The Computer and Accounting

Many individuals receiving accounting degrees today have never had to use the old manual system of journals, ledgers, and manual reconciliations. Why? Because today we have the computer, and it has sparked a revolution in daily accounting practices, that can be compared to the invention of the automobile.  The computer has made accounting for the lazy person, a breeze.  It has also opened up the door to much faster processing of information, and left more opportunity for numbers games.

Here, we're just going to take a look at the benefits the computer has given the accounting industry, and how it is affecting the information technology of today.  Thanks to the lightening speed and precision of the computer, monthly closings and reconciliations that used to require many man hours, and much adjusting, can now be accomplished in a matter of a few hours, without excessive manual adjustments.  The computer entry, or data entry, function of the accounting department has changed drastically with the invention and progress that has been made in the computer field.  Data entry that has previously been accomplished by hand, and with the use of manual journals and ledger, is now keyed on a computer, if there is a problem or discrepancy in entry information, the computer alerts you to that fact immediately; many of the programs available today, will not even accept an entry that is not properly balanced and credited/debited to the right account.

Naturally, if it requires less time to complete the data entry aspect of the accounting process, it allows for more time to finish the final cycle requirements of closings and reconciliations.  But, thanks to the fact that here in America, we want information as quickly as it can be processed, it didn't buy anyone anymore time, it just meant that we expect our information much faster.  Closings and reconciliations include something called "closing entry adjustments" that often included adjustments that were the result of calculation errors; not today.  Although there is still a need to make closing entry adjustments for things like prepaid items, depreciation, and deferred items, the entry error aspect of the adjustments, has all but been eliminated. 

When you eliminate time in each process, you create the opportunity for greater reaction time.  What does this mean for a business?  It means greater productivity, and better use of business resources.  Employee productivity is one of the largest areas of business waste, and anything that can be done to improve employee performance can help the company's bottom line (profit at the end of the year).  If managers and supervisors, or even small business owners have access to better information about expense and production information everyday, they can make better decisions about how to use their employees.  This improves not only employee productivity, but the use of business resources: money, inventory, and time.  Thanks to the computer age, we are on the verge of a new revolution: the information revolution and accounting is going to play a tremendous role in the use of every aspect of business information.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.