Traditional and online accounting: What are the differences?

Understand the difference between traditional and online accounting will help the owners of small and medium-sized businesses to choose the one suitable to their goals. Online accounting is different from traditional accounting in terms of speed of operation, backup, cost, and others. So, this article explains the difference between traditional and online accounting.

What is traditional accounting?

Traditional accounting is the process of accounting for the financial transactions of an organization traditionally by recording the transactions manually in columnar papers. However, traditional accountants prepare financial statements, tax returns, and others like online or digital accountants.

What is online accounting?

Online accounting which is also known as cloud accounting is the process of accounting for financial transactions through the use of accounting software. The advancement of technology changes the process of accounting from papers to programs. It allows the owners of small businesses to record their transactions online through accounting software. Once the data is entered into the software and the software will prepare the annual accounts for the business.

The difference between traditional accounting and online accounting

So, the main differences between traditional accounting and online accounting include:

Speed of operation

Cloud accounting operating with high speed. Once the data is entered and saved in the software, the annual financial reports will be prepared within few minutes which is not possible in traditional accounting. Cloud accounting helps the business to know whether it makes a profit or loss without waiting for days or weeks or months.


Under traditional accounting, there is a high chance of losing data when papers are destroyed because it relies on manual backup of data. This occurs especially when you have only a copy of the data or the whole copies destroyed. However, when you make use of online accounting, the data can be stored off-site by saving it on an external hard drive, CD, flash drive, someone else’s system, and even online. So, if something happens to the data, the company can restore the data from the backup.


Traditional accounting may be more expensive than online accounting because of the recent affordability of accounting software or license. Manual accounting requires paper and other writing materials together with labor to carry out the process.  Meanwhile, cloud accounting requires a computer, printer, accounting software, and other related expenses. Therefore, small and medium business owners may opt for online accounting because it is safe and easy to use.


The calculations under cloud accounting are highly accurate than traditional accounting. This because traditional accounting involves creating columns, entering figures, adding them up, move them between pages, preparing a trial balance, and generating annual accounts manually. Therefore, if any error occurs, it always takes time to detect and correct. However, with the use of accounting software, you can use formulas to do calculations that have a high degree of accuracy in the process.


By entering invoices, receipts, and other vouches online through accounting software enhance transparency in the process. This is because it enhances the communication between accountants and business owners. While traditional accounting on the other hand involves less communication between the business owner and accountant. The accountant receives vouchers, receipts, and others and works on them to prepare the financial statement.


In conclusion, using online accounting helps the business to store their data in one place, enhances the organization of financial information, enhances the accessibility of data in the accounting software. All these make online accounting to be easier to use than traditional accounting. Additionally, it makes searching for information to be easier because you can make use of system functions to do it.

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