Electric Accounting System Accounting is an important part of any business venture. It allows for the communication of the financial information of the business units to the users such as the managers and the shareholders. It allows for the greater understanding of the functioning of a company, and helps manage the resources in a better manner through the systematic management of the revenues and the expenditure of the organization. In the following paper there shall be conducted a detailed discussion on the changes that have been experienced in the accounting system of a retail business in the wake of the adoption of the electronic method of accounting as opposed to the paper accounting of the inventory.
The study of the market has reflected that the changes in the technological sector have affected the functioning of the businesses. With the advancement of the technology in the late 20th and the early 21st century, the industries have been observed to have become more dependent on technological functioning (Kalpan, Johnson, 1987). One of the many changes has been in the accounting sector, where there has been observed a noticeable shift from the use of paper to the use of calculators and other such technologies for maintenance of the accounts of an organization.
The accounting that has today emerged is seen to have followed the basic principles of accounting that have been established by the state. This is considered to ensure that the accounting of the finances of a company is carried out in a transparent method. The principle of accounting that is followed by a retail business is the GAAP. GAAP is the General Accepted Accounting Principles, which are the �standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. � These look at the inventory management of the retail business (Takatera, S, 1962).
It can be based on the first in first out or the last in first out principle based on the choice of the principle (Carruthers, Bruce G., & Espeland, Wendy Nelson 1991). This helps ensure that the accounting is carried out in a more organized manner. The first widgets you bring into inventory will be the first ones sold as product.
A �widget� is an imaginary item that could be just about any product First in, first out, or FIFO as it is commonly referred to, is based on the principle that most businesses tend to sell the first goods that come into inventory. Last in first out is more commonly referred to as LIFO, and is based on the assumption that the most recent units purchased will be the first units sold. The advantage of last in, first out accounting, or LIFO, is that typically the last widgets purchased were purchased at the highest price and that by considering the highest priced items to be sold first, a business is able to reduce its short-term profit, and hence, taxes.
The accounting that is carried out in a retail business is a very difficult process, as the books have to be maintained on a daily basis, and these have to be tallied at the end of each day to ensure that they balance out. This process is made all the more complicated in the cases of retail businesses that provide a wide range of products as the accounting then has to process various groups at the same time.
Due to this problem, most of the businesses today try to ensure that the accounting is maintained on the basis of the different departments so that the whole process is more efficiently carried out. Although this allows for better compartmentalization and efficiency, it makes the whole process of accounting lengthier. Thus, all these concerns need to be accommodated in the accounting system of a retail business.