ICT in accounting

What accounting software does

• Records each transaction once; the software makes both entries automatically.
• Keeps the trade receivables and payables ledgers and produces control accounts and the trial balance at any time.
• Helps prepare reconciliations, for example matching the bank account with bank statement data.
• Produces the financial statements, aged receivables schedules, invoices and management reports instantly.
• Spreadsheets are used for budgets, costing and ratio analysis.

Advantages

• Speed: statements and reports are available immediately, giving more up-to-date information for decisions.
• Accuracy: no casting (addition) errors or one-sided entries, so the trial balance always agrees.
• Fewer staff hours on routine bookkeeping.
• Easy analysis: aged receivables, departmental results, ratios.
• Records can be backed up and accessed remotely.

Limitations

• Errors of principle, omission, commission and original entry still happen: the computer posts whatever it is given ('garbage in, garbage out').
• Costs: software, hardware, training and support.
• Risk of data loss, viruses, hacking and fraud; needs passwords and back-ups.
• Staff may trust the output without checking it.
• System failure can stop the business recording sales.

In an evaluation question, weigh advantages against limitations for the business in the question, then give a supported conclusion.

Worked example

A sole trader with 400 credit customers is thinking about replacing handwritten ledgers with accounting software. Give one point for and one against.

1. For: aged receivables reports and statements can be produced automatically, so slow payers are chased sooner and cash flow improves.
2. Against: set-up and training cost time and money, and errors of principle or wrong amounts typed in will still occur.

Answer: A balanced answer weighs better credit control and speed against cost and the errors software cannot prevent, then reaches a judgement.

Check yourself

1. Which error can computerised accounting NOT prevent?
   • Posting a purchase of a machine to the Repairs account
   • A debit entered without a matching credit
   • A mistake adding up a column of figures
   • A balance carried down on the wrong side
   Show answer

   Posting a purchase of a machine to the Repairs account. That is an error of principle: the software posts to whatever account it is told.

2. Why does a trial balance produced by accounting software always agree?
   • The software corrects all errors
   • Only cash transactions are recorded
   • Every entry automatically has an equal debit and credit
   • The suspense account is hidden
   Show answer

   Every entry automatically has an equal debit and credit. Double entry is built in, so totals agree even if an entry is to the wrong account.

3. Which is an advantage of using accounting software for managers?
   • Up-to-date reports are available whenever they are needed
   • No staff training is needed
   • Fraud becomes impossible
   • Source documents are no longer needed
   Show answer

   Up-to-date reports are available whenever they are needed. Instant reports support quicker decisions.

4. Explain one disadvantage to a small business of moving its accounting records onto computer.
   Show answer

   The software and staff training cost money and time, and if wrong figures are typed in the errors are still posted, so the records may be wrong.. Name the disadvantage and its effect on the business.

5. How does software help with control accounts?
   • It removes the need for a trade receivables ledger
   • It produces the control account total and the list of individual balances automatically
   • It means discounts are no longer recorded
   • It replaces the trial balance
   Show answer

   It produces the control account total and the list of individual balances automatically. Both the total and the individual ledger are generated from the same entries.

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Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting specification (issue 2), Unit 1 and Appendices 6 to 8

Last updated 8 November 2026. Spotted a mistake? Tell us.