Computerized Accounting System

Along with the improvements in the technology, information systems have been computerized.

Improvements in this technology have replaced manual bookkeeping systems with

computerized ones. The revolution in the information systems, which started in the early 1950s

when the first business computers became available, is still in progress (Nash, 1989: 5).

Large mainframe computers have been replaced by small and fast personal computers at lower
costs. As a result, accounting information systems that were previously performed manually are
now performed by computers in most companies. Companies can now capture, process, store,
and transmit data with the help of computers. Whereas data collections and processing were
performed manually in historical systems, on-line collection and processing of data are
performed by computerized systems (Grabski and Marsh, 1994: 63). In manual accounting
information systems, processing of data is slow and subject to error. Fortunately,
improvements in the technology have enabled companies to collect, process, and retrieve data
quickly. In addition, there is less likelihood for error when data are processed with computers

Functions of Computerized Accounting System Software

Accounting software’s are used to implement computerized accounting system. The

computerized accounting is based on the concept of database; it is basic software which allows

access to the data contained in the database. The following are the functions of computerized

accounting software.

a) Preparation of accounting documents; Computers help in preparing accounting documents

like cash memo, bills, invoices and accounting vouchers.

This section includes the most-frequently used software tools and their most appropriate use.

Accountants must be familiar with the software tools because they help the users perform the

accounting functions more effectively and efficiently. Accounting software. This software contains the

basic accounting functions such as input, processing and output. There are two classifications of
accounting software as low-end and high-end. Low-end is all-in-one software, which means all of the

functions of accounting system are performed within one software. Therefore, lowend software is used

for small companies. On the other hand, in high-end software, each accounting function comes in a

separate module. Each module checks data for correctness, processes it, and updates all relevant

accounts, and finally, produces outputs such as documents and reports. Personal computer (PC)-based

accounting software allows companies to computerize their manual systems and to provide better and

timely information. In addition, PCs have been connected to another PCs via networks. This allows

companies to process indefinite number of transactions occurring at different locations simultaneously

within several minutes. Income tax. Because tax laws are frequently changing, it is becoming exceedingly

difficult to deal with them. Therefore, manual tax preparation is becoming more and more difficult and

time consuming. Fortunately, tax preparation software is currently available for companies. Therefore,

instead of processing tax manually, companies can use computer software to perform the same

functions. As a result, even complex calculations can be performed via computers in a short period of

time. Audit. Information technology has also computerized the auditing profession. If auditors perform

auditing functions manually, it takes time. However, audit software packages are currently available for

auditors. For example, trial balance software enables auditors to input the working trial balance, handle

all types of adjusting entries, and automatically compute the adjusted trial balance. In addition, software

package can access customer’s files, select a statistical sample of the accounts, and print a working

paper sheet. Auditors have used personal computers to reduce their costs significantly. Word

processing. Word processing is computer-assisted creation, editing, correcting, manipulation, storage,

and printing of textual data (Romney et al., 1997: 246). Accountants use word processing software to

prepare reports, billings, memos, and financial statements. Graphics software. Graphics can be prepared

using graphics software. Graphics can be printed on paper or displayed on slides, transparencies, and

photos. Many auditors and managerial accountants use the graphics software to graph the data in
financial statements and reports. 27 Image processing. Creating, storing, and updating paper forms of

documents take time. In addition, it is very costly to process and store documents. Fortunately, these

costs can be eliminated with the help of document imaging systems. Image processing captures

electronic image of data so that it can be stored and shared. With the help of document imaging,

accountants can scan paper documents into the computer and process all of the files electronically.

Companies that use document imaging are moving toward paperless offices. Electronic data interchange

(EDI). Electronic data interchange enables companies to communicate with each other electronically.

Therefore, EDI enables companies to exchange documents electronically with each other. For example,

computerized network enables purchaser and the supplier to exchange purchase orders and invoices

electronically in the form of images. Electronic funds transfer (EFT). Companies can now connect to

banks through EFT. This system enables companies to make payment and collection electronically. In

this case, when company wants to pay for accounts payable to a supplier, it can do it via EFT.

Furthermore, whenever company makes sales, transactions are immediately charged to consumer’s

bank account and simultaneously credited to company’s account. In addition, all relevant accounts such

as accounts receivable and cash are updated immediately by the computerized system. The use of the

computerized systems mentioned above has led to the automation of accounting information system.

Accounting information systems equipped with these kinds of technologically advanced tools can now

perform accounting functions more effectively and reduce costs

Manual Accounting Versus Computerized Accounting

Manual accounting implies that employees perform the whole accounting cycle manually on a

periodic basis: they calculate trial balances, journalize transactions, and prepare financial

statement reports and other routines. Of course it takes much time, resources and effort in

large organizations. On the other hand, computerized accounting implies that the only thing
that employees do is record transactions into the computer which processes the other steps of

accounting cycle automatically or by a request. But this is a very simplified view on the

computerized accounting because transaction is a complex category which includes not only

sales or acquisitions, but depreciation, premiums and wages calculation, dividends, etc. So

computers provide accurate calculations and smart reports but it takes much time, resources

and effort too and it's difficult to assess which accounting type is faster and more economic.

The computerized system requires accountants who can use specific software and thus costs

more. Computer software calculates faster but it does not know what you need until you can

clearly explain what you exactly need. In addition, a good computerized accounting system can

cost thousands and even millions of dollars, depending on the complexity and the size of the

organization.

Furthermore, the computerized accounting provides better internal control report system for any given

period of time (computer can control thousands indicators simultaneously and create notifications to

the appropriate departments or workers if some indicators do not correspond to the normal state),

while manual control takes more time (Weber, 2014). The small and medium enterprises in Lipa, City

have already been facing stiff competition since every management wants to invest in that fast growing

business. For this continued evolution of the SME's in Lipa City, it is expected that more and more

development and improvement of financial management operations and practices will emerge so as to

minimize the problems they encountered. (Sarmiento, et. al., 2014). In today's computerized,

interconnected, global business environment, Computerized Accounting Systems became the „engine of

growth‟ in business organizations. It therefore involves the computerization of accounting information

systems which is established in order to facilitate decision making. These are associated with a number

of benefits like speed of carrying out routine transactions, timeliness, quick analysis, accuracy and
reporting. (Genil & Valencia, 2013). The researchers have been inspired to conduct the study because of

the significance and vitality that lies in the subject matter especially in discovering the most appropriate

accounting system. The researchers believe that the manual system has its own advantages so is the

computerized accounting system. Also, the researchers aimed to have a broad knowledge about finding

out if there are organizations that still use manual accounting and are planning to change it to the

computerized accounting system. The findings of this study could provide relevant information and

insight for entrepreneurs on the problems encountered by the users.

Background to Computerized Accounting Systems in Afghanistan

The introduction of Computerized Accounting Systems (CAS) in Tanzanian public institutions

dates back to 1992 when the government took measures to computerize various aspects of its

financial management functions and moving from a manual accounting system toward a

computerized system. Ever since, performance in the financial sector has improved significantly

(World Bank, 2002). Some aspects of accounting practices which have been computerized

include; accounts payable, accounts receivable, general ledger, cash management, purchase

order and payroll. The main computerized accounting system used by public institutions in 4

Tanzania is EPICOR (formerly PLATINUM). After the implementation of the system, all

accounting staff received training on how to use the system (World Bank, 2002).

Definition of Terms

Accounting as many professional accountants and auditors state - accounting is a language of

business which is accepted in all developed and developing countries, but what exactly is

accounting? Well, accounting has been defined by many authors in various ways. According to

Weber (2011), accounting is the way business owners manage their company’s financial
information. Sacco (2008) defines accounting as a process through which financial information

is recorded, organized, summarized, analyzed, interpreted, and communicated. This implies

that accounting is concerned with the design of an organization’s record keeping system, the

preparation of financial documents, analysis and interpretation of financial documents.

Computerized Accounting

A computerized accounting system involves the computerization of accounting information systems

which is established in order to facilitate decision making Manson, McCartney, and Sherer, (2001).

These are associated with number of benefits like speed of carrying out routine transactions, timeliness,

quick analysis, accuracy and reporting. Effective and efficient information flow enhances managerial

decision-making, thereby increasing the firm’s ability to achieve corporate and business strategy

objectives Manson, McCartney, and Sherer, (2001).

This in turn, may increase the prospects of the firm’s survival Platt and Platt, (2012).

This can be evaluated by the procedures, accounting records and tools used Keating and Frumkin

(2003).

Payroll Accounting

Payroll Accounting refers to that aspect of accounting needed to determine the accurate

records of salaries and wages paid to workers. Naturally, business organizations are required by

law to keep accurate payroll records. Apart from being needed to compute the accurate

amount of employee's salaries and wages, payroll accounting is needed to establish the various

expenses related to salaries and wages (Okoye, 2010)