Accounting Sub-Systems & Manual vs. Computerized Accounting PDF

ACCOUNTING SUB-SYSTEMS AND COMPARISON BETWEEN MANUAL & COMPUTERIZED ACCOUNTING CREATED BY YUSRA NAZEER. 04 DEC 2024 INTRODUCTION ACCOUNTING IS VITAL DISCUSSING VARIOUS SUB-SYSTEMS AND FOR BUSINESS...

ACCOUNTING SUB-SYSTEMS AND COMPARISON BETWEEN MANUAL & COMPUTERIZED ACCOUNTING CREATED BY YUSRA NAZEER. 04 DEC 2024 INTRODUCTION ACCOUNTING IS VITAL DISCUSSING VARIOUS SUB-SYSTEMS AND FOR BUSINESS ACCOUNTING SUB- PROCESSES ENSURE FINANCIAL SYSTEMS AND EFFECTIVE HANDLING MANAGEMENT COMPARING MANUAL OF FINANCIAL VS. COMPUTERIZED TRANSACTIONS AND PROCESSES. DATA. CASH AND DEFINITION : Handles the receipt and payment of both BANK SUB- physical cash and electronic transfers. SYSTEM KEY FUNCTIONS : Manages cash receipts and payments. Processes electronic funds transfers (EFT) through credit cards and online banking. IMPORTANCE : Ensures accurate cash flow management and reduces errors.  DEFINITION : SALES AND ACCOUNTS Manages recording of sales and accounts receivable. RECEIVABLE KEY FUNCTIONS : SUB-SYSTEM Records sales, maintains sales ledger. Tracks overdue accounts and provides aging reports. Generates periodic reports on collections. IMPORTANCE : Helps monitor cash inflow and overdue receivables. INVENTORY DEFINITION : SUB- Tracks inventory records and stock movements. SYSTEM KEY FUNCTIONS : Manages purchases, issues, and inventory valuation. Generates inventory position and valuation reports. IMPORTANCE : Improves stock control and reduces inventory-related issues. PURCHASE DEFINITION : AND ACCOUNTS Manages purchasing and payments to creditors. PAYABLE KEY FUNCTIONS : SUB-SYSTEM Tracks goods orders, purchase expenses, and payments. Generates supplier performance and payment schedules IMPORTANCE : Enhances supplier relations and ensures timely payments. PAYROLL DEFINITION : ACCOUNTIN Manages payment of wages and salaries to employees. G SUB- KEY FUNCTIONS : SYSTEM Records wages, allowances, deductions, overtime, etc. Generates wage bills and reports for taxes, provident funds, etc. IMPORTANCE : Ensures accurate and timely payroll processing.  DEFINITION : FIXED ASSETS Manages purchases, usage, and ACCOUNTING depreciation of fixed assets. KEY FUNCTIONS : SUB-SYSTEM Records asset purchases, additions, and deletions. Tracks depreciation and book value of assets. IMPORTANCE : Helps monitor asset life and value over time EXPENSE DEFINITION : ACCOUNTIN Tracks company expenses under various categories. G SUB- KEY FUNCTIONS : SYSTEM Records manufacturing, administrative, and other expenses. Provides reports on expense trends and cost control. IMPORTANCE : Helps optimize costs across the business. TAX DEFINITION : ACCOUNTING Ensures tax compliance (VAT, excise, income tax) SUB-SYSTEM KEY FUNCTIONS : Tracks and files taxes as per regulations. Generates tax-related reports. IMPORTANCE : Facilitates tax compliance and avoids penalties. FINAL DEFINITION : ACCOUNTS Manages the preparation of Profit and SUB- Loss accounts and Balance Sheets. KEY FUNCTIONS : SYSTEM Generates Profit & Loss accounts, Balance Sheets, and Cash Flow statements IMPORTANCE : Provides insights into the company’s financial health. COSTING DEFINITION : SUB- Determines the cost of goods produced. SYSTEM KEY FUNCTIONS : Links with other subsystems for cost data (materials, labor, etc.). Generates reports on cost variations. IMPORTANCE : Helps maintain cost control and improve profitability. BUDGET DEFINITION : SUB- Manages preparation and tracking of SYSTEM financial budgets. KEY FUNCTIONS : Prepares budget for the coming year. Compares actual performance to the budget. IMPORTANCE : Helps with financial planning and discipline MANAGEMENT DEFINITION : INFORMATION Gathers and processes data to support decision-making. SYSTEM (MIS) KEY FUNCTIONS : Provides customized reports for management (operational, strategic). IMPORTANCE : Aids in effective decision-making across departments. MANUAL VS. PURPOSE: COMPUTERIZED A comparison of how accounting ACCOUNTING processes are handled in manual vs. computerized systems. OVERVIEW FOCUS: FOCUS: Identifying financial transactions, recording, classification, summarizing, adjustments, grouping of accounts, and generating financial statements.  MANUAL PROCESS Transactions are identified and recorded manually by an authorized person or following the accounting manual IDENTIFYING FINANCIAL TRANSACTIONS COMPUTERIZED FOCUS:PROCESS: The same steps apply, but transactions are identified through automated systems, reducing human error.  MANUAL PROCESS Transactions are manually recorded in books of original entry and calculations (adding, subtracting, totaling) are done manually RECORDING TRANSACTIONS COMPUTERIZED FOCUS:PROCESS: Transactions are recorded automatically, and mathematical functions are performed by the system without manual intervention.  MANUAL PROCESS Transactions are posted manually to the ledger accounts after being recorded. CLASSIFICATION OF COMPUTERIZED FOCUS:PROCESS: TRANSACTIONS Transactions are classified and sorted automatically using accounting software.  MANUAL PROCESS Ledger accounts are manually summarized to prepare the Trial Balance SUMMARIZING TRANSACTIONS COMPUTERIZED FOCUS:PROCESS: After recording, the system stores data in the database and can automatically generate the Trial Balance. TRIAL BALANCE  MANUAL PROCESS Adjustment entries are passed manually to correct errors or comply with accounting principles. ADJUSTMENT ENTRIES COMPUTERIZED FOCUS:PROCESS: Adjustments are automatically identified and entered into the system  MANUAL PROCESS Decides whether a transaction is capital or revenue and classifies accounts manually. GROUPING OF ACCOUNTS COMPUTERIZED FOCUS:PROCESS: System automatically classifies accounts as assets, liabilities, income, or expenses at the time of transaction.  MANUAL PROCESS Financial statements require a Trial Balance to be manually prepared. GENERATING FINANCIAL COMPUTERIZED FOCUS:PROCESS: STATEMENTS Financial statements are automatically generated from the system, eliminating the need for a Trial Balance.  Aspect Manual Process Computerized Process SUMMARY OF Identifying Transactions Manual validation by authorized person Automated identification using software DIFFERENCES Recording Transactions Manual entry and calculations Automatic recording and calculations Manual posting to ledger Automatic internal data Classification accounts sorting and classification Manual preparation of Instant generation of Trial Summarizing Trial Balance Balance from the system Manually identified and Automatically identified Adjustment Entries recorded and entered Manual classification Automatic classification Grouping of Accounts during financial statement at the time of transaction prep Directly generated from Generated from Trial Financial Statements the system without Trial Balance Balance QUIZZ