Manual data processing

A lot of small businesses process accounting data manually. It calls for handwritten journals, ledgers, financial statements. But even in a small business with handwritten records the use of office machines and laboursaving devices such as cash registers, adding machines, desk calculators has become standard practice.

In a large business there may be hundreds and or even thousands of transactions every day. To handle a large volume of transactions rapidly and efficiently, it is helpful to group the transactions into like classes and to use a specialized journal for each class. It will reduce the amount of detailed recording work and will also permit a division of labour, since each special-purpose journal can be handled by a different employee. The great majority of transactions (perhaps 90 – 95%) usually fall into four types. These four types and the four corresponding special journals are as follows:

TYPES of TRANSACTION	NAME of SPECIAL JOURNAL
Sales of merchandise on credit	Sales journal
Purchase of merchandise on credit	Purchase journal
Receipts of cash	Cash receipts journal
Payments of cash	Cash payments journal

In addition to these four special journals, a general journal will be used for recording transactions which do not fit into any of the above four types.

Automated data processing

Automated data processing (ADP) is a term used to describe the processing of data by automatic equipment, either mechanical or electronic, with manual activities reduced to minimum.

The mechanical data processing is getting out of date. A few years ago it was considered to be progressive, though. While mechanical data processing bookkeepers used accounting machines, punched cards, tabulating equipment.

Electronic data processing

The term electronic data processing (EDP) is restricted to systems which process data by use of computers.

The first advantage of electronic data processing (EDP) is its incredible speed. The number of computations made by a computer is measured in millions per second. A second advantage of EDP is its ability to produce more information useful in the planning and control of business activities.

Elements of an EDP system. An electronic data processing system includes a computer and a number of peripheral equipment. The computer is the heart of the system; it performs the processing function which includes the storage of information, arithmetic computations, and control.

The other two major elements are (1) input devices which prepare and insert information into the computer and (2) output devices which transfer information out of the computer to the accountant or other user. Both input and output devices perform the function of translation. The machines used to feed information into a computer translate the data into the computer language; the output devices translate the processed data back into the language of written words.

Hardware and software. The machines and related equipment used in an EDP system are called hardware. All the other materials utilized in selecting, installing, and operating the system are called software.

Processing operations in the computer. The processing operations performed by a computer include storage of information, arithmetic manipulation of data and control. The computer receives and stores instructions and data; it calls this information from the memory or storage unit as required by the processing routine; it goes through arithmetic operations, makes comparisons of numbers, and takes the action necessary to produce the required output of information.

The term control describes the ability of the computer to guide itself through the processing operations utilizing detailed list of instructions concerning the work to be done.

A program is a series of steps planned to carry out a certain process, such as the preparation of a payroll. Each step in the program is a command or instruction to the computer. A program for payroll might be compared with a very detailed written set of instructions given to an inexperienced employee assigned to the payroll function in a manual accounting system. A most important attribute of the computer is its ability to receive and store a set of instructions which controls its behaviour.

The preparation of a computer program is a complicated and costly task. A company may employ its own programmers or may rely on outside organisations which specialize in such services.

The relationship of the control unit, the arithmetic unit, the storage unit and the devices for input and output.