Traditionally, accounting is defined as a process that collect, collate, analyse, interpret and communicate financial/ accounting
information in a prescribed format that is easily understood by the intended users. In as much as this definition of accounting is correct, it makes accounting look like a mechanical process that does not interact much with the business environment.
In today’s dynamic and vibrant business world, accounting is simply defined as a lens through which decision makers sees through the clouded business world. This is to say that accounting has seized to be an almost automated process that it used to be and is now highly scalable, by scalable, it means that accounting process is now robust enough to accommodate any unforeseen event that turns out. Anything that is short of this is not accounting.
Many accountants and other finance professionals have come to agree that accounting is now more of a contingent process than a repetitive process. This view is however disputed by some group of accountants who still see accounting as a routine process that only involve crunching numbers. I have once worked under the supervision of one of such ‘old fashioned accountants’ before and must tell you that it is not very easy convincing them of the great change that has taken place in the field of accounting as a whole.
FEATURES OF MODERN BUSINESS ACCOUNTING
For companies and business owners to be sure they have accounting system that is not still living in the past, following three features of modern accounting briefly discussed below must be present.
REAL TIME PROCESSING OF ACCOUNTING FIGURES:
The creation of the branch of accounting called AIS opened up a whole new way of seeing the information gathering process involved in business
transactions. Information on business processes gets to the responsible managers at the right time and in the right specification. Any accounting
system that is not equipped with the features of online-real-time capability is not worth having. Information on business valuation and investment appraisal quickly become obsolete with minutes of receipt if not acted upon- so why wait?
FRAUD AND RISK AWARENES
The simple fact that financial information that flows in a firm needs to be processed on a real time basis does not justify the high level of fraud tolerance that we all still see in many accounting systems in practice. Modern business accounting should be sensitive enough to flag irregular transactions. The surest way of achieving this is to have a scalable and flexible internal control in place. It is not just enough to have an internal control that meets with the requirements as stipulated in the governing bodies like we have in many countries. Extra care should be taken to ensure the functionality and adaptability of controls in place. In fact, modern accounting has so married with forensic studies to the extent that the mention of the word ‘accounting ‘conjures ‘forensic accounting and investigation’. A lot of old economy accountants that still dwell in the past will probably think they have millions of reasons to counter this argument. But what they think are valid arguments in their favour are mere fallacies as time has shown that definition and scope of accounting in its strict form has failed to live up to expectation.
USE OF TECHNOLOGY
The line business accounting, finance and technology have forever been removed thereby making it hard for you to mention accounting and finance without creating and imagery of technology in the mind of all concerned. For any system that puts figures and numbers together to be defined as accounting, it must be highly married to technology and innovation.
I hope that by reading this short article, you now have a new perspective of the definition of accounting. You are now well informed and in a better position to educate those that sees accounting as an old fashioned profession
that does not allow room for flexibility.