CHAPTER 1: Introduction
Accounting is the act of
collecting, organizing. and interpreting financial data. The first financial
statement is the income statement,
which tells how much money was made or lost in a given time period. Next is the
statement of retained earnings,
which tells how much money that was made was reinvested into the company. The
third statement is the balance sheet.
The balance sheet is the financial statement that lists all the assets,
liabilities, and owner's equity of the company. It's important to note here
that the accounting equation is also known as the balance sheet equation. The
last financial statement is the statement
of cash flows, which tells how much money came in and was paid out in a
specific time period.'
Accounting or accountancy is the measurement, processing and communication of
financial information about economic entities such as businesses
and corporations. The modern field was established by the Italian
mathematician Luca Pacioli in 1494. Accounting, which has been called
the "language of business" ,measures the results of an organization's
economic activities and conveys this information to a variety of users,
including investors, creditors,
and regulators. Practitioners of accounting are known as accountants.
The terms "accounting" and "financial reporting" are often
used as synonyms.
can be divided into several fields including financial
accounting, external auditing, and tax accounting. Accounting
information systems are
designed to support accounting functions and related activities. Financial
accounting focuses on the reporting of an organization's financial information,
including the preparation of financial
statements, to external users of the
information, such as investors, regulators
and suppliers; and management accounting focuses on the
measurement, analysis and reporting of information for internal use by
management. The recording of financial transactions, so that summaries of the
financials may be presented in financial reports, is known as bookkeeping,
of which double-entry
bookkeeping is the most common system.
is facilitated by accounting
organizations such as standard-setters, accounting
firms and professional
statements are usually audited by accounting
firms, and are prepared in accordance
accepted accounting principles (GAAP).
GAAP is set by various standard-setting organizations such as the Financial
Accounting Standards Board (FASB) in
the United States and the Financial Reporting Council in the United Kingdom. As of 2012, "all major economies"
have plans to converge towards or adopt the International
Financial Reporting Standards (IFRS).
is an asset to all businesses because of the enhanced communications skills it
has provided. Technology has provided many tools that increase efficiency in
any business, including accounting. Examples of these technological tools
include computer-integrated manufacturing, image processing, the Internet, and
expert systems (Journal of Accountancy, 1996). This enhanced efficiency within
businesses allows accounting information to become dynamic, reflecting the
current state (Journal of Accountancy, 1994b). This helps to fulfill management
accountants’ objective of providing the most accurate and timely information.
Unfortunately, a technological asset to a
business may result in a liability for the business’s accountant. The more
timely and accurate information that is provided by the technological tools
often costs the business accountability and confidentiality. There are many
more opportunities for fraudulent activities due to the purely electronic audit
trail accountants are often forced to deal with. These audit trails do not
allow the accountant to trace many transactions to their origin. Internet
transactions, as well as other methods, lead to confidentiality issues.
Accountants’ dependency on computers has proven to be a disadvantage with the Year
2000 Problem. These are just some of the negative impacts that technology has
had for today’s accountant.
Overall, technology has caused change in the
accounting profession. Hiring trends, education needs, and the rise of the
consulting side of accounting are just some of the impacts that technology has
had on the accounting profession. These cannot necessarily be labeled as
benefits or disadvantages. It is clear, however, that these impacts, as well as
the advantages and disadvantages, are forcing a change in the accounting
profession. In response, the accounting profession needs to conform to these
changes, or the profession could be replaced by a rising generation of
competitors. As one author for the Journal of Accountancy says, it is clear
that the accounting profession ‘needs to upgrade its practices and skills to
reflect where the world is going, not where it has been’ (Journal of
1.1 Background of the Study
years ago, most financial accounting was done manually, leading to a great deal
of paperwork. Currently, most accounting information is recorded via computers
and wide area networks (Journal of Accountancy, 1994a). Technology has certainly changed
the face of accounting over the years. While it is unclear whether technology’s
impact on accounting has been positive or negative, it is clear that technology
has drastically changed the accounting profession. Often a technological
advance may be an asset to a business, but a liability to the firm’s
accountant. For example, information can be provided in a timely and more
accurate manner, but at the price of confidentiality. Some of the impacts of
technology are neither positive nor negative; they are simply changes. So in
essence, the impacts of technology on accounting have been positive, negative,
and neutral, but each impact results in a demand on the profession to conform
to the changes. The obvious advantage of technology is in the various tools
that it has provided. Examples of these tools include computer-integrated
manufacturing, communications technology, image processing, the Internet, and
expert systems. These are a few examples of the many tools of technology whose
purpose is to provide more detailed and accurate information in a timely manner.
The research therefore seek to investigate the impact of Technology changes on
the accounting profession.
1.2 Statement of the Problem
accounting profession has definitely been influenced by the recent bombardment
of technology within the industry. Some ‘business thinkers’ believe the
accounting profession should be entirely revamped. It is true that some
technological changes have made many of the current accounting practices no
longer relevant. An example is the ledger account (Journal,
1994b). Previously, this account was very important as a historical record of
transactions and was used to expedite the preparation of financial statements (Knapp,
1996, p. 82). With today’s timely information, the ledger account becomes less
important. Computers have taken over as the record keeper for this type of
information. According to a contributor to the Journal of Accountancy: ‘if the
accounting profession doesn’t reinvent itself, it easily could … be replaced by
a profession that has yet to emerge with an entirely different vision of how
information, analysis and attest services should be provided’ Therefore the
problem confronting this research is to determine the impact of technology
changes on the accounting profession
1.3 Objective of the Study
1 To determine
the nature of Technology changes
2 To determine
the nature of the accounting profession
3 To determine
the impact of Technology changes on the accounting profession
1.4 Research Questions
1 What is the
nature of the accounting profession?
2 What is the
nature of Technology changes in the Accounting Profession?
3 What is the
nature of the impact of Technology changes in accounting profession?
1.5 Significance of the Study
proffers the new face of the accounting profession so as nurture and builds new
entrants in the Accounting profession according to quality and new standard set
by the profession in the face of global technology changes
1.6 Statement of Hypothesis
1 Ho The quality
and standard of the Accounting Profession is low
Hi The quality and standard of the
Accounting Profession is high
2 Ho The level of
Technology changes is low
Hi The level of Technology changes is high
3 Ho The impact
of Technology changes in the Accounting Profession is low
The impact of Technology changes in the Accounting Profession is high
of the Study
The study focuses
on the appraisal of the impact of technology changes in the Accounting
1.8 Definition of Terms
accounting equation: assets = liabilities + owner's equity.'
are items that are owned, have value, and can be turned into cash. Bank
accounts, CDs, cars, property, and machinery are all examples of assets.
Liabilities are what is owed.
A loan to purchase an asset is a liability.
Owner's equity is the amount of money
that a person has invested into an organization. The investment may be in the
form of a stock purchase or a capital investment made by buying into a company.
The most important thing to remember is that both sides of the accounting
equation must be equal. If they don't balance, then there is a problem.'