The Impact of Computerization in an Accounting Organization

The Impact of Computerization in an Accounting Organization

 

Information technology and computer systems have significantly benefited accounting

departments and organizations. They have reduced the lead time required by

accountants to prepare and present financial information to management and

stakeholders and have upgraded the accuracy, efficiency and timeliness of the

 information. The translation into computer systems of paper ledgers, manual

 spreadsheets and hand-written financial statements have resulted in quick presentation

 of individual transactions into financial reports.[1]

 

In manual accounting systems, a calculator is used in aiding the preparation of all

entries and records by hand. Specialized journals are used in recording initial

transactions like sales and payables, after which they are manually posted to the

subsidiary journals and/or to the corresponding general ledger accounts. At the end of

a monthly, quarterly or annual accounting cycle, worksheets are readied, adjusting

entries are entered and financial statements and reports are prepared.[2]

 

In a computerized accounting system, basic components like receivables, payables,

inventory and payroll will also be recorded and processed to obtain reliable financial

statements and reports, but this time they are keyed into a computer.[3]

 

Integration is the major difference in a computerized system, because a transaction

entered into the computer is carried to all parts of the system. For instance, in the

recording of a sales figure, only one entry of the invoice account is needed to post it

to a sales journal, to a subsidiary accounts receivable ledger and to the general ledger.

This will then facilitate the updating of sales and accounts receivable reports, client

billing statements and the financial statement as well. Time and accessibility of

information is a second advantage of a computerized system, because accounts

will always be current following the immediate posting of information in a computer.

The frequent issuance of financial statements and reports are useful to clients.

Flexibility is a third difference in a computerized system, because handling of

information and producing of reports can be simple and straightforward or be very

sophisticated, depending on the need.[4]

 

Spreadsheets allow accountants to perform multiple tasks, including the saving of data

for use in different business locations and the creation of a structured set of data on

spreadsheets by linking them. Since accounting software packages supplant manual

accounting tasks, they enable accountants to have more time for analysis. They also

offer automatic closing procedures at each accounting period’s end. The push-button

moving of temporary account balances to permanent accounts, the resetting of the

accounting cycle, plus the reporting of any problems during the process collectively

reduce closing time from days to hours. Computers likewise facilitate the access to

financial information by accountants via the Internet. Since establishments like banks,

creditors and suppliers likely use online websites, downloading statements, making

payments, updating information and preparing data can be done by accountants

through these portals.[5]

 

Practice management is another area in an accounting firm where a computerized

system can be used, because it enables the ready tracking of client files, employee

files and billing and work assignments. Word processing software can prepare letters

of billing and of information to clients, with standard report and engagement letters

being readily modified. Data bases can house client information like filing dates and

work type, where they can be sorted for scheduling purposes, and can allow the

selection of clients for specialized mailings and also prepare labels for the same.[6]

 

Software packages that cater to the needs of the professional accountant are the

recommended products to use, as in the case of a general ledger write-up package for

the public accounting firm, because it contains subsidiary journals for receipts and

disbursements, and sales and purchases in addition to a general journal. A good

program should be user-friendly, simple in operation, not much different with

traditional accounting procedures and have the ability to integrate with other programs.

The software provider to consider is one which has a solid history of keeping its

software up to date with advances in both the accounting and computer fields.[7]

 

[1] Osmond Vitez, “The Impact of Information Technology on Accounting”, eHow money, 2011,

<http://www.ehow.com/about_5471307_impact-information-technology-accounting.html>

[accessed 21 May 2011]

[2] Marlyn A. Schwartz, “Computers and Accounting”, AllBusiness, 1 May 1990,

<http://www.allbusiness.com/technology/computer-software-auditing/123395-1.html>

[accessed 21 May 2011]

[3] ibid

[4] ibid

[5] Kirk Thomason, “How Have Computers Changed Accounting”, eHow money, 10 April 2011,

<http://www.ehow.com/info_8196868_computers-changed-accounting.html>  [accessed 21 May 2011]

[6] Marlyn A. Schwartz

[7] Thea Graves Pellman, “Accounting & Computers: The Perfect Union”, AllBusiness, 1 May 1991,

<http://www.allbusiness.com/accounting/160724-1.html>  [accessed 21 May 2011]

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