Computers In Accounting
Around a generation ago, an accountant s tools would probably have consisted of a pencil and sharpener, a hand-cranked calculator and a columnar pad. An electric pencil sharpener in those days was a high-tech accessory. Today the only one of those tools that you might find in an accountants office would be the pencil and sharpener. Replacing everything else are computers. Mostly personal computers (PCs), and their high-tech accessories and software products that do more than the hand-cranked calculators could ever think of doing.
It s taken years for accountants to adapt to computer technology. Computers are now being used to perform accounting tasks such as posting transactions, writing reports, developing what-if business scenarios with spreadsheets, preparing tax returns, and keeping track of fixed assets and receivables. After transactions are recorded they can be manipulated, sorted, analyzed, summarized, and turned into financial statements with ease.
In 1980 and early 90 s the personal computer accounting system was divided into two major segments, high-end and low-end systems. A few mid-range accounting systems were also developed however these were never really big sellers. Today the accounting system has three major levels. On the highest tier of accounting systems the software solutions can start at $150,000, the mid-range around $8,000 to $50,000 and the low-end anywhere from $100 to $5,000 range. Low end is further broken down into very low-end and larger low-end systems that are more functional but not quite big enough to be categorized in the mid-range computer systems.
Another computer related drive is the Internet and interfaces with the ability to have multiple software and hardware products communicating directly with the accounting system and its databases. Commerce that is conducted using the Internet technology will be the most widely used technology in the years to come. Quicken, is a popular, easy to use accounting system that is now providing remote entry of transactions through the web. This allows Quicken users to enter transactions through a site and store them for later retrieval.
The exchange of goods and products using electronic means is known as E-business. E-business conducted at commercial or wholesale level would consist of things like transferring electronic funds. Amazon.com and online securities trading are examples of e-commerce at the retail level. Dell Computer Corporation currently handles $10 million dollars in retail transactions over the Internet per day.
While Windows is the most common operating software in use, users are moving away from the older DOS-based or text-based interface. The newest of accounting systems are now going to web-based accounting systems. In the past things that would normally have cost millions of dollars can now be achieved for less than $500,000.
The use of local area networks and wide area networks is growing. Of an e-mail survey sent out to over 4000 different CPAs, the Journal of Accountancy magazine was able to find out the most commonly used programs. It was discovered that windows runs 92% of government offices and most CPA s use the Microsoft software for its ability and diversity to be able to do anything from word processing to designing spreadsheets. 80% of respondents were shown to use Microsoft Office for their program needs.
Edward Denison pioneered an expression used to measure the contribution to computers to growth in 1985. The following is a decomposition of output growth.
(1) (Output growth)=(contribution of growth in computer capital)
+ (Contribution of growth in the stock of other capital)
+ (Contribution of labor growth)
+ (Contribution of multifactor productivity growth)
Some of the computer technology has already lost its charm. DOS, one of the first operating systems, has fallen victim to the Y2K bug. Accounting systems created in the time of DOS will fall by the wayside. Furthermore the ability to use the Internet with these older accounting systems will be nonexistent.
Aside from accounting software, CPA s use a variety of applications like Microsoft Word and Microsoft Excel. Microsoft word is a word processing program that can be helpful to accountants when preparing financial statements or typing reports. Microsoft Excel is commonly used by accountants for its spreadsheet applications. In the survey conducted by The Journal of Accountancy Magazine, Microsoft Excel had the highest rating. 44 % of users who didn t currently use Excel planned on changing over to it within the next six months.
Computers are also used by CPA s in presentations. Programs like Microsoft Power Point enable accountants to graphically present material and create eye-catching presentations. Software designed for tracking and billing can save accountants time and money by keeping track of the time spent working on a client s case and then preparing the invoices. Some of the tax prep software that is on the market these days makes it easier than ever for the average person to prepare there taxes on there own rather than having an accountant do it for them. This in turn can hurt the CPA s business.
Overall computers have greatly revolutionized the accounting world. Many different software companies are entering the industry and continue to introduce new and improved products. With prices on low-end PC systems hovering around $600-$1,000, and accounting software costing around $100, families and businesses can afford to have computerized accounting. Now days, of the tools that you may find on a desk belonging to a CPA, you can almost be assured that you will find a PC.