A manual accounting system is a bookkeeping system for recording business activity transactions, where financial records are kept without using a computer system with specialized accounting software. Instead, transactions are registered by hand in accounting books, using a written ledger of transactions, physical records, pads of paper, and books. Often, a manual accounting system will have several ledgers with separate books to record different types of accounts, such as payroll or sales. The information recorded in these ledgers will be used to prepare the financial statements for the business.
Commonly, accounting pages of a manual accounting ledger have four or more printed columns with multiple rows to record the date of the transaction, type of account, the amount, if it's a debit or credit, and to make any observations.
Considering that a manual accounting system may be less costly than specialized accounting software, small businesses may use them to reduce expenses such as computer equipment costs, software license fees, and employee training. Furthermore, a small business may also use a manual accounting system because it may not have a high volume of transactions to record in the accounting ledgers.
[Last updated in July of 2021 by the Wex Definitions Team]