Investigating dimensions of the Computerized Accounting Technique

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This paper proposes an overview of key issues of computer use in accounting entities at the moment. The author captures a series of practical problems arising during the accounting and recording the activity of economic agents. Also the material is trying to show the computerized accounting technique.

From pencil to computer

Any economic activity, any common or individual property susceptible to be shared, any financial activity, any tax revenue source needs to be quantified and wrote, by values, and, if necessary, quantitative. The current legislation stipulates that business agents, freelancers, public institutions, etc. must conduct the accounting of their estate and managed funds and transactions. [1] Accounting is not only necessary but mandatory for all traders today.

The ancient technique of bookkeeping has gradually emerged in a range of rules and procedures designed to provide not only reflection of accounting information, but also the control made through them. The accuracy of accounting records, the true fair view, concerned the practitioners. So the double party accounting technique developed, which is specific for accounting modeling of property or financial position. Using double party accounting can significantly reduce the risks of miscalculation, writing or rewriting data. Account information is centralized and checked through the balance sheets. Accounts and balances may themselves point out some errors in recognition of structures and treatment of transaction.

Despite the beauty, symmetry and perfection of the double party accounting processes, many types of errors still occur in evidences. There are calculation errors undetectable through balance sheets. There is a risk of wrong recognition of the structures by wrong framing in another class or by their wrong assessment. There is also the risk of wrong treatment of transactions or events. So, the computer became useful to reduce the risk of human error.

Modern computers got to be more and more necessary in our daily life. We increasingly use the computer in the economic and administrative activities. On the one hand the computer is necessary for basic evidence, for recording events and transactions of the entities life, generating the documentation. On the other hand, the computer is needed to prepare specific forms and accounting records.

There are now a very wide range of software products for accounting entities. Some of these products have only limited accounting destination. Many, however, allow the integration of the two circuits: basic evidence and proper accounting. Some products are designed for a single user, tailored to their specific needs. Others are of general use and adapt relatively easily to the specifics of each entity. There are management and accounting programs that can be used individually, but also there are programs that can be exploited in the network.

What's good and what can be wrong with using the computer for accounting? How much the computer can change accounting technology? How well can the computer reduce the risk of error appearance mentioned above?

Accounting technique, new dimensions

Accounting theory shows techniques, different ways of organizing the flow of financial accounting information, known techniques of accounting. Accounting technique we can also define by range of forms and registers and how they are used in the entity's accounting.

Theory textbooks present two classic techniques of accounting, so called chess-master technique and journals technique. Both ways should provide the required accounting books:

the inventory register, kept for writing the value of the assets and liabilities of entity;

journal register, for chronological record of transactions and events;

general book, for systematic evidence of the various assets, liabilities and equity. [2] 

Chess master accounting technique is characterized by getting data from a single journal or from the auxiliary journals to chess forms, separately opened for debit and credit of each account. The name of "chess" is due to the detailing of the amounts on each debit and credit account in every correspondent account. Data from chess files are either written directly in the balance, or at first in various operations account files.

Journal based accounting technique is characterized by writing on journals for simultaneous chronological and systematic evidence, only for the credit of the accounts, detailed on corresponding accounts debit. The same information is retrieved in the general book.

Both variants were crystallized from the need to organize a safe and pertinent manner of recording and using the financial accounting data. Records are completed in express order. Simply use of the computer to calculate and to write books, balances and financial statements does not significantly affect the technique of accounting.

However, we accept today a new technique of accounting, the computerized one. It involves using a computer system, being only necessary data entry on the events and transactions, the system automatically generating the necessary records and reports.

Here are some of the features of computerized accounting technique:

the possibility of using the computer only for processing accounting information and financial statements (eventually combining tax reporting) or an integrated information systems, which combine the writing of basic evidence with the accounting itself, moreover, such systems can arise in financial management of the entity, following for example the deadlines of receivables and debts, they can also contribute to the financial audit or management control of the entity;

the possibility to use accounting software on an individual computer or a network depending on the architecture of the software and the needs of the user, and also the possibility of differentiated authorization access in the program depending on the duties of the operators;

conversion or alteration of dedicated specialist language, as for example, the widespread of the term "report" for all registers, balance sheets and financial situations, improper use of the term of analytical balance for the synthetic balance but detailed on the analytical accounts;

suppression of the steps of data transcription, steps that are characteristic for classical techniques of accounting, the computer automatically processing the desired statements;

loss of the defining characteristics of the classic techniques;

appearance of new models for the account files held on the structure that is proper for the user of the computerized technique;

working speed and ability in analytical detail accounts by comparison to the classical techniques.

There are some clarifications and legal restrictions on the use of computers in basic evidence and bookkeeping. These concern mainly:

using the special forms - issue for the series of invoices, receipts etc;

ban / limit the ability to come back with deletions and changes to the records of the previous months;

details on the operational and accounting records archiving on paper and electronic support.

Critical considerations

Benefits and losses of computerized technique are differently perceived by users. It is therefore difficult to synthesis them, so we understand that the list below is limited.

There are many benefits of using the computerized techniques. These include:

fast processing speed;

large amount of data processed;

possibility of automatic generation of the accounting records after data introduction from basic documents, eliminating manual rewriting steps;

superior analytical record;

adaptability of system to the users needs, that allows the use of the software for basic evidence, accounting, tax reporting etc;

ability to report errors in a timely manner: double pay for the same invoice, debit or credit balances wrong final value;

increased usefulness of the system for financial management, economic analysis, audit, control;

possibility to get special reports.

Among the risks and disadvantages of using the computer we can see:

addiction to the software provider services or to other qualified support for the user's needs to update the calculating formulas, the percentage of social security contributions on wages, the rate of VAT, income tax rate, etc.;

low intervention of software providers in improving the skills of human resources of the user;

boring warning messages about the effects of operator actions, usually at unmarking and deletion of records;

inability to perform some corrections to certain data already stored;

rigidity of settings and the architecture of certain files and structures;

rigidity of some reports that the system can generate;

system incapacity to report key moments of business management (different maturities, financial reporting periods)

system incapacity to identify some errors in recognition of transactions and events;

easy access of some inappropriately qualified users to such software, harming the accounting profession, that is inefficient protected;

the risk of failure analysis of processing results, allowing the occurrence of hidden errors;

Introduction of erroneous data can be followed by their processing without a proper analysis;

the need for resumption of previously entered data;

the need to gather accounting data, working with the same information from the modules of basic evidence;

difficulty in records and calculating the depreciation of fixed assets;

inadequacy endowment of the tax authorities for reporting on-line.

We conclude that computer intervention in financial accounting activities can be viewed as positive, but it must be developed to become better. Serial products are not always good for the customer, adjustments are often necessary.