Information Technology in Accounting

Processing financial information can happen in two main ways. The manual system involves recording transactions by hand in books like the journal and ledger, then preparing financial statements through calculations done on paper or with a calculator. This method is still used by many small Nigerian businesses, like local tailoring shops or kiosks that track sales and expenses in notebooks.

The computerized system uses accounting software to record, process, and organize the same information automatically. When you enter a transaction once, the computer updates all necessary accounts instantly, reducing errors and saving time. Most banks and established Nigerian companies like cement manufacturers use this system because it handles large volumes of data quickly and produces reports immediately.

Both systems follow the same accounting principles, but computerized systems are faster, more accurate, and provide better security for business records.

Data processing means converting raw financial information into useful accounting reports. Think of it like preparing jollof rice: you gather ingredients (raw data), cook them together (process), and serve an organized dish (finished reports).

In accounting, the four main stages are input, processing, storage, and output. Input involves collecting source documents like invoices and receipts. Processing means sorting, calculating, and organizing this data using computers. Storage keeps records safely in databases. Output produces final reports like trial balances and financial statements.

Consider a Nigerian shop owner using accounting software. She inputs daily sales receipts, the system processes totals automatically, stores everything in memory, then generates monthly profit reports. Without this process, she'd spend weeks calculating manually and making errors.

Computer hardware refers to the physical machines you can touch—like your desktop computer, keyboard, printer, and server. Software, on the other hand, is the set of instructions that tells these machines what to do. Think of hardware as a car's body and software as the engine that makes it run.

In Nigerian accounting firms like Deloitte Nigeria or First Statutory Auditors, accountants use hardware like computers and printers daily. The software they use includes programs like QuickBooks, Sage, or even Microsoft Excel for recording transactions, preparing financial statements, and managing client accounts. Without proper software installed on quality hardware, these firms couldn't process accounting data efficiently or securely.

Understanding both components helps you appreciate how modern accounting works. You cannot separate them—hardware without software is useless, just as software cannot run without hardware.

Accounting can be done by hand or with computers, and each method has strengths and weaknesses. Manual accounting means recording transactions in books by hand, which is cheaper to start because you only need pens and ledgers. However, it's slow, prone to errors, and takes much storage space. Many small Nigerian shops still use this method because they lack capital.

Computerized systems use accounting software to record and process data automatically. This method is faster, more accurate, and reduces human mistakes significantly. A large Nigerian bank like GTBank processes thousands of transactions daily—something impossible manually. The downside is high cost for software and training, plus technical problems can stop operations.

In reality, most Nigerian businesses combine both methods, using computers but keeping manual backup records for security.