Comparison of the Accounting Cycle in a Computerized and Manual System

Steps in the Accounting CycleManual SystemComputerized System

1. Analyze the source documentsManualManual

2. Record transactions in journalManualManual Data Entry includesmanual electronic coding

3. Post to the ledgerManualAutomatic

4. Preparing unadjusted trial balanceManualAutomatic

5. Preparing the adjusting entriesManualAutomatic

6. Preparing the Financial StatementsManualAutomatic

7. Preparing the Closing EntriesManualAutomatic

8. Preparing the Post closing Trial BalanceManualAutomatic

9. Preparing the Reversing EntriesManualAutomatic

Differences between Electronic Data Processing (EDP) and Manual Processing

Points of DifferenceDiscussion

1. Transaction (Audit) TrailOnly in computer-readable form

2. Uniform ProcessingUniformly subjects like transactions to the same processing system

3. Segregation of functionsCombines functions which are performed by several people in a manual system.

4. Visibility of informationRecords and files may not be printed and cannot be read without using information

5.Unauthorized accessUnauthorized access without visible evidence is greater than in manual system

6. Transaction initiation/execution by computercertain transactions may be initiated by computer

7. Systems changesMore difficult to implement than in manual systems

8.Potential for increased management supervisionProvide effective means of supervising and reviewing company operations

9. Dependence of other controls on computer processing controlsProduce reports that are used in performing manual control procedures