The Evolution of Accounting Software: Past, Present and Future

The Evolution of Accounting Software

In 1887 the first accounting organization was established in New York. However, this also led to the importance of accounting software to simplify the entire process. You need a proper accounting system to have a complete purview of your business organization's financial activities.

Accounting's origin goes back to the fifteenth century when the Italian mathematician Luca Pacioli discussed the importance of a formal bookkeeping method. As business processes became significantly complicated, it became necessary to develop complex formulas to understand the financial transactions being carried out by a business organization. Luca Pacioli's method of bookkeeping was simplistic and helped merchants understand business productivity.

But it did not help them understand the nuances of accounting. Moreover, it did not give them an idea of where they could reduce expenses and improve accounting management. With the advent of the nineteenth century, business organizations became complex, and in 1887 the first accounting organization was established in New York. This made accounting a profession, and the American Institute of Certified

Public Accountants was established. However, this also led to the importance of accounting software to simplify the entire process. Irrespective of whether you run a small, medium, or big business, you need the best accounting system to have a complete purview of your business organization's financial activities.

The following points will give you an idea of the evolution of accounting software:

Accounting Software Past Present and Future

1. Issues with early methods of accounting

In the early ages, simple machines were used to record the business transactions being carried out.  However, these simple machines did not have a memory like a computer, and hence, you could not go back to an older financial transaction. Moreover, the double-entry bookkeeping was not enough to get an idea of the company's day-to-day operational expenses. Hence a new and modern method of accounting became necessary.

2. Accounting changes over the ages

The modern era of Accounting started with Electronic Data Interchange or EDI. The EDI is primarily a spreadsheet to keep account of the transactions being carried out between vendors and the customers. In 1981, major multinational companies started making it mandatory to provide customers with such spreadsheets. This became the origin of 'Peachtree,' the first accounting software developed and implemented across companies.

If you are thinking of different types of accounting software, this began to develop from the latter half of the twentieth century with QuickBooks' launching. This simplified the entire process of accounting. It made it easier to put in the formulas and make changes directly to the QuickBooks' spreadsheets. Presently, it is one of the most popular accounting software, which is used by most companies.

3. Using technology to simplify accounting

With the advancement of technology, accounting too could now be simplified further. Say, for instance, you want to do Tax Accounting, Inflation Accounting, Auditing, and Human Resource Accounting for your company. If you want to do it with available software, you might find it very complicated, as the variables for the various types of accounting are different. The following analysis will help you understand the use of technology to simplify the process of accounting:

  • Accounting has different uses and hence, there you need different types of accounting software. For example, in Human Resource Accounting, you have to consider salaries, wages, benefits, and other similar details. But for Inflation Accounting, you will have to consider the purchasing power of the population, historical data and make predictions for the future. Hence there are different types of technology used in accounting to produce the desired result. 

  • In Human Resource Accounting, you will need a technology that will allow you to update data automatically and, if required, even daily. But, for Inflation Accounting, you require data analysis, data mining, and analytics. Thus, the basis of technology keeps on changing based on the result that you want. The technology for the accounting system changes as per the result required. 

An accounting system's objective is to help the accountant, auditor, business manager, and entrepreneur gain a better understanding of the business organization. Sometimes accounting results can also be used for predictive analysis, which is essential in Government Accounting and financial planning. Hence, the use & features of accounting software will depend on the type of result you are looking for, so there are different types of accounting software available in the market.

4. Latest advances in accounting software development

In the present scenario, it has become necessary that the software being developed be accessible from anywhere and anytime. This is why developers are coming up with various cloud-based accounting software that will produce the same result as your standard software. But with cloud accounting software, you can access the details of your company's financial transactions anytime. Cloud-based accounting software will also have a dashboard, charts, bar graphs, and other such graphical representations to simplify complex financial transactions carried out in a quarter, in a day, or a year.

With the help of graphical representation, you will understand the financial transaction and condition of your company. Moreover, cloud-computing is usually provided by a third-party offering Software-as-a-Service (SaaS). Hence, you can be assured that your company's data will be stored securely on a hybrid server. There is no chance of data loss if you opt for cloud-computing  

Thus, accounting software has changed over the years, and it continues to change. The objective of accounting software is not just to audit your company's finances but also to give you a better perspective of your firm's financial condition. In the long run, by investing a good accounting software, you can identify several things like methods to reduce your operational expenses, improving your company's financial condition, and helping your firm have robust financial growth. Even You can go through our top tips that will be useful while selecting the first accounting software.

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