Transferring Accounts to a Computerised Accounting System

1. Select suitable software for the business's needs and budget. 2. Set up the system — create the chart of accounts and customer/supplier/inventory records. 3. Enter the opening balances (the closing balances from the manual system). 4. Verify — produce a computerised trial balance, check it balances and agrees with the manual records, and run both systems in parallel before relying on the computerised one alone.

The opening balances are the closing balances taken from the old (manual) system — the assets, liabilities, capital, receivables and payables at the date of transfer. They must be entered accurately and on the correct side, because if any balance is wrong, the new system starts off incorrect and the error is carried forward into the trial balance, the financial statements and every future period.

The business should produce a computerised trial balance and check that it balances (total debits = total credits) and that it agrees with the manual trial balance prepared from the old system. It can also run both systems in parallel for a period and compare the outputs before relying on the computerised system alone.

1. Speed — transactions are recorded and totals updated automatically and instantly, saving time. 2. Accuracy — the software performs the arithmetic and applies built-in double-entry checks, reducing calculation and posting errors. 3. Instant, up-to-date reporting — trial balances, financial statements and analyses (e.g. aged receivables) can be produced on demand, giving managers current information for decisions. (Integration of modules and easier backup are also valid.)

1. Cost — purchasing software and hardware, installation, and ongoing maintenance and upgrades can be expensive. 2. Data loss and security risk — hardware failure, corruption, hacking or fraud can lose or corrupt records, so backups and security are essential. 3. Training and reliance — staff must be trained (with a possible dip in productivity), and the business becomes reliant on the system, so a power cut or failure can halt work. ('Garbage in, garbage out' — input errors still produce wrong output — is also valid.)

A computerised system reduces arithmetic and posting errors because it performs calculations automatically and enforces double entry. However, it processes whatever data is entered and cannot tell whether that input is correct. If incorrect data is entered — a wrong amount, the wrong account, or a transaction omitted — the system will produce incorrect output ('garbage in, garbage out'). So mistakes from inaccurate input still occur; computerisation does not remove the need for careful data entry and checking (and good input controls).

Computerisation creates new risks — unauthorised access, fraud, hacking and data loss — so controls are needed to protect the integrity and security of the records. Three suitable controls are: passwords and access rights, so that users can only access the data and functions relevant to their role (reducing fraud and error); regular backups, stored securely and ideally off-site, so data can be recovered after a failure or loss; and an audit trail, which records who entered or changed each transaction, deterring and detecting manipulation. (Antivirus/firewalls and segregation of duties are also valid.)

For computerising: with a sharply increased volume, a manual system becomes slow and error-prone. A computerised system would process transactions faster and more accurately, produce instant reports (helpful for managing a growing business), keep information up to date, and integrate modules such as sales, inventory and payroll. It also scales well as the business continues to grow.

Against / costs: there is the cost of software, hardware and maintenance, the time and disruption of transferring the accounts and training staff, and new risks (data loss, security/fraud) requiring controls and backups. During the transfer, accuracy of opening balances and parallel running are essential to avoid carrying errors forward.

Conclusion: for a business whose volume has risen sharply and is still growing, the efficiency, accuracy and reporting benefits are likely to outweigh the costs, so transferring to a computerised system is recommended — provided the transfer is carefully verified and strong controls are put in place.

Integration means the system's modules (such as sales, purchases, inventory and payroll) are linked, so that a single entry automatically updates several records at once. For example, recording a credit sale updates the sales (receivables) ledger, reduces the inventory records, and posts to the general ledger simultaneously — saving time and keeping the records consistent.

1. Faster processing of transactions. 2. Greater accuracy (automatic arithmetic and double-entry checks). 3. Instant, up-to-date reports (trial balances, financial statements, analyses). 4. Easier storage and backup of data (and integration of modules / multi-user access).