In a world where electronic data transfer is becoming the accepted norm, the definitions of such terms as “books of original entry” and “data set” are constantly changing. Check ledgers are being replaced by backup files and seven-column pads by accounting software. Some remote accounting and data storage systems, often referred to as cloud accounting, are virtual in nature.
Smart Business spoke with Todd Jolicoeur, tax senior at Cendrowski Corporate Advisors LLC, to learn more about how technology has affected age-old accounting tools.
What are books of original entry?
When it comes to accounting that still utilizes column paper and a 10-key calculator, the accounting journals kept manually where any financial transaction are recorded for the first time, or originally, are the books of original entry that compile all of the information.
How has this changed with the use of accounting software?
Software has increased the efficiency of most accounting and tax services. Electronic books of entry are different because most data is entered only once. There is no longer the need to make sure each transaction is manually posted to each applicable journal. Because of the nature of software, this procedure is systematically performed and entries are automatically reflected in different accounting ledgers as pre-established by the software.
What is a data set when applied to accounting records?
The data set is essentially all of the information that supports an accounting statement, whether it is a balance sheet, bank reconciliation or general ledger. It is also the documentation that is often used by accountants to prepare other financial statements such as a Statement of Financial Condition or by tax professionals who perform tax services for individuals, fiduciaries and business entities.
One important note related to data sets is that the information contained within the data set is subject to subpoena when legal action is brought under suspicion of wrongdoing regarding finance and financial records.
How is the information stored for these data sets?
The oldest method is paper format. This includes things like checkbooks, receipts and other documentation. The prevailing new method is maintaining the records electronically. Firms are often digitizing and electronically storing any original documents required to perform accounting and tax services. Regarding electronic books of entry, firms have been transitioning for years to accounting software. The use of software not only expedites the work flow by requiring single entry of information, which flows to all appropriate journals and reports, but also when corrections are required you only need to make one correction, as opposed to making that same correction on several ledgers. Accounting records that are kept utilizing software are also easier to backup and create a copy of the data set for transfer to any parties that are authorized to receive such records.
What is cloud accounting?
The term simply refers to the remote storage of this information, as if it were stored in a cloud in the sky that can always be accessed. This is a relatively new concept that it is becoming more popular with the proliferation of technological gadgets. The use of electronic devices such as smartphones and tablets in business has increased the need for information to be stored on servers that allow for remote use. Whether this means using apps and remote connection to financial reports or accessing archived data and documentation, the need to use the Internet and these cloud resources is growing.
How can these changes in the process help my business?
You may want to speak with an accounting professional to determine the most advantageous way to perform your accounting function and store information as it relates to your needs for information recall and use.
Todd Jolicoeur is a tax senior at Cendrowski Corporate Advisors LLC. Reach him at (248) 540-5760 or [email protected]
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