Computer Accounting PackagesFundamentally, computer accounting packages are accounting software that enable recording and analysis of financial data and information among other functions that allow monitoring and understanding of a firm’s financial health. Specifically, the associated functions include recording business transactions including expenses and income, preparation of ledger accounts like cash, sales and debtors as well as payroll accounts, among others and maintenance and automatic updating of accounting records. Computer accounting packages like Peach Tree and QuickBooks, among others, also allow storage and retrieval of accounting data and information in form of reports as well as preparation of cash books, final accounts like profit and loss accounts as well as balance sheets, vouchers, cost reports and cash memos, among others. Basically, the use of accounting software is advantageous in that it allows recording and analysis of accounting data and information quickly, accurately and with few resources based on defining elements of computer systems such as speed, storage, reliability and accuracy as well as timeliness among others. Rezaee, Ford and Elam (2000) affirm that information technology has enhanced real-time management of accounting information such as accounts payable and receivables making use of real-time accounting systems possible. This essay discusses the advantages and disadvantages of computer accounting packages.
Computer Accounting Packages: Advantages and Disadvantages
Considering the relentless evolution of technology and associated hardware and software including accounting packages, the necessity for updating and even changing to different accounting software represents a disadvantage in terms of costs (Friedlob and Knorr 1991). This means that some accounting software may highlight limited functionality if no updates are not purchased which would negatively impact timely and accurate preparation of financial statements. In addition, some of these software may fail leading to compromised financial information which is worsened by system failures as well as corruption of one’s data by viruses. Other associated problems include the need for other software programs such as Microsoft office spreadsheets which would lead firms to incur more costs including those associated with training of personnel to work with the software. Lack of relevant knowledge on the usage of the software can lead to grave errors that lead to generation of erroneous financial reports. Since firms use varied information in conjunction with financial information, the limited scope that some accounting software (ready-made) provide in terms of links to other information systems highlights a disadvantage (Singh 2015, 24).
Considering the relentless evolution of technology and associated hardware and software including accounting packages, the necessity for updating and even changing to different accounting software represents a disadvantage in terms of costs (Friedlob and Knorr 1991). This means that some accounting software may highlight limited functionality if no updates are not purchased which would negatively impact timely and accurate preparation of financial statements. In addition, some of these software may fail leading to compromised financial information which is worsened by system failures as well as corruption of one’s data by viruses. Other associated problems include the need for other software programs such as Microsoft office spreadsheets which would lead firms to incur more costs including those associated with training of personnel to work with the software. Lack of relevant knowledge on the usage of the software can lead to grave errors that lead to generation of erroneous financial reports. Since firms use varied information in conjunction with financial information, the limited scope that some accounting software (ready-made) provide in terms of links to other information systems highlights a disadvantage (Singh 2015, 24).
The enhanced storage, maintenance and automatic updating of accounting records is one advantage of using accounting software especially as it allows quick preparation and generation of financial reports and statements. The implication is that the need for particular financial data or information regarding specific company operations by various important stakeholders such as investors can be provided at a moment’s notice in terms of documents like balance sheets, among others. This speedy generation of financial reports is tied to the fast data processing that defines computerized accounting systems as opposed to manual entry. Fast data processing allows easy updating of accounting information where the computerized accounting system takes over working out calculations and assignment of relevant transactions to appropriate journals and ledgers. Generally, storage, maintenance and automatic updating is especially enabled by how easy it is to use accounting software where one is required to input relevant transactions after which the software does the rest; even though some packages are more complex than others. The elimination of duplication of work like recording of transactions in journal entries and then recording them again in ledger accounts can be identified as another advantage of accounting software whose processes store data and produces it as classified (Siddiqui 2011, 645).
Tied to this is the reduction of tedious clerical labor through automation of various activities required in the preparation and generation of relevant financial information. Further, elimination and disclosure of errors, as a hallmark of a good accounting system among others, according to Longenecker et al. (2006), is another advantage of using accounting software. In this case, errors in calculations are eliminated by the software including through automation of journal and ledger entries. The level of accuracy achieved through elimination of errors especially in calculations provides the advantage of reliable financial information which is vital not for firm decision making, among other functions. This is enhanced by the range of representational forms especially visual forms through which financial information can be presented which will enable one to spot any misrepresentations or mistakes made during data entry. Relatedly, Ilias and Zainudin (2013, p.3-5) indicate that the use of a computerized accounting system enhances accuracy of accounting information through use of customized computerized accounting and accounts management leading to cost and time efficiencies. Further, storage of massive data and accounting information in databases allows easy and effective retrieval of accounting data and information in comparison to manual systems. Other associated advantages include the aspect of less paper work in comparison to manual systems as well as the provision of warning signals for financial information like debts which should be corrected promptly.
Further, since the requirements of the user are primarily data entry after which the computer works out other relevant processes, the software enhances user ability to engage in fraudulent financial practices. This reflects the problem of errors committed during data entry where financial reports produced are entirely erroneous and since software is regarded as highly accurate, identification of the problem may be difficult (Bell et al. 1998). However, if errors are identified they can be easily and quickly corrected unlike when using manual accounting systems where much time and effort will be needed. Further, the evolution of technology is also responsible for the proliferation of various software programs that not only enhance the working of existing software but also ensure protection of computer systems against viruses and other elements that may corrupt financial data. This also applies to production of high-tech hardware and software that is less susceptible to crashes and failure as well as added security through robust security programs and inclusion of passwords which generally implies effective, uninterrupted working of accounting software.
Conclusion
The use of accounting software reflects a lot of positive elements and potential benefits to businesses that outweigh the disadvantages. Indeed, the higher rating of computerized accounting reporting system in relation to elements like ease of use, satisfaction, ease of use and usefulness, in comparison to traditional paper system supports why advantages of accounting software usage outweighs the disadvantages (Eaton and Stanga 1998, p.25-7).
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