to Report Date.

An alternative is to customize the Aging report to the As of Report Date. The report will balance to the Balance Sheet as long as the Balance Sheet follows the accrual reporting method for the same date range.