Technology in Accounting

Computers changed how transactions are entered and reported, but they didn't change the underlying rules — accounting principles still decide what gets recorded and why.

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Key things to remember

1A data entry sheet organizes accounts, amounts, and explanations before entry into computerized accounting software.
2Cloud accounting stores data remotely so it can be accessed securely from anywhere and shared among several users at once.
3A POS terminal is an electronic cash register linked to a computer that records sales directly into the accounting system.
4EFT (electronic funds transfer) and debit cards move money electronically between bank accounts without paper cheques or cash.
5Computers handle arithmetic and data entry reliably; professional judgment (materiality, conservatism, objectivity) still requires a person.

A hundred years ago, every transaction was written by hand into paper journals and ledgers. Today, almost every business uses some form of computerized accounting system. Technology has made accounting faster, more accurate, and more connected — but it hasn't replaced the need to understand what's actually happening underneath the software, because someone still has to decide what to record and verify that it's correct.

From Paper to Computer

Even in a computerized system, someone needs to organize the raw information before it's entered. A data entry sheet is used to organize the information to be entered into a computerized accounting system — it lists the accounts to be debited and credited, the amount, and an explanation of the transaction, exactly like a journal entry, before it's typed into the software.

Fig 1Technology changes how source documents reach the accounting system, not whether they're needed.

Cloud Accounting

Modern accounting software often runs "in the cloud" rather than on one office computer: the data lives on remote servers and can be accessed securely from anywhere with an internet connection. This lets a bookkeeper, the owner, and an external accountant all view the same live numbers at once, and it means data is automatically backed up instead of living on a single hard drive that could fail.

Point-of-Sale Systems and Electronic Payments

A point-of-sale (POS) terminal is an electronic cash register linked to a computer — it records the sale, calculates HST, updates inventory, and sends the transaction straight into the accounting system, all in one step.
Debit cards are a method of transferring funds between two parties electronically, moving money directly out of the customer's bank account at the moment of sale.
Electronic funds transfer (EFT) is a cash exchange system where bank accounts are accessed electronically over a secure network — used for things like direct-deposit payroll or paying a supplier without writing a cheque.
Spreadsheet software (like Excel or Google Sheets) is often used for budgets, quick calculations, and analysis that sits alongside the main accounting system.

What automation changes — and what it doesn't

Automation is very good at arithmetic, at moving data from a POS terminal into the ledger, and at instantly producing a trial balance or balance sheet. It is not good at judgment: deciding whether a $50 expense is material, whether a customer's account should be written off as a bad debt, or whether an accounting treatment is being chosen conservatively — those decisions still need a person applying GAAP.

Task	Handled by computer	Still needs a person
Adding up a trial balance	Yes — instantly	No
Recording a sale from a POS terminal	Yes — automatically	Checking the entry is coded correctly
Deciding if something is material	No	Yes — professional judgment
Applying conservatism between two methods	No	Yes — professional judgment

Worked examples

Reveal one step at a time and try to beat it to the next line.

Example 1

A grocery store customer pays for $63.40 of groceries with a debit card at a POS terminal. Describe, in order, what technology does automatically versus what a human still had to set up in advance.

Where marks get lost

Assuming accounting software eliminates the need to understand debits and credits — the software still relies on someone entering transactions to the correct accounts.
Confusing EFT with a debit card — EFT is the broader electronic bank-to-bank transfer system; a debit card is one everyday way a customer initiates a transfer.
Thinking cloud accounting means less security — properly configured cloud systems are usually more secure and reliably backed up than a single office computer.
Believing automation removes the need for GAAP judgment calls like materiality or conservatism — those still require a person's professional judgment.

Flashcards 5

Data entry sheet

Point-of-sale (POS) terminal

Debit card

Electronic funds transfer (EFT)

+ 1 more

Practice

What is a data entry sheet used for?

A POS terminal is best described as...

Name one accounting task computers do very well and one that still requires human judgment.

Electronic funds transfer (EFT) is best defined as...

What is one advantage of cloud accounting over keeping records on a single office computer?

Give an example of a decision accounting software cannot make on its own.

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