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Accounting and the Use of Computers


To succeed in todays highly competitive international markets, an enterprise

must be nimble and responsive. Companies around the world are facing new
challenges, and opportunities created by the Internet and other technological
innovations, industry deregulation and the global economy. If an enterprise
can adapt quickly to todays fast- paced business conditions, it stands to gain
significant competitive advantage. But rapid adaptation demands rapid
changes in business processes and that includes computerizing the accounting
processes of the company.


The purpose of this lecture notes Accounting and the Use of Computers is
to introduce only the reader on the many benefits that a company may enjoy in
using computers in their accounting system.

In this unit

This unit contains the following topics:

Computer Advantages
Computer as a machine

Marivic D. Valenzuela-Manalo

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Computer Advantages


Most entities use a computer to do their accounting. The computer makes

debit and credit entries according to exactly the same rules as that we have
described. In this manual, we must show the journal entries manually because
what goes on inside the computer is not visible. The actual hands-on on the
use and appreciation of the computer in the bookkeeping process will be done
in the course Accounting One B


The computer has the following advantages over the manual system we use in
this manual (Anthony, R., 1997):
The computer is much faster.
The computer does not make copying errors. For example, when the

computer writes a check, the amount of the check is always the amount
credited to Cash and debited to some other account. The amounts reported
on the financial statement are the same as the balances in the accounts.
The computer assures that debit entries always equal credit entries. It will

not accept an entry in which this equality does not exist.

Once an amount has been recorded in the computer, it may be used for

several purposes. For example, an entry to Accounts Receivable is used in

calculating the total amount in the Accounts Receivable account, the
accounts of individual customers, and the amount reported on the balance
The computer does not make arithmetic errors.
The computer may require that certain rules be followed. For example, the

credit entry for a check is always to the Cash account.

The computer has built-in safeguards that help detect fraudulent or

erroneous entries that will assist in the keeping of accurate records.

Continued on next page

Marivic D. Valenzuela-Manalo

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Computer Advantages, Continued

It is a machine

If a person makes the initial input to the computer, an error made by that
person might not be detected. For example, if a check is supposed to be for
P879 and the bookkeeper keys in P897, the computer may not detect the
Despite the built-in safeguards, the computer cannot detect certain types of
fraudulent entries. As examples of multimillion peso errors reported by some
companies demonstrate, there is no guarantee that errors do not exist.
Therefore, there must be an audit function to check the possibility of fraud or
The computer may perform most of the bookkeeping functions, but it cannot
replace the accountant. The accountant specifies the rules to be followed in
routine transactions. The accountant must tell the computer how to make the
different entries. If the accountant makes an incorrect decision, the accounts
will be incorrect.

Marivic D. Valenzuela-Manalo

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