The Importance of Information Technology in Accounting

Information technology plays a crucial role in accounting systems.

Generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) require a company to prepare full and accurate financial statements. A company's senior management establishes adequate computerized accounting systems to prepare accurate operating reports.

Accounting Defined

Accounting is a business practice that helps a firm record operating transactions in financial accounts and report operating data at the end of each month.

Computerized Accounting

Computerized accounting involves the tools, methods and computer software and hardware that a firm uses to automate recording and financial reporting processes.

Significance

Information technology plays an important role in accounting processes because it improves financial reporting procedures and prevents errors in financial statements.

Time Frame

Computerized accounting activities help an accountant perform month-end close procedures. These activities also help a company report profit information over a period, such as a month or quarter.

Recording Procedures

An accountant uses computerized accounting software to make journal entries in financial accounts, such as assets, liabilities, revenues, expenses and equity. The accountant debits an asset or expense account to increase its amount and credits it to reduce the account balance. The opposite is true for revenue, liability and equity accounts.

References

• Top Accounting Degrees: How Technology has Impacted Accounting
• McGrawHill: Importance of Accounting
• University of North Carolina at Pembroke: Accounting and Information Technology