Accounting Essays - Technology Modern Accounting

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Technology Modern Accounting

The Effect of Changing Technology on Modern Accounting, and the Implications for the Future of Accounting & the Accountant

Introduction

This paper presents a need to report on the effect of improving technology on today’s Accounting profession and the impacts such technologies have had for the Modern and future Accountant.

What is Accounting?

Accounting is the process of recording, analyzing, summarizing the transactions of a result oriented business (Profit & Non Profit) entity to provide day to day information for business management and other interested parties.

What is Technology?

The practical application of science to commerce or industry or the discipline dealing with the art or science of applying scientific knowledge to practical problems. Word Web Dictionary database .Available from: http://wordweb.info/ [Accessed 10th March 2005].

What is Modern Accounting?

Modern Accounting deals with original definitions of Accounting as an ancient science but extends the usage from the United States from the 1960’s the FASB (the Federal Accounting Standards Board and the ASB (Accounting Standards Board) its Uk counterpart in its FRS 18 Accounting Policies (Financial Reporting Standards documents) Modern Accounting as Accounting evolution based on the following concepts:

  • Relevance
  • Reliability
  • Comparability
  • Understandability

What is Accounting Technology?

Accounting Technology is the use of technology usually Computers, printers, scanners ,storage Devices & networks etc . Within an accounting firm or department, It can also be seen as Information Technology products and services that are sold to clients of Accounting Firms or purchased separately by corporate bodies for their internal use..

The Effect of Changing Technology on Modern Accounting

Having defined the basic terms and concepts for this paper let us gently build up a case of how Changing Technology has affected Modern Accounting.

Within the fundamental definitions of Modern Accounting and the burgeoning Technological changes we shall extrapolate early emergence so that the more modern cases can be adequately represented.

We shall take a brief look at Accounting Technology in its early stages.

Accounting and Early Technology

The usage of Accounting during the birthing of 20th Century Technological advances have impacted the Business and Commercial world from its inception .As Technology in itself is a tool for carrying basic day to day tasks within World Economies , It has also impacted major Accounting concepts and ideas from this early stage.

Simplistically, the abacus can be referred as the first real technological innovation in Early Accounting practices. Other variations on the same theme that incorporated the early principles of Accounting like Collecting, Recording ,Analysis and summarization of data were introduced by the Italian Luca Pacioli in the 14th century .

So tools like the double entry system and ledger bookkeeping were accredited to this Accounting Icon. Not to banish the fact that Accounting had existed since the dawn of civilization as in Mesopotamia ,the Chaldeans and the Sumerians who had gotten a grasp of writing and inculcated it within early Commercial transactions as far back as 3500BC.

This Technological Advancement was a giant leap ahead as Recordings could be made on papyrus of Business transactions between Ancient Civilized cultures.

This new trends enabled collection and recording of transactions but calculating Engines like the Abacus introduced mechanical methods of Analysis and Summary.

The Electronic Calculator and Babbages’s Analytical Engine extended the usage of Technological devices seen in those days as fancy tools into a working practical means of doing calculations regarding Accounting Transactions.

By and by Modern Calculators and Early Mini Computers and Mainframe Systems contributed to Accounting methods as “clumsy” programs were written in various languages like COBOL (common business oriented languages) that improved the interaction between Accounting and the advent of Technology.

Modern Accounting and Technology (Overview)

Modern Accounting concerns itself to Standards and innovations within the Technology Industry and has greatly induced the way in which Accountants operate today.

We shall look at trends between the late 1980’s till date and see how changing Technology has greatly affected Accounting as we know it today.

As Accounting evolved into what we know it as today , It became clearer for a need for Standards ,these Standards were introduced by varying geographical bodies and they offered the International Accountant a fundamental guideline in the methods in which they would practice Accounting.

As individual States and Countries had their own Accounting laws like Taxation and Trading issues with respect to Regulatory bodies within each Region. Compliance across borders will affect tools that effect these rules so Technology must be able to meet the ever increasing demand of International bodies that govern such rules of engagement .e.g. the Sarbanes Oxley Act (see glossary) and a plethora of organizations and bodies concerned in harmonizing financial practices across international Commerce of the entire planet.

It became pertinent that Technological advancement would or might have to toe the line in offering Systems that could meet this amalgamation of diverse bookkeeping practices and cultures .

Language has long been an issue within Commerce and likewise Technology must also have the ability to cut across the variants that exist when differing platforms of Computing Systems require seamless integration .A need for adaptable Technology in the case of Operating Systems and Programming constructs in terms of Hardware and Software can not be overemphasized.

Emerging Technologies for example Sun’s Java programming language, XML ,UML (Universal modeling language) and BPMN (Business process modeling notation) which are becoming fast technological innovations within the business and Financial world.

Be it as it may it is a certainty that these technologies are themselves influenced by Accountants as being primary users, their expertise would be of immense importance to reasonable and marketable Software Applications from Prototype to finished products .

Within the early stages of Software Engineering in those days, suitable allowance was not usually given to the end user of such products and development distinctions within the Software life cycle like System analysis, design and coding were usually done by the Software programmer who cared little for the Average accountants desire to account for everything the way Osama Bin laden cares for George W. Bush.

So clear lapses in development, implementation and deployment have existed along the way with Firms like Microsoft’s Excel Spreadsheet and Borland’s paradox churning out early Accounting packages that can be now best compared to the early Mainframes of Ancient Computing as true museum pieces.

The emergence of Storage repositories and Database banks and their methods and interactions within the Modern Accounting framework as aided the different players in the market and lessened development constraints in the Fast changing world of Information Technology .

Major manual Accounting processes have been affected by a lot of these Technological improvements, enhanced in the sense that the present day Accountant calls “The Paper less office” an Utopia of Business paradise achievable by new emergent Technologies in the wake of the search for the Holy Grail of the perfect Accounting computing tools.

Not to leave out the effects of the Information Superhighway the Internet and its inherent advantages and disadvantages as it affects the Accounting world today from its transition as a mere University Science project in the mid and late 80s to the behemoth it is now.

From the inception of the terms Electronic Data Interchange (EDI) and Management Information Systems (MIS) the desire to satisfy the needs of Business and Accounting Software that have invaded the Software Market for Accounting packages has been enhanced by the competition for the acceptance of the practicing Accounting Firms and their Clients to Corporations requiring customizable products that can be tailored to their in house accounting needs.

This market, long recognized as very buoyant and profitable has made its goal to present the Accounting profession with Technology that will change the way they do business with each other. As Information technology as a tool has become a key determinant within every facet of endeavor these days , it became increasingly difficult for Accountants and other business professionals long regarded as pariahs of the Computing world to recognize the importance ,benefits both direct and indirect impacts of Technology as a serious tool to enhance Accounting performance and objectives.

These direct influences of Technology became rampant as Technological advancement went into overdrive from the early 90s .

Before then, Technology within Accounting systems was based on the collection and recording of data .The analyzing and Summarizing aspects of Accounting were implemented in rudimentary computer logic .The theories had existed for ages but the Tools needed in terms of Computing power and flexibility were actually non existent.

Technology as we know it was at its “infancy”. Complete crossover adaptations were usually long term projects engaged in by Governments and large Corporates or Multinationals who could afford the wherewithal of developing such Accounting packages.

This was the age of the early spreadsheet programs like Dbase, paradox Microsoft excel and the emergence of Database driven Applications like Oracle, Sybase ,Informix etc.

If we see the emergence of technology within modern day Accounting from the late 80s till date we can analyze the trends that have affected Accounting in the window of time when Technology was seen as an expensive business tool to possess until now when such technologies have not only shrunk in size and cost but their performance has increased in manifold ways.

What we can ask ourselves are relevant questions like

What affected what? Did Technology bring about today’s Modern day accounting methods or vice versa?

Did Modern Accounting contribute to the need for fast hardware and High Tech programming languages & operating Systems used to design Accounting Software that we have today?

Is their evolution into the careening complex systems of this present age a function of independent growth and development?

The marriage of Accounting and technology has been more profound within the following concepts.

Accounting processes are the necessary end products so Technology as a tool is required to satisfy the needs and desires of this end product.

Summarizing of Data

Technology represents an ideal tool to carry out these procedures within the information Technology concepts from right when the First desires of Technical minds to manipulate data within the confines of each process of the Accounting definition.

For each Accounting process we can come up with a relevant & corresponding Technological tool that has faced the test of time to be what it is today.

Collecting of Data

Computers collect data very well but from inception they have not done that very nicely .In short collecting data for the early computers was an uphill task that required extremely cumbersome processes As only recently has accounting moved away from the age old Bookkeeping practices of Manual Ledgers, Invoices, Cash books ,Trial balances, Tax preparation forms etc become prone to such factors as integrity, Consistency & Relevance .

Recording of such Data was also a gargantuan operation as the era of human Data entry operators posed a threat to the fluidity of systems processing. This was based on factors such as Human Efficiency and man’s ability to be prone to errors.

Today these are issues of the past.

Effective Data Collection has been proved to not only be achievable but can be done in an assembly line mode where entries like Tax forms and pay slips , etc can be generated electronically from the internet and via email etc. Electronic Ordering and invoicing is the norm with the overwhelming usage of Credit/debit Cards and other forms of Electronic payments thereby reducing the clutter and cost of paper commercial transactions.

This transition although capital intensive, allows for correct Accounting procedures like Auditing via electronic trails made possible because of the Electronic nature of such transactions. Data Access although largely a chief issue with respect to security and integrity of today’s Networked world has created mitigants and also improved and designated Accountants into specialists within such fields that act as kind of Electronic financial police within the Accounting industry.

Even documents long seen as impossible to do away with can now be fed into Optical Character recognition devices like Scanners which carry out he Job of preserving and verifying originals of Document long seen as essentially physical .

This documents were prone to wear and tear due to the modes in which they were stored.

Data retrieval was largely an Herculean task and involved clerks, filing assistants and large Rooms to store such Documents and files etc.

Today’s hi tech. Accounting offices look less like mini library shelves as they sport gleaming table boxes with Star Trek veneers and are labeled such names as Desktops PCs ,Laptops, LCD monitors ,Space age printers with Photocopiers and Scanners all in one plus fax machine .

Pocket Desktop Assistants (PDAs) now considered the primary tool of most mobile Accountants even putting laptops into a secondary sidekick role as these tiny contraptions can efficiently compete as mobile offices with their traditional counterparts. They combine mobile phones, answering services with Office Applications like spreadsheets ,databases, Email, Internet browsers etc all within the palm of your hand.

The Treo 600 and the Hp Ipaq Pocket PC5500 which are product leaders are amongst the numerous brands available in the market today.

All this within an Accountants office!

The ubiquitous Computer server room with a vast array of Servers either locally resident or centralized depending on the firms Enterprise status contain Databases that store Data and are powered by Hardware wizardry that increases yearly at a breakneck speed.

These Servers are faster, smaller, cheaper and run such technological marvels as Object Oriented Database e.g. Oracle 10G the latest in Grid Technology plus Enterprise Ebusiness suites featuring the latest in CRM’s (Customer Relationship Management techniques).

All these run on Operating systems like Unix, Windows, and Linux a recent innovation in Operating System Technology largely regarded as the Open Source community’s reply to dominating costs within Operating Sytems Application development and have largely reduced the prices of applications available on the market today. These systems are guaranteed of never going down and maintain the always on Demand computing parlance of “What you want is what you get . “

These days adverts like this below are rampant within most Accounting Technology publications for Faster innovations within the Paperless office .

“Get paperwork out of the way fast .

Free up your space and time with the new Scan Snap paper manager .It is fast it is simple and automatic .In seconds it turns a double sided document into an easy to manage pdf (Adobe’s portable document format ).It will reads business cards into your contact manager , It will scan documents into your email for faster delivery than faxing etc .etc It might even get you some coffee if you configure it right ! “

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