In earlier days, accounting and book keeping consisted of thick binders, colour coded files, pencils and battery operated calculators. But since information technology has been adapted into accounting and bookkeeping, tremendous changes have been brought into this line of work. With this in mind, let’s see the Impact of information technology in accounting.
Changes such as the following have occurred:
- The accounting documents have been changed from hard copies to soft copies throughout the years.
- Equipment such as computers, laptops, CDs, pendrives, printers, scanners and fax are being used instead of typewriters, pen and physical books.
- Data is entered , recorded are maintained on computers.
- Accounting software like Erp 9 which makes accounting simple, convenient and helps keeping records of due dates and payments are made available.
- Spreadsheets are often used for the purpose of accounting instead of traditional papers and files. These spreadsheets are used along with personal computers.
- Error handling was improved with automated methods. Accounting software are really useful to detect errors of commission and omission, though it still cannot detect errors of principles.
- Taxes are paid over online instead of going to the tax department. In fact for certain companies it is compulsory to pay taxes over online.
- Security is also enhanced due to introduction of digital signature which is used while submitting various kind of reports. Digital signature makes sure the integrity of the files is intact when transferring.
- The documents are encrypted and stored in very safe file systems where only certain employees have access.
- Accounting for small business is also covered with many accounting software which used to be for corporate businesses only.
That’s just a tip of the iceberg when mentioning impact of information technology in accounting, and since the technology is growing over time even at the moment this article is being written, the future is so unpredictable, but is expected to be brighter for accounting field. Nowadays it is really important to be at least somewhat tech savvy to be an accountant as it requires constant use of information technology in the field of accounting. Even though technology covers a wide area with many advanced fields, knowing about handling certain application software is more than enough for an average accountant. Drastic changes have been made in accounting, due to information technology, and among of them some of the prominent ones are noted below.
Advantages of Accounting Software
- Saves Time: Time is saved as only voucher entry is required to be made, then financial statement gets prepared on its own automatically.
- Saves Space: Earlier, So many cabinets were required to store accounting information, which now hardly takes up any space as they are saved in soft copies
- Detects Errors: Accounting softwares detect errors of commission and errors of omission. However, still many accounting software are unable to detect errors of basic principles of accounting
- Easy Access: Accounting data can easily be accessed through the organisational servers
- Security: Bookkeeping is more secure as data is encrypted and is less likely to be stolen or destroyed. With the accessibility to internet, data can be backuped in a remote server for the disaster recovery plan.
- Easy filing of returns: Returns are easily filed online in a format prescribed by the board of taxes
- Easy Payment of taxes: Taxes can easily be paid over online. Some individuals even get a grace period if they opt in for online mode of payment.
- Easy preparation of financial statements: Financial statements like trading account, profit and loss account and balance sheet are automatically formed. Balance sheet for any day can also be viewed.
- Use of accounting ratios: Accounting ratios are automatically calculated, which can further be used for cost and financial management
- Lesser chances of manipulation of data: Data cannot be easily manipulated as it is entered through a software, subjected to various validation and verifications. If necessary, entered data can be reviewed at the request of the management.
All in all, accounting today owes everything to information technology, otherwise people would still be scratching their head to search for errors throughout big financial reports wasting tremendous amount of time. So, it’s safe to say that impact of information technology in accounting is significantly higher than what the industry anticipated, but it’s in a good way because technology not only increases the efficiency, but also lessens the time to get things done in the finance sector.