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Review on Information Technologies

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The role of Information Technology in Management Accounting cannot be ignored or overlooked and there exists a body of literature on the topic. The technology used in Accounting has developed from the clay tokens and containers used in the past, to the punched card and computer systems. Before the advent of Information Technology, record keeping and processing of data, which are the primary functions of accounting was done manually and it was laborious and error-prone.

The introduction of Information Technology to Management Accounting meant the Manager could carry out his functions of Planning, Directing, Controlling, Improving and Decision Making, effectively, efficiently and with speed. The development of railroads and steel during the19thcentury led to an increase in the level of commercial transactions and the need to reduce human error to the barest minimum. And by the late nineteenth century, writing boards, peg boards, and document control registers were invented to accommodate, repetitious data processing tasks. The typewriter and adding machine were also extended to create cash register, posting and accounting machine. This can be said to be the beginning of the mechanization of accounting practice.

The introduction of the large-scale digital computer in 1946 further increased the efficiency of carrying out accounting functions. It is the advent and use of Information Technology in Management Accounting that has necessitated the quest to find out its impact on Accounting.

Accounting has evolved from simple record-keeping in the past to a system designed to evaluate changes in economic activity. Likewise, the technology used to store economic data has evolved from clay tokens and jars to punched card and computer system (Robert Kee). For a better understanding of the impact of Information Technology management Accounting, we shall examine the historical relationship between data processing technology and accounting.

Recordkeeping seems to have started even before the advent of written language and numeral system. It is believed that small tokens found throughout the Middle East, dated around 8000 B. C., were used to represent and quantify commodities such as sheep or measures of grain(SchmandtBesserat 1978, p. 52). He continues by saying that this representation of an economic transaction or data was stored in clay jars and may have been processed by adding or removing container tokens to reflect an entity’s account balance (SchmandtBesserat1978, p. 52). This simple practice shows some of the basic function of accounting, like storing, organizing, retrieving and processing. According to SchmandtBesserat, the limitations of this type of record keeping may have led to the development of written language and eventually alphabetic systems. The Greeks and the Romans used alphabets and numeric systems to record economic transactions on storage mediums such as pottery (ostraca) and wooden boards coated with wax (Robert Klee). The Romans in their computations usually used an abacus, which was to become man’s earliest attempts to supplement human processing of data (Robert Kee).

The feudal system emerged throughout most of Europe after the fall of theRoman Empire. Record keeping became much more localized and centered around institutions such as the church and manorial estates(Chatfield, 1974. P. 1920). A tally stick with notches cut was used to record payment and receipt of funds. It can be concluded that the tally sticks performed the same role as clay jars and tokens of the past, which eventually were replaced by computer systems. Records of manorial estates were added up and balanced during an audit(Oschinsky, 1956, p. 9192), which perhaps was an indication that a more elaborate summation of financial data may be required.

During the tenth and eleventh centuries, the feudal system in most of Italy became weakened and it was replaced with an economy based on trade and commerce. This led to the development of the double entry system, which is a great contribution to accounting practice because it provided a powerful and flexible model for managing data. The double-entry system was also overtaken in the 19thcentury with the introduction of the use of Information Technology in accounting.

To say that Information Technology has impacted positively on ManagementAccounting is to state the obvious. Information Technology has become the primary means of managing financial data and as a result, the dependence on Electronic Data Processing (EDP) technology and professionals to manage financial data is on the increase. Financial data are usually managed by a Data Base Administrator (DBA) (Page andHooper, 1992, p.188), which is responsible for the content, structure, and security of the database (Everest, 1966, p. 589600). This DataBase provides access and availability, which conflicts with management’s goal of restricting and controlling access to a firm financial record with its attendant consequences. Although authorization and password systems are often used to reduce their effects a database system exposes companies to unauthorized users who can hack into systems to perpetrate fraud or steal vital information.

Another drawback of Information Technology in management accounting is that much of the traditional data management function of Accountants have taken over by EDP professional, which has led to a gap between the technology and data used to implement accounting functions, though it has also increased the functions of the Accountant to include managing the firm’s data in conjunction with performing its traditional role. The use of Information Technology in accounting has also led to a new corps of professionals responsible for the management of the software developed for accounting.

The use of Information Technology has also rendered the double-entry accounting model, which had existed for centuries as the primary means of managing financial data manually, obsolete. This is as a result of using DBMS software, which now maintains the journals,ledgers, and procedures of manual accounting systems.

It can be concluded that the impact of Information Technology management Accounting, though a welcome development in that it has increased the efficiency and effectiveness of accounting practice, has also created new challenges that did not exist in the accounting profession.

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