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Summary AAT introduction to bookkeeping section 2 notes
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Introduction to bookkeeping - section 2Manual versus computerised accounting systems
Traditionally bookkeeping was manual which involving writing all books of prime entry and individual
accounts in ledgers by hand.
This meant that manual bookkeeping was time consuming and can be cumbersome, there was more
room for error, quite often these errors went unnoticed until end of year accounts were produced.
Manual systems ran the risk of reporting incorrect figures and information to the decision makers of a
business.
Last few decades has seen a shift to computerised accounting systems most businesses regardless of
their size will operate some form of digital bookkeeping system.
Computerised systems have taken out the hard work of bookkeeping as they automatically post most of
the double entry depending on the transaction being recorded.
The range of software used by businesses for bookkeeping ranges from single spreadsheets to record
income and expenses to fully intregrated packages that not only incorporate books and ledgers but also
aspects of inventory control, payroll and non-current asset registers.
Most software is cloud based and fully intregrate with things such as business bank account which allows
automatic download and post transactions with little or no human intervention.
All accounting software uses the same practices and principles as traditional manual systems. In order to
understand what accounting software is doing and hence spot and correct errors, it is essential that a
bookkeeper has a sound knowledge of double entry and manual bookkeeping.
The role of computers in the modern accounting function
Many computerised accounting packages available that are used in today's businesses. They all do the
same thing, as the fundamental principle of accounting does not change regardless of the business.
The differences appear in the way those transactions are posted to the accounts, the layout of the
software will be different in each package and the functionality will depend on the business.
Such as having a built-in inventory system that records levels and can automatically reorder materials
when the count meets a certain level.
There are also bespoke accounting systems that can be purpose built for a business. Generally used by
large companies with complex needs.
Advantages and disadvantages of computerised accounting systems
, Advantages:
● uicker and more efficient
Q
● Saves time
● Automatically generates accounting documents such as invoices
● Standardised account format is used
● Reduces errors or omissions
● Processes recurring entries
● Data can easily be transferred into other programs such as Excel Spreadsheets
● Automatically balances the cash book
● Automatically completes the transfer of data from the books of prime entry to the ledgers and also
data into the control accounts
● Automatically reconciles receivables and payables to their control accounts
● Automatically creates a trial balance from the general ledger accounts
● Can import transactions from several sources such as:
○ Bank records - CSV files - third party software
isadvantages
D
● ulnerable to security issues
V
● Setting up the software can be difficult
● Learning how to use the software can be time consuming
● Maintaining the software can be expensive
● Software constantly needs upgrading and updating
● Makes duplication of automated and manual entries possible
● Can create errors when the amount or frequency of recurring entries change
● Automatically balances but does not mean the entries are automatically correct
Importing data to computerised accounts packages
One of the advantages with accounting software such as sage and xero is that data can be imported to
minimise the effort of doing so:
Bank data:
The transactions from the relevant bank account can be imported and this means that actual data entry
required can be reduced.
CSV files:
A CSV file is a data file that can be imported into the accountancy software.
These files are not excel files, but an excel file can be converted to a csv file.
This information can be imported and again will potentially reduce the amount of data entry required.
3rd part software:
This is where information is generated within another software package but can then be imported directly
into the businesses' software package. For example, paperless invoices from suppliers.
Coding:
Coding is used in the documentation process for 2 main reasons:
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