Definition of Computerized Accounting
Computerized accounting is a beneficial use of current technological advances. Not only has it revolutionized the traditional paper methods of accounting, but it has also created new types of accounting applications for business. Companies now create entire accounting information systems that integrate all business operations, including external suppliers and vendors in the value chain.
Enterprise resource systems are a relatively new type of computer management system that includes several functions of traditional accounting software. An enterprise resource system has every major business operation linked into one software system that accountants can use to retrieve pertinent financial information and input into the accounting module. This type of management software is used in large organizations to increase the speed and availability of financial information.
Computerized value chains allow the traditional enterprise resource system to import and export certain types of financial information to outside suppliers and vendors. Value chains are extensively used in manufacturing operations to plan for materials purchase and finished goods transport to wholesalers and retailers. Computerized accounting software will transmit order information and purchase orders to suppliers for production materials as orders come into the system from wholesalers and retailers. This shortens the lead time between production and sales, increasing the company's profitability.
With all the information being transmitted through the enterprise resource system and external suppliers and vendors, many computerized accounting programs are Internet-based. This allows companies to use pre-existing fiber-optic communication lines for accessing accounting software information. Internet-based programs also allow companies to use instant-messaging and email communication methods to transmit purchasing information. Additionally, companies are now using online money transfers to pay for goods, cutting down on payment processing delays.
Another important feature of computerized accounting is the ability to have several accountants access the system internally to review and process the financial information. Companies usually set up an intranet, which allows users to access information on their personal computer through a server-based system. These intranets, called local-area networks, are extremely reliable and cost-efficient for companies to install. They improve employee productivity, communication and financial integrity through the various safety controls employed by company management.
The most important part of a computerized accounting system is the improved functionality it provides to internal accountants. Most accounting software can have financial information imported from external enterprise resource or value chain systems, allowing accountant to simply review and correct and problems. These programs also have internal calculation checks that look for value errors, printing an exception report for accountants to review these problems. Financial information can also be exported into financial statements for final review by accounting management.