Question

Describe how to manually process financial transactions and outline the key features of manual and computerised accounting systems. (300 words)

Answer 1

Manually process financial transactions- Mostly small business and sole proprietors process the transactions manually because they have small set up and business and they cannot afford the cost of accounting software.

Steps in processing financial transactions manually-

1. Firstly any transaction that takes place, is noted in the rough.
2. Accountant does journal entries with the help of rough notes.
3. He does debit and credit according to the transactions.
4. Whenever a payment is received or made, it is added or subtracted and new journal entry is created to adjust the amounts.
5. With the help of journal entries, general ledger is made and with the help of general ledger T-Account is made and then Income statement and balance sheet are made to know the profit and loss and financial position of the company.
6. Any footnote is written at the bottom of balance sheet.

Key features of manual accounting systems- These are as following:

• Transactions are recorded in the books of accounts that is called Journals.
• Generally used by small businesses and sole proprietors.
• Vouchers are kept separately so whenever need, they can be found easily.
• Manual accounting system uses physical papers and pads.
• There are separate books for various accounts.

Key features of Computerized accounting systems- As following:

• Each and every transaction is recorded in the computer.
• Accounting software is used.
• Accounting software is fast, simple, powerful and integrated.
• Computerized system is safe, secure and password protected.
• Vouchers are scanned and kept in the system only.
• Whenever, there is need of any transaction or item, it can be found in no time.
• Quick books are used.
• Accounting information system is used.