8/6/2019 Accounting and the Use of Computers

1/3

Marivic D. Valenzuela-Manalo Page 1of I

Accounting and the Use of Computers

Overview

Background To succeed in todays highly competitive international markets, an enterprise

must be nimble and responsive. Companies around the world are facing new

challenges, and opportunities created by the Internet and other technological

innovations, industry deregulation and the global economy. If an enterprise

can adapt quickly to todays fast- paced business conditions, it stands to gain

significant competitive advantage. But rapid adaptation demands rapid

changes in business processes and that includes computerizing the accounting

processes of the company.

Purpose The purpose of this lecture notes Accounting and the Use of Computers is

to introduce only the reader on the many benefits that a company may enjoy in

using computers in their accounting system.

In this unit This unit contains the following topics:

Topics See PageComputer Advantages 2 of I

Computer as a machine 3 of I

8/6/2019 Accounting and the Use of Computers

2/3

Marivic D. Valenzuela-Manalo Page 2of I

Computer Advantages

Overview Most entities use a computer to do their accounting. The computer makes

debit and credit entries according to exactly the same rules as that we havedescribed. In this manual, we must show the journal entries manually because

what goes on inside the computer is not visible. The actual hands-on on the

use and appreciation of the computer in the bookkeeping process will be done

in the course Accounting One B

Advantages The computer has the following advantages over the manual system we use in

this manual (Anthony, R., 1997):

The computer is much faster. The computer does not make copying errors. For example, when the

computer writes a check, the amount of the check is always the amount

credited to Cash and debited to some other account. The amounts reported

on the financial statement are the same as the balances in the accounts.

The computer assures that debit entries always equal credit entries. It willnot accept an entry in which this equality does not exist.

Once an amount has been recorded in the computer, it may be used forseveral purposes. For example, an entry to Accounts Receivable is used in

calculating the total amount in the Accounts Receivable account, the

accounts of individual customers, and the amount reported on the balance

sheet.

The computer does not make arithmetic errors. The computer may require that certain rules be followed. For example, the

credit entry for a check is always to the Cash account.

The computer has built-in safeguards that help detect fraudulent orerroneous entries that will assist in the keeping of accurate records.

Continued on next page

8/6/2019 Accounting and the Use of Computers

3/3

Marivic D. Valenzuela-Manalo Page 3of I

Computer Advantages, Continued

It is a machine If a person makes the initial input to the computer, an error made by that

person might not be detected. For example, if a check is supposed to be forP879 and the bookkeeper keys in P897, the computer may not detect the

error.

Despite the built-in safeguards, the computer cannot detect certain types of

fraudulent entries. As examples of multimillion peso errors reported by some

companies demonstrate, there is no guarantee that errors do not exist.

Therefore, there must be an audit function to check the possibility of fraud or

error.

The computer may perform most of the bookkeeping functions, but it cannot

replace the accountant. The accountant specifies the rules to be followed in

routine transactions. The accountant must tell the computer how to make thedifferent entries. If the accountant makes an incorrect decision, the accounts

will be incorrect.