Before the age of computerized financial systems, all accounting processes were performed by hand, using paper and pencil. Some small businesses still use this old methodology, also known as the manual accounting system. The concepts behind both manual and computerized systems are the same, only the mechanics have changed.
The manual accounting method is much cheaper than a computerized system. Some people are not comfortable working with computers, and perform better with the paper and pencil system. The manual system works, even if electricity is off -- unlike most computer setups. Another benefit of the manual system is that there is no data corruption or duplication, as sometimes happens with accounting software. Because manual accounting is simple and doesn't require computer skills, firms can hire employees for less money, a major advantage to small businesses.
Before computerized spreadsheets and software, accountants used pads of papers printed with columns. The first column to the left is usually narrow and is used for dates, while the second column, the widest in the page, is used for descriptions. Accounting pads present four or more columns -- each column separated by double lines running down the page. The pads are often printed in light green or white stock with a space for each digit, minimizing confusion due to handwriting. The lines on the pads reflect business transactions, such as sales or inventory transactions.
Journals are used to facilitate the manual accounting process. These are specific purpose pads for a certain process. You could have a journal for all your cash receipt transactions, for example. When a sale occurs, you write the transaction in the journal as a single line item. At the end of a week or a month, you add up the transactions and make one journal entry in the general ledger -- a credit to sales, and a debit to cash.
When using a manual accounting system, you need to have a strategy to find and correct errors in an efficient manner. Generally, you find an error when you compile a trial balance, and it doesn't balance -- debits don't equal credits. In this case, make sure the balances on your journals and journal entries are accurate. You could run a calculator tape, and attach it to each page of the journals and general ledger, making sure totals are correct. You should also review the trial balance for reasonableness, and compare the numbers with your last trial balance, looking for differences that may be mistakes.
Sheila Shanker is a certified public accountant based in California. She writes online courses for professionals seeking CPE hours and has also published the book "Guide to Non-profits: From the Trenches." Her articles have been published in national magazines such as the "Journal of Accountancy," "Architecture Business and Economics" and "Veterinary Economics." Shanker holds a Master of Business Administration.