The evolution of accounting dates back thousands of years. Although the principles still remain the same, technology has drastically altered how merchants are able to handle the accounting process. Cloud computing and accounting software programs now allow businesses to take a once 20-hour accounting process and condense it down to 15 minutes.
Let’s take a look at how technology has changed accounting over time.
Basic Paper Accounting
In the 15th century, Italian mathematician Luca Pacioli first established the “language of business”, now considered to be the spearhead of modern bookkeeping.
He found that merchants used books of debits and credits to keep track of what they spent and what they owed. These early methods of bookkeeping helped merchants maintain financial records and manage the productivity of their business.
Although the application of bookkeeping has changed since then, the fundamentals of these methods have remained vastly similar.
The first accounting organization was established in New York in 1887, which later became the American Institute of Certified Public Accountants. Before this, accountants typically served only a single client. Now, accountants began serving multiple individuals and businesses. This was also the beginning of modern accounting as a profession.
The evolution of accounting was revolutionized with computer technology, which meant bookkeeping no longer had to be done with paper and pencil.
In 1978, a spreadsheet program known as VisiCalc helped streamline the accounting process. VisiCalc ran on an Apple II computer and allowed for digital data entry. Before this, changing a single number would force accountants to recalculate the entire spreadsheet. With VisiCalc, you could change a single number and it would automatically update cell information in its entirety.
IBM launched Lotus 1-2-3 in 1983, an updated version of VisiCalc. Lotus became the first integrated software solution with its ability to handle spreadsheet calculations, database functionality and graphical charts.
In 1985 Windows introduced Microsoft Excel, which replaced Lotus as the standard for spreadsheets. Excel allows accountants to prepare financial statements, reconcile accounts, manage cash flow statements and more.
QuickBooks, now the most popular accounting program in the U.S., was released as a day-to-day bookkeeping software for small businesses in 1998. While 80% of bookkeepers currently use QuickBooks, its security was initially questioned by professional accountants who claimed it did not conform with traditional accounting standards.
Apple Computer with Excel Spreadsheet in 1985
In the year 2000, QuickBooks updated its security to include audit trials, double entries and other accounting compliant items. It also developed components that catered to specific industries. QuickBooks made it easier for small businesses to manage finances, record transactions, pay bills and complete reporting.
Today, technology has improved the speed and security of the accounting process. Computers can process information faster and more efficiently than humans, and automatically update reports and balances.
With the help of tokenization, the accounting process is extremely secure. Tokenization processes credit card information using a unique token which is only decipherable with the proper payment card tokenization system. The token is completely different from the original credit card information, and acts as the key for all future transactions. Hackers cannot unlock the vault that houses credit card data without this key, and even if they did, the information would be indecipherable.
Mobile banking also allows businesses to process transactions from a mobile phone or tablet with the help of a software application.
The Future of Accounting
Businesses now have the option of using cloud-based accounting. Cloud-based accounting is a software that runs on servers, allowing you to access data from anywhere using the Internet. It protects businesses from system administration costs and server failures. For most companies, moving to the Cloud reduces IT expenses between 30% and 70%.
Technology has simplified the accounting process. Integrations now streamline data entry and give accountants the ability to improve accuracy and reduce the margin of error.
With integrations, businesses can link their accounting software to an integrated payment provider. This simplifies the payment process and allows businesses to process payments directly within existing accounting software.
The evolution of accounting will allow for greater software integrations, increased efficiency and faster data entry for businesses across the globe.