Describe the advantage and disadvantage of computerized accounting


Ans: Advantages/importance/positive points/features etc.

(1).Accuracy: The software automatically posts the transactions to the respective ledger accounts. Hence there is less scope of errors as compared to making the same entry separately into different ledgers manually.

(2)Automatic updating; Accounting records are automatically updated so that account balances, debtor’s and stores ledgers ,etc are always up-to-date.

(3) Efficiency: customised data entry screen, and databases of customer’s suppliers, and stock records, speeds up each transaction. Prompt debt collection and better inventory control improves the efficiency of the business.

(4).  Multiple currency capability: An accounting software takes care of exchange rate changes and allows a business organization to trade in multiple currencies

(5).Document generation: Accounting software can generate accurate and legible documents such as invoices, credit, debit notes, purchase orders, vouchers, payroll and pay slips etc.

(6).Management information: Complete and up –to-date information on purchases ,sales, inventory, taxes, assets, reduce frustration of the management who can now take crucial decisions quickly

(7).Generation of GST and VAT returns: An accounting software can generate returns for goods and service tax (GST) and value Added Tax(VAT).

(8).online form filling of IT returns: with up-to-date computerized accounts, calculation of income tax becomes a breeze and the returns can be filed over the internet.

Disadvantages/limitation of computerized accounting

(1)   Power outages can entirely stop the accounting work and access to accounting information

(2)   Computer viruses can erase or damage vital business and accounting data

(3)   Hackers can clandestinely gain access to top secret business and accounting data if proper care of data base security and access control is not exercised.


(4)   Accuracy of computerized output depends critically on the correctness of data entered .i.e garbage in garbage out(GIGO)