Advantages And Differences Between Traditional And Cloud-Based Accounting Systems

Differences Between Cloud Accounting and Traditional Accounting

Question:

Describe about the Development of Accounting,Internal Controls and system Development Life Cycle?

The cloud based system is very useful when it comes to the financial information of the business. The problems of the traditional system is that it has only one user, it is costly, the data system is not up to date and neither is the software. It was due to these issues of the traditional accounting system that cloud based system was developed.

This report aims at discussing the advantages of the cloud based system, the differences between the traditional and the cloud based accounting system.

Further the report focusses on the controls that must be put in place on the purchase systems and the analysis of the system.

The following are the differences between cloud accounting and traditional accounting:

1. There are an abundant amount of cost savings in the cloud based accounting and the same are immediately realized whereas under the traditional accounting, the costs involved are much higher. The software expense under the traditional accounting are higher and are unable of being transferred.

2. In terms of accessibility, one has the access to the accounts maintained at any place through the use of the internet connection at any time of the day and the discussion of the financial matters could take place in real time whereas under the traditional accounting, the financial accounting, the financial matters could take place only in person where both the persons could meet.

 

1. In terms of flexibility, the cloud based accounting entails the travelling of the information with oneself whereas under the traditional accounting, one is at the mercy of the accountant

2. In terms of automation, the cloud accounting have the added features and additions that could improve. Whereas under the traditional accounting, the accounting is done manually by inputting the information into the different systems.

3. With regard to upgrades, the cloud based accounting update and upgrade the systems automatically whereas under the traditional systems, when a software is purchased, then that software is being purchased at that point of time.

4. In terms of back up, the cloud accounting backs up all the processes online. There is a single source of information that is continuously backed up so as to avoid the risk of the data loss whereas under the traditional accounting, the backups are done manually.

(McCarthy, 2013)

The following are the advantages of a cloud based system:

1. Restrictions of the applications, operating system and the options of infrastructure. The suppliers of the computers already have what they have.

2. The accounting firm does not know where the data is since everything will be there in the cloud. The attestation, client files and the tax returns will be stores somewhere in the cloud.

(Accountantnextdoor.com, 2015)

 (Price & Veips, 2012)

The following are the risks that are involved:

1. Collusion between the employees
2. Overriding of the controls by the management
3. Controls may have been so designed that they could handle the routine transactions and not the non-routine transactions
4. Human error
5. The cost of maintaining the control may outweigh the benefit so that the same could not be implemented

The following are some of the controls that could be in place in the purchase system:

1. The procedures of authorisation and the policies must be in place for the ordering of the goods and the services
2. Segregation of the duties
3. The purchase orders that are raised must be authorised by some appropriate senior personnel
4. Approval of the purchase orders for each of the receipt of the goods
5. The staff that receives the goods must check the order of purchase
6. The clerk of the store must sign the goods received by him
7. The order of purchase and the GRN’s must be signed with the invoices of the suppliers
8. The GRN;s must be pre-numbered for the periodic accounting
9. There must be an independent check on the amount that is recorded in the purchase journal
10. The addition and the subtraction must be checked thoroughly
11. The amount that is posted to the general must be reconciled to the purchases ledger
12. The chart of the accounts must be kept in place
13. All the reports of the goods that are received must be forwarded to the accounts payable department on the daily basis
14. The procedures must be kept in place for the recording of the purchases as soon as the goods and the services have been received.

(Open tuition, 2015)

The systems development life cycle is defined as the conceptual model that is used to describe the stages that are involved in an information system’s development project, from the initial feasibility study through the maintenance of the complete application.

Advantages of a Cloud-Based System

 (Searchsoftwarequality.techtarget.com, 2015)

The following are the benefits of it:

1. Learning from the experiences of the project management
2. Learning from the strategies of development
3. Avoiding the common mistakes
4. Standardising the routine tasks
5. Using the creativity to solve the novel problems than to reinvent the whole wheel
6. Reducing the risk of failure
7. 20% of the projects are implemented on time but 70% of the experience 100% cost overruns
8. 50% of the projects are run over he planned schedule and the budget.

(www.comp.nus.edu.sg, 2015)

System analysis is defined as the specifying of the requirements of the system. The system analyst is the one that is responsible for the carrying out of the system analysis work. The common responsibilities in the work of the system analysis are the following:

1. Analysing the system: this includes the study of the system in order to know the facts about the activity of the business. This is all about getting the information and determining the requirements. The responsibility of the analysts of the system includes the requirement of determination and not designing the system.

2. Designing the system: this includes the designing of the new system and the application.

3. Analysis of the system, designing and programming: in this, the analyst is required to perform as the programmer, in which he actually writes the code in order to implement the design of the application that is proposed. The system analyst has to handle a huge number of responsibilities and therefore, he must possess multiple skills at the various stages of the life cycle. Additionally, the system analysts must also have the following knowledge:
       
1. The knowledge of the business since the analyst may be required to develop the kind of the business that the client already has and therefore, he must know the general functioning of the business.

2. The analyst must possess the skills that may be required at the various stages of the process of development for the interaction of the users ad then, extracting the requirements for the system.

3. The system analyst must have the skills of problem solving so that the alternate solutions could be defined and for the various problems that occur at the various stages of the process of development. The main aim of the system analysis is to define the requirements of the organization and this could be done by the way of a number of means and methods. The information that is acquired by the analysts could either be manual or based on the computers. The collection of the information is very important and could indirectly affect all the major decision in the organization.

4. Defining the requirements: the system analyst is required to understand the requirements of the users. This could be achieved by the various fact finding techniques such as interviewing, observation, questionnaire etc.

5. Prioritizing the requirements: a number of users use the system in the organization. Each of the user has his own set of different requirements and retrieves the different information. Due to the presence of the limitations of the capacity, it is not possible to satisfy the needs of the users.

6. Gathering of the facts, data and the opinion of the users: after the determination of the necessary needs and collection of the useful information, the analyst starts the process of development of the system with the co-operation from the users of the system. The users from time to time update the analyst with the necessary information for the development of the system. The analyst during the process of developing the system continuously consults with its users and then acquires their views and opinions.

7. Evaluation and analysis: the analyst maintains the continuous modification of the system and makes it better and user friendly for the users.

8. Problem solving: the analyst has to provide the alternative solutions to the management and must undertake the study in depth so as to avoid the future problems. The analyst must provide with some of the flexible alternatives to the management that will provide the best solution.

9. Drawing of the specifications: the analysts must draw the specification that could be useful for the managers. The analyst must lay down all the specification and the same should not be technical. The specification must be detailed and very well presented.

(www.mu.ac.in, 2015)

The following are the deliverables for the system analysis:

1. Programs, reusable modules and the objects
2. Files and the databases
3. Records and the transactions
4. Data dictionary
5. Procedures
6. Schedules and timings
7. Interfaces
8. Data requirements
9. Revised cost benefit analysis
10. The recommended designing alternatives
11. The recommended implementation techniques
12. The preliminary system test plan
13. The management summary of the system that is proposed to be developed
14. The index to the related material
15. The requirements of the network and the telecommunications
16. The controls of the system

(Umsl.edu, 2015)

Conclusion:

It is better to implement the cloud based system. This is mainly due to the benefits like saving money, providing of the financial information in the real time, collaboration, reduction of the fraud, improving efficiency etc.

The adequate number of controls must be put in place so that all the procedures and the rules are followed in time and there is no fraud whatsoever.

References:

Accountantnextdoor.com, (2015). Advantages and disadvantages of cloud accounting to a small business | Investment and Small Business Accountants. Retrieved 18 January 2015, from https://www.accountantnextdoor.com/advantages-and-disadvantages-of-cloud-accounting-to-a-small-business/

McCarthy, D. (2013). Out of the Office: Cloud-Based Accounting vs. Traditional Accounting | Compass EAST. Compasseast.com. Retrieved 18 January 2015, from https://compasseast.com/cloud-based-accounting/cloud-based-accounting-vs-traditional-accounting/

opentuition.com, (2015). Internal Control Systems. Retrieved 18 January 2015, from https://opentuition.com/wp-content/1/files/group-documents/15/1288628380-D.InternalControl.pdf

Price, D., & VIPs, L. (2012). Advantages and Disadvantages of Cloud Computing To Accounting Firms – CloudTweaks.com. CloudTweaks.com. Retrieved 18 January 2015, from https://cloudtweaks.com/2012/02/advantages-and-disadvantages-of-cloud-computing-to-accounting-firms/

Searchsoftwarequality.techtarget.com, (2015). What is systems development life cycle (SDLC)? – Definition from WhatIs.com. Retrieved 18 January 2015, from https://searchsoftwarequality.techtarget.com/definition/systems-development-life-cycle

Umsl.edu, (2015). Deliverables in Analysis. Retrieved 18 January 2015, from https://www.umsl.edu/~sauterv/analysis/deliverables.htm

www.comp.nus.edu.sg, (2015). Software Engineering Project. Retrieved 18 January 2015, from https://www.comp.nus.edu.sg/~cs3215/lecture/3215-3-SDLC%20for%20SPA.pdf

www.mu.ac.in, (2015). System Analysis. Retrieved 18 January 2015, from https://www.mu.ac.in/myweb_test/MCA%20study%20material/M.C.A.%20(Sem%20-I)%20Paper%20-%20II%20-%20System%20Ananalysis%20and%20Design.pdf