Computers in Accounting After 40 years - The Verdict

By The BC Accountant

Computers in Accounting after 40 years - The Verdict is an eye-opening analysis of computers and how they changed accounting.

The author was an accountant before the introduction of computers and for many years afterwards. While there are many positives about computerising accounting practices, is there still much lacking?

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• Language: English
• Publisher: TBA
• Release date: Nov 30, 2021
• ISBN: 9780645177404

Book preview

Is all OK with the New Accounting Systems?

Accounting has been my working experience and background since long before computers came into the field and took over. After 40 years I am giving voice to some drawbacks I have come across with the new systems right from the start.

The one I consider particularly bad is I see very little change from the earliest computer accounting systems introduced in the 1980s up until today in 2020. It was not perfect then and is still not perfect.

Considering the major advances in communications and banking in that period, I deplore the fact the accountancy profession has not seen fit for a review before this.

Another drawback is the lack of serious consideration for confidential information between parties to transactions. My understanding of this is that it did not matter in the past as banking details were not needed before net banking. Cheques were written and cleared by banks before payment passed over without revealing account details.

With today’s instant banking, confidential details are part of the trust between parties and should not become part of databases available to others.

I am not sure that modern accounting practice agrees with me on that matter.

Introduction — Who am I?

I’m new to this so I’ll start off with who I am, followed with what I am not!

Who am I?

I am from a different era, trained in the BC (before computers) era as an accountant. It is hardly imaginable that such a time existed. Almost like prehistoric times.

My testimony is that it is still within living memory! That is what I am.

Now for what I am not! Keep reading …

Part 1 — My Credentials

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Chapter 1 Computers: End of an Era!

It might be the end of an era but I have not been discarded on the waste heap of new technology. With great interest I embraced the new changes made in the 50 years or so since I first qualified as an accountant.

After years of practice, which included experience working with large mainframe computers in the 60s and 70s, I abandoned my career for personal reasons. Not least because of dissatisfaction with my career choice. New horizons beckoned. And the sea change lasted a long time.

New world, new career

I returned to my former accounting career in the late 80s. It was then I discovered mainframe computers had given way to small boxes nestled on my desk.

To my delight, I realised that I had no trouble with them as the product was similar to what I had been used to in those early days. It was astounding that the power of the box on my desk was greater than the computers I remembered from my mainframe days.

Huge chunks of drudgery work to create financial reports disappeared. Taken over by the prowess of software programs not available in my earliest forays into computer land.

What a wonderful new servant!

Is everything perfect in the new world?

Does this mean that I am completely satisfied with these new programs compared to the traditional manual mores of my early training?

Most of the changes I see are reasonable and welcome, but some practices are doubtful compared to my experience as a BC Accountant!

One observation is that computers have two major drawbacks — human beings and human beings.

The first comes from incorrect data input by humans. This results in distortions to computer reports. The second is that human beings, in general, think computers are infallible.

If not satisfied, offer alternatives

Not being in a position to question computer solutions without producing alternate ones, I decided to see if I could create better solutions based on user friendly principles.

Have I succeeded? I hope this book convinces you, and others, that I have created something that merits further examination. Only time will tell.

To start, I must offer alternatives that are superior to the ones available and just as professionally capable, but easier to operate.

My new career

I returned to accountancy because I saw the need for very small business owners to cope with the demands of computerised systems. They are not normally the best at keeping records, and many were lost and confused.

Hence my career as a small business advisor started almost by accident. I became their bookkeeper, not accountant. Only because they associated an accountant with how much tax they owe the government at the end of each year.

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Regular advice

Small business owners needed a day-to-day advisor on (mainly) cash flow problems. They knew they were making a profit but couldn’t understand why they kept running out of money.

That was my job. And over a long time, even I had trouble providing up-to-date information on cash flow problems. The new computer systems didn’t help as they didn’t seem to recognise the problem.

Remembering back to my old accounting days, this was a problem even then, and it affects large businesses as well.

Start of research

I taught myself the mysteries of computer spreadsheets as I enjoyed working with them. I experimented with client data to provide quick ways to control the flow of cash movements through bank accounts. I am pleased with the results and confident most business owners would find them worthwhile. That was the start of my research and, in time, I created alternate solutions.

The BC Accountant Report Card: New against old

Along with the chapters of this book based on my findings, I also compare computer accounting against traditional methods. Each chapter has a report card as a feature.

In this one, I compare providing financial reports using computer software to traditional systems. My rating is highly in favour of the new and, thus, Very Good!

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Chapter 2 Off with Debit and Credit!

In the last chapter, I mentioned that I had set out to create a system showing what was wrong with new computerised systems compared with traditional ones, and then left the subject up in the air. Did I leave you feeling a bit up in the air the last time? Sorry about that. I didn’t mean to. I had to gather my thoughts on how to continue!

A good beginning is how computer systems have made life easier. No longer is there the drudgery of working with the old account books, adding up columns of figures manually and deciding which ones are debit or credit columns.

In the past, these two common terms caused much anguish — debit and credit. You don’t hear them used much these days because computers automatically assign them to the transaction it’s processing. In the old days this was called ‘posting’ transactions but today is better known as data processing.

So, what exactly do the words debit and credit mean? They describe the two parts of all transactions. For every action by a business (transaction) there is a corresponding opposite reaction. This comes from the age-old premise ‘double-entry bookkeeping’.

Account Reasons

Most accounting systems, manual or computerised, are double-entry systems. Reasons for actions taken by organisations are called accounts and each action has a corresponding reaction. This means that when funds are paid or received (payment for goods or services,