46th ISTE Annual National Convention & National Conference 2017

International Journal of Advance Research and Innovation (ISSN 2347 – 3258)

Comparative Analysis of Traditional and Modern

Accounting Approach
Damanpreet Kaur
Assistant Professor
Department of CSE, Gulzar Group of Institutes, Punjab, India
damanpreet@ggi.ac.in

Abstract- Indian accounting is going to face new challenges from the developed countries after outsourcing accounting work. To overcome
these problems accounting sector in India needs tangible improvement in terms of quality and output. To accomplish this , Ind ian accountants
must be well formed about the latest trends in accounting industry such as new techniques of journal entries , new techniques of accounting of
branches and departments and new system of automation of accounting work . This should be possible only by adopting Modern accounting
practices. The purpose of present paper is to highlight the traditional and Modern accounting concepts.

Keywords— Indian accounting, modern accounting, trends, automation.

computers became in fashion with affordable software,

I. INTRODUCTION
Accounting is an art that an organization uses to measure its
financial performance by recording and classifying all the
transactions like sales, purchases, assets, and liabilities in such
a way that adheres to certain accepted standard formats. It is
useful to evaluate a Company’s past profit trends, present
condition, and future prospects. A more formal definition of
accounting is the art of recording, classifying, and
summarizing accounting transactions and events which are, in
part at least, of a financial character and interpreting the
results thereof.
Indian accounting is set to face new challenges from
developed countries after externalization of accounting work.
To meet this challenge accounting sector in India needs
tangible reforms in terms of quality and output. To fulfill these
kind of needs, Indian accountants must know about the latest
trends in accounting, i.e. about new methods of accounting
entries , new methods of departmental accounting and
accounting of branches and automation of accounting system.
This should be possible only by adopting Modern accounting
practices.
Till 1980 Accounting has been done manually. Before the
emergence of fast and cheap computers, accounting
traditionally was performed by recording all the transactions
in columnar papers and kept in voluminous binders. Once
accounting work stepped into this medium, where concepts
remained the same but techniques changed from papers to
programs. With the emergence of fast and furious computers
user friendly, accurate and reliable software started.
Accounting system is a process of interpreting business
transactions (related to money) in such a manner so as to
useful to the management in decision making. Modern
accounting involves making use of computers therefore it is
called as computerized accounting. It includes accounting
software to record ,store and analyze financial data. Modern
system of accounting brings with it many advantages that are
unavailable to along accounting systems.
II. BACKGROUND
A. Traditional Accounting
There is a book of original entry called as 'Journal'. There
were subsidiary books like sales book, purchases book, sales
and purchase return book, cash book and more. the accounting
is based on double entry system i.e. we record both the aspects
of transaction. One is debit and other is credit. it helps to
check the arithmetical accuracy of the books of accounts.
There are three golden rules of accounting these are also
called traditional rules of accounting. A Traditional accounts

Gulzar Group of Institutes, Ludhiana, Punjab-141401 (INDIA)

 46th ISTE Annual National Convention & National Conference 2017

International Journal of Advance Research and Innovation (ISSN 2347 – 3258)

system, if developed accurately can deliver accurate chronological order and classify the transactions i.e. one type
information. Particularly for the small businesses, in a well of transactions under one head which is known as ledger book
designed Traditional accounting system the advantages which contains collaboration of different accounts. After the
outweigh the disadvantages ledger report software generate the income statement and
The golden rules of accounting require that you assure the balance sheet which depicts the profit or loss and financial
type of account in question. Each account type has its own position of the concern at the year end. If you try to pass an
rule that needs to be applied to account for the transactions. entry in modern approach you should find that it is much
The golden rules have been listed below in Table easier to apply modern approach in accounting than traditional
approach.
TABLE 1. Golden Rules of Accounting
TABLE 3. Rules for Modern Accounting
Type Of Account Debit Credit
Type Of Account Debit Credit
Personal A/C The receiver The giver
Asset A/C Increase Decrease
Real A/C What comes in What goes out
Liability A/C Decrease Increase

Capital A/C Decrease Increase

Expenses and Incomes &
Nominal A/C losses gains Revenue A/C Decrease Increase

Expenses A/C Increase Decrease

The following table 2 describes both the positive and negative Drawings A/C Increase Decrease
aspects of traditional accounting

TABLE 2.Aspects of Traditional Accounting

Aspects of Modern Accounting
Positive aspects of Negative Aspects of One accountant can deal with various companies through
Traditional Accounting Traditional Accounting
effective utilization of modern accounting .
1)Applicable for any business 1)Chances of human error 1. Positive Aspects
2)Easy to set up 2)Take more time to generate
a) Cost:
reports Modern accounting system provides many advantages to
3)More flexible than a modern small businesses. Modern systems provides instant reports on
accounting 3) Suitable for small business inventory control, Income or loss, customer accounts and
4) Safe and secure 4)Records susceptible to perils payroll and sales analysis, allow faster adjustments in your
such as fire and water business decisions.
5)Does not need electricity or 5) Cannot be recover if lost
b) Time
Power
Modern accounting system saves time a lot. Software allows
6)Cheap 6)Not particularly suited to
environments where there are
fast data entry than traditional system. It also allows us to
large volume of transactions improve your inventory control and payment collection which
saves time and improves the cash flow of the business.
Traditional accounting systems, seem can still provide an c)Computerized accounting systems
effective way of recording business transactions and can Computerized accounting strengthens the efficiency of the
deliver an efficient accounting information system for the business. We can generate reports in few seconds by inputting
small business. the transaction once only. The main advantage of
computerized Accounting is that it increases functionality,
B. Modern Accounting improves accuracy, fasten up the process of accounting.
Modern accounting records the transactions into a book of 2. Negative Aspects
prime entry. Modern accounting mainly use the computer Modern accounting system has its own set of problems, there
system The accounting software sort all the transactions in is a need to protect data against loss through power failure or

Gulzar Group of Institutes, Ludhiana, Punjab-141401 (INDIA)

 46th ISTE Annual National Convention & National Conference 2017

International Journal of Advance Research and Innovation (ISSN 2347 – 3258)

viruses, and also there is a risk of hackers stealing data. Cyber
crime is also a concern, and you need a system of controls for
who has right to access to the information. If there is a security
breach and data is stolen, management is personally liable for
the loss of data. You also need to ensure that the data has been
correctly inputted into the system.
III. COMPARATIVE ANALYSIS
The modern accounting approach has many advantages over
traditional accounting approach as described here in detail
1. Speed
The main difference between manual and computerized
systems is speed. Accounting software helps to process data
and creates reports faster than manual system. Calculations are
done automatically in softwares, it minimize errors and
increasing efficiency.
2. Cost
modern day businesses. There is now a need for
accountants who can easily cope with modern accounting
approaches.
References
[1] Balvant M.Unnibhavi,(2005), “Financial Accounting”,Atlantic
Publisher and Distributors New Delhi.
[2] Gopinathan T(2010) , Modern Accounting, April 2010
[3] Mukharji and M Hanif(2000), “ Modern Accountancy”, Volume 1,Tata
McGraw Hill Publishing Co.Ltd., New Delhi.
[4] Mukharji and M Hanif,(2001), “ Modern Accountancy”, Volume 2,Tata
McGraw Hill Publishing Co.Ltd., New Delhi.
[5] Smith.S ,The smart way to invest in computers,may 1997
[6] Vinod Kumar ,Role of information technology in accounting ,October
2009
[7] Web link of ejournal: https://eujournal.org/index.php
[8] Web link: https://en.wikipedia.org
[9] Indian Journal of Finance New Delhi

Manual accounting with paper and pencil is cost effective

than a computerized system, which requires hardware system
machines and software. Other expenses associated with
accounting software training and maintenance. Expenses
increase with costs for printers, paper, ink etc.
3. Backup
A third difference between manual and modern systems is the
ease of backup of a automated system. All information can be
saved and backed up, in case of fire or other mishap. You
cannot do this with paper records, you have to make copies of
all pages--a long and inefficient process.
4. Accuracy
Computerized systems have increased accuracy of calculations
if compared to the traditional system, in which journal, ledger,
trial balance and financial statements manually compiled. If
errors occurred, it will take much time to find and correct
them.

IV.CONCLUSION
Accounting software help accountants to forecast sales with
the help of economic business models and other business
decision tools. They automatically process information, hence
the number of human data entry errors decreases. This paper
briefly explains the drawbacks of traditional accounting
approach and focuses on positive aspects of Modern
Accounting approach. Modern accounting approach provides
better speed, low cost and ensures accuracy and reliability
over traditional accounting approach. In the modern day an
accountant having right qualification is itself not enough for
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Gulzar Group of Institutes, Ludhiana, Punjab-141401 (INDIA)