Traditional accounting or sometimes we call it manual accounting process is a bookkeeping system where records are maintained by hand, without using any computer system. Financial transactions are written in journals, columnars, physical records, pads of paper and books. These records are manually sum up to generate the Financial Statements.
Having to deal with a lot of records and files in manual accounting makes it labor-intensive and time-consuming. Although automated or computerized accounting system, requires additional cost for the set-up, implementation and training, manual accounting is more costly for the company in the long run. It requires a number of people to deal with the recording, summarizing and reporting of financial transactions.
Another disadvantage of using traditional or manual accounting system is that it is more prone to human error. There is greater risk of mistake when using manual accounting especially when the company has to deal with numerous transactions all at the same time. In an automated accounting system, human errors will be lessened and mistakes in the data entries can be easily identified.
On the other hand, automated or computerized accounting system has its own disadvantages when it comes to data handling. There is a risk of loss and theft of digital data when there are no proper backup procedures and confidentiality policies in place. Currently, there are automated accounting systems with built-in and automatic backup capabilities and our maintained in cloud storage servers.
As the technology landscape continue to evolve and automated business tools are more accessible even to small and micro businesses, there are a number of advantages noted in using the automated accounting system. These advantages include faster and more efficient record keeping, access to real time financial data and reports, automated issuance of invoices, receipts and credit notes and cost savings.
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