Question

Please make it original in your words. Each part require 150 words only please. 450 in total.

·         As a professional accountant, how would the process for completing the practice set assignment (a manual accounting process) be used in an accounting department. Explain how communication, teamwork, time management and interpersonal skills play a role in completing this process within an accounting department?

·         When (why) would you use this system rather than an automated accounting system?

·         What are the benefits and limitations of each type of system (manual vs computer)?

Answer 1

Q As a professional accountant, how would the process for completing the practice set assignment (a manual accounting process) be used in an accounting department. Explain how communication, teamwork, time management and interpersonal skills play a role in completing this process within an accounting department?

Answer:-

Every company applies accounting because it is generally accepted that companies have to reveal certain financial and management information to the government and public users and also used as tool in business decision-making process.

Every transaction must be recognized, classified and documented. The transactions are recorded in appropriate journals , affected accounts’ titles, debit and credit of each affected account and explanation specified in the journal record. The above procedure is used for each transaction. All the journal records must be posted to the ledger on a periodic basis and classified. In addition there is a subsidiary ledger can be used.

Manual accounting cycle includes the following steps:

journalizing the transactions,

posting them to ledger accounts,

preparing trial balance,

making adjustment entries,

preparing adjusted to end-of-period trial balance,

preparing financial statements, and

appropriate disclosures, journalizing and posting the closing entries, and preparing after-closing trial balance at last.

At the end of accounting period with the help of general ledger there is a trial balance calculated to make sure that debit and credit are in balance (if they are not equal it means that there is an error somewhere).

Then there must be appropriate adjustments made like depreciation and income tax expenses, adjusted records posted to the ledger and adjusted trial balance calculated. After this there are financial statements should be prepare.

These processes can be completed with use of following skills:-

"communication, teamwork, time management and interpersonal skills"

If communication is weak then the information will not be able to flow properly and may result into fraud or error.

Team work is neceasssary to divide the work into small modules where one personnel is alloted a seperate responsibility and can execute the work on time.

Time management is necessary because the accounts department has to meet various compliance deadlines and in order to file the form or report on time they have to manage the time effectively.

and to co-ordinate all the above mentioned tasks and skills interpersonal skills are required.

Q. When (why) would you use this system rather than an automated accounting system?.

Manual accounting system is comparatively cheap in the sense of both capital outlay and the need of Trained workforce in case of automated accounting.

Affordable:-It is basically well suited in the organizations that cannot afford heavy capital expenditure on purchase of computers and automated softwares and peripherals. ie IT infrastructure. since IT infrastructure also requires regular repair and maintenance costs.

Trained Employees:- It is sometimes difficult to find the work force that can operate automated/ computerized accounting system. Even if they are found they are not cheap. Since they are more skilled the businesses are required to pay more thats when organizations opt for manual accounting systems.

Fear of Change:-

Many organizations still continue to use the manual accounting sys because they dont have confidence over the automated accounting systems. They have doubt over whether the confidentiality will be maintained or not. Due to various malicious software the data might get into the hands of rivals.

Corrupt Persons:-

Few organizations use the manual accounting systems because they carry on illegal businesses and don't want their data to be on computerized system so that they can hide the details with much ease.

Q.  What are the benefits and limitations of each type of system (manual vs computer)

Answer:-

Computerised accounting offers several advantages vis-a-vis manual accounting, these are summarised as follows ;

Speed : Accounting data is processed faster by using a computerised accounting system than it is achieved through manual efforts. This is because computers require far less time than human beings in performing a task.

Accuracy : The possibility of error is eliminated in a computerised accounting system because the primary accounting data is entered once for all the subsequent usage and processes in preparing the accounting reports. Normally, accounting errors in a manual accounting system occur because of repeated posting of same set of original data by several times while preparing different types of accounting reports.

Reliability : The computer system is well-adapted to performing repetitive operations. They are immune to tiredness, boredom or fatigue. As a result, computers are highly reliable compared to human beings. Since computerised accounting system relies heavily on computers, they are relatively more reliable than manual accounting systems.

Up-to-Date Information : The accounting records, in a computerised accounting system are updated automatically as and when accounting data is entered and stored. Therefore, latest information pertaining to accounts get reflected when accounting reports are produced and printed.

Efficiency : The computer based accounting systems ensure better use of resources and time. This brings about efficiency in generating decisions, useful informations and reports.

Disdavantages of computerized accounting system.

Cost of Training : The sophisticated computerised accounting packages generally require specialised staff personnel. As a result, a huge training costs are incurred to understand the use of hardware and software on a continuous basis because newer types of hardware and software are acquired to ensure efficient and effective use of computerised accounting systems.

Staff Opposition : Whenever the accounting system is computerised, there is a significant degree of resistance from the existing accounting staff, partly because of the fear that they shall be made redundant and largely because of the perception that they shall be less important to the organisation.

Disruption : The accounting processes suffer a significant loss of work time when an organisation switches over to the computerised accounting system. This is due to changes in the working environment that requires accounting staff to adapt to new systems and procedures.

System Failure : The danger of the system crashing due to hardware failures and the subsequent loss of work is a serious limitation of computerised accounting system. However, providing for back-up arrangements can obviate this limitation. Software damage and failure may occur due to attacks by viruses.

Whereas advantages and disadvantages of the manual accounting system are:-

Comparatively cheap workforce and resources, reliability, independence from machines, skilled workers availability;

the disadvantages include: reduced speed, increased effort of accountants, relatively slower internal control reporting, routine work.