Accounting Systems

Question: This assertion sounds like science fiction. It hardly seems believable that Xerox keeps up with over

$17.6 billion in revenue (approximately $48 million per day) using the same methods that Venetian merchants

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applied to their transactions during the Renaissance. How can a five-hundred-year–old bookkeeping system

possibly be usable by today’s modern businesses?

Answer: State-of-the-art computers and other electronic devices are designed to refine and accelerate the financial

accounting process but the same basic organizing procedures have been utilized now for hundreds of years. In

simplest terms, accounting systems are all created to follow four sequential steps:

• Analyze

• Record

• Adjust

• Report

As explained previously, financial accounting starts by analyzing each transaction—every event that has a

monetary impact on the organization—to ascertain the changes created in accounts such as rent expense, cash,

inventory, and dividends paid. Fortunately, a vast majority of any company’s transactions are repetitive so that

many of the effects can be easily anticipated. A sale on credit always increases both accounts receivable and

revenues. Regardless of the time or place, a cash purchase of equipment increases the balance reported for

equipment while decreasing cash. Computer systems can be programmed to record the impact of these events

automatically allowing the accountant to focus on analyzing more complex transactions.