Manual Book-keeping Vs Computerized Accounting

Manual Book-Keeping


In manual Book-Keeping, you first create ledgers; carry forward previous year’s closing balance as

Opening Balance for the current year. Record cash transaction in Cash Book and non-cash

transactions in Journal (or subsidiary books), then amounts from Cash Book and Journal are posted

into respective ledgers.

Whenever, you need to know balance of any ledger, you are required to total amounts in both Debit

and Credit columns of the ledger and compute the difference to derive the closing balance for the

Ledger as on that date. To prepare Final Accounts (Profit & Loss A/c, Balance Sheet) for any period,

you have to compute closing balance of ledgers for the period and then prepare a Trial Balance. From

Trial Balance, you post Nominal accounts to Profit & Loss A/c, Real & Personal ledgers to Balance

Sheet.

Next year, when you create New Year books, again you create all the ledgers afresh and enter

opening balance (a sheer repetition and monotonous job.)

Since Posting, casting, totaling and balancing – all are done manually, this leaves enough room for

errors. At the time of finalization of accounts, it’s a common scenario that Accountants are burning

mid-night oil to tally Trial balance. And even after spending few sleepless nights, if accounts do not

match, they are forced to leave an entry in Final Accounts Difference in Trial Balance having no

explanation.

Computerized Accounting

When you opt for Computerized Accounting first time, you have to create all the ledgers and enter

opening balance (in subsequent years you need not to create the Ledgers again or carry forward

previous year’s closing balance as opening balance since it would be carried forward on it’s own by

the software) and classify at this stage. Thereafter, you enter all transactions in Vouchers (different

types of Vouchers to record diverse nature of transactions). That’s all you have to do and everything

else (like posting to Ledger, preparation of Trial Balance, Final Accounts etc.) is done by the

software.

In computerized accounting, while creating new ledger, you are required to classify it suitably under

relevant accounts Group to tell the software the nature of the Ledger and where it will appear. This is

necessary at this stage as all Reports are prepared on-line the moment you enter transactions

(Vouchers). In case of Manual Book-Keeping, this classification is done at later stage (after

preparation of Trial Balance, Nominal Accounts are transferred to Profit & Loss Account through

Journal Entry, Real & Personal Accounts are posted to Balance Sheet under proper heading i.e.

Groups).

Year-end Entries

In manual book-keeping, you are required to pass Journal entries to transfer closing balance of all

nominal accounts to prepare Profit & Loss Accounts, which you are not required to do in case of

computerized accounting. The software does this job on it’s own. In next year, only closing balance

of Real and Personal accounts are carried and nominal accounts balance is zeroed by the software (for

which you pass Journal entries in manual book-keeping). The advantages are that your accounts are

always open and any modification is instantly reflected.