ACCTING7014 | Management Accounting | Manual Accounting Function

Richard Murray, the chief executive officer of JB Hi-Fi Ltd, is considering a cost reduction strategy which will involve the removal of the manual accounting function entirely. Richard Murray believes that the manual accounting function serves no purpose since the company is using a computerised accounting system. 

To help Nick Wells convince Richard Murray to reconsider this decision, you have been asked to prepare a report. 

Your report must

• Be addressed to the CEO Richard Murray. 
• Outline the relative advantages and disadvantages of manual accounting.
• Outline the relative advantages and disadvantages of computerised accounting.
• Justify why the manual accounting function should be kept alongside the computerised accounting function.
• Explain the impact on the accounting cycle if the manual accounting function was removed.
• Cite relevant sources and include a reference list.

Introduction

Accounting refers to the system of maintenance of the financial accounts of the company. The company can maintain the accounts by implementing the manual accounting system or, computerized accounting system or manual accounting system along with the computerized accounting system (Beattie, 2014). The present study focuses on the impact on the removal of the manual accounting functions entirely within the organization.

Manual accounting function

Manual accounting functions refer to a system of maintena

Computerized accounting function

Computerized accounting function refers to a system of the maintenance of the accounts by using the accounting software, for keeping the financial records electronically. This system assists the managers in interpreting the financial data and taking a decision by collection, recording, classification, summarization of the financial data in a computer system with the accounting software. This system is very suitable for the large organization as it can process a large amount of data in a very few spans of time. Further accuracy, data access, automation process, speed, security are the advantages of this system. Through the computerized accounting function owner of the business has the right to give the permission of access to the data to a particular person by which the unauthorized access of the data can be prevented. However, in this system, there are chances of the fraud by the hacker. It is because; in a situation where the hacker gets access to the financial data of the business then sensitive information of business can be leaked and consequently there will be significant losses. Along with this, if the accountant is not skilled and having lack of knowledge of computer, then it is difficult for them to maintain the accounts with the computer (Yu & Xu, 2018).

Manual accounting function along with the computerized accounting system

Implementation of the whole manual accounting function or the computerized accounting system is not beneficial for the organization; therefore Richard Murray should implement the manual accounting function along with the computerized accounting system in the JB hi-fi limited for the cost reduction strategy (Patel, 2015). As the computerized system assists in the generation of the financial data in a more accurate and reliable manner and also it is more cost-effective than the paper-based accounting system.

But if the whole process of accounting is managed in the computerized software, then there is the possibility of the compensatory errors in the financial records, which cannot be identified without any supervision (Trinandha, & Ghozali, 2018). Apart from this, the role of the manual accounting also assists to perform a series task so that financial security can be ensured and the chances of fraud can also be detected. Due to the all above reason it is justified for Richard Murray to implement the manual accounting function along with the computerized accounting function in the organization.

Impact on the accounting cycle by removing the whole manual accounting function

The accounting cycle of any business is consist of several steps such as identifying and evaluating the business transactions, recording in the journals,posting to ledgers, unadjusted trial balance, adjusting entries, adjusted trial balance,financial statements,closing entries,post-closing trial balance and the reversing entries.By implementing the whole computerized function, there is no need to make the different entries for one transaction as this system enable to give the impact of one transaction at all places only after getting input from one time. Further, it is also easy for the manager to evaluate the financial statement, as all records can be analyzed just by one click. However, the whole manual accounting function removed then there are chances of fraud and compensatory errors in the company.

Conclusion

On the basis of the above study, it has been concluded that implementing the manual accounting system along with the computerized accounting system is beneficial for the company.As the computerized accounting system with the manual accounting system facilitates to process a large amount of data and the generation of the reports will be more accurate and reliable.

References

Beattie, V. (2014). Accounting narratives and the narrative turn in accounting research: Issues, theory, methodology, methods and a research framework. The British Accounting Review, 46(2), 111-134.

Ellwood, S. (2018). Accounting for What We Treasure. In The Oxford Handbook of Public Heritage Theory and Practice (p. 125). Oxford University Press.

Patel, F. (2015). Effects of accounting information system on organizational profitability. International Journal of Research and Analytical Reviews, 2(1), 168-174.

Trinandha, A., & Ghozali, I. (2018). Understanding the Potential Impact of Accounting Information System to Computer Accounting Fraud. International Journal of Engineering, 11(2), 191-200.

Yu, J. H., & Xu, F. L. (2018). Research on the Problems of Internal Control in Accounting Computerization. DEStech Transactions on Social Science, Education and Human Science, (emss).