Five major parts make up this book: (1) an overview; (2) accounts receivable, including cash receipts and credit and collections; (3) accounts payable, including cash disbursements; (4) general ledger, including general accounting, chart of accounts, budgeting and profit planning, and financial reporting and consolidation; and (5) other accounting systems and technologies, which is limited to a discussion of Electronic Data Interchange. In addition, Parts 2, 3, and 4 each contain a section on the management and administration of their processes.
Because the book is already over 500 pages long, it contains little information concerning other essential accounting processes such as fixed asset or cost accounting. Some information concerning the interfaces between the processes discussed and those other processes is provided, although these interface discussions are rather general.
According to the preface, the author has attempted to comprehensively catalog all of the procedural considerations in buying or developing software for each of the accounting processes he describes. He generally succeeds. He indicates that the procedures he describes are primarily oriented toward large companies, and that small to medium-sized companies will not necessarily be able to afford, or need, all of the procedures discussed. He says that the text will attempt to indicate where the procedures can be scaled down for small to medium-sized companies. Here the text only partially succeeds. The material presented does not provide sufficient guidance on how the procedures can be scaled down and how the applications might need to be modified for smaller organizations.
Throughout the book, the orientation is toward large companies that use either mainframes or minicomputers with terminals, and primarily batch processing and periodic transfers of data from the accounts receivable and payable processes to the general ledger process. The author recognizes that personal computers (PCs) may be the terminals, and that in some instances (examples include consolidation of general ledger and management reports and budget planning) PCs may be used to perform some of the procedures discussed.
Little consideration is given to the current trend to down-sizing and integrating large systems. In fact, some of the discussion of accounting controls indicates that the author does not believe that adequate controls can be maintained without batch processing. In this regard, the author’s continuing emphasis that the material he is presenting is the modern approach to automated accounting systems is overstated.
The systems approach suggested, while completely adequate for the fiduciary requirements of accounting systems, does not lend itself readily to the recent advances in the development of executive information systems (EIS) or other management systems that require timely, and not periodic, general ledger information. A properly automated accounting system must consider both the fiduciary and the management needs for the data it contains.
The problems that the author points out with maintaining adequate internal controls over non-batched data entry can be solved in various ways. Two examples are redundant keying of essential data (which is inherent in producing the recommended batch control data) and verification of data entry by statistical quality control techniques such as those used by accounting systems auditors.
The historical information presented contains a minor inaccuracy. The author says that the 1954 General Electric payroll application “is widely heralded as the first automated accounting system.” This statement is correct for a computer-based system. The first large-scale automated accounting application was railroad freight car accounting for inter-line settlement of charges for freight cars owned by one railroad but operating or stored on the tracks of another railroad. This was the first commercial application of the Hollerith punched card equipment developed for the 1890 Decennial Census. The application was developed and implemented early in the first decade of this century and did not become computer-based until the early 1960s.
Despite the shortcomings discussed above, this book can be a valuable, although somewhat pricey, resource for data processing professionals who are not well versed in accounting systems and are involved in the selection or development of accounting systems software for moderately large organizations. The discussion of electronic data interchange can also be valuable to accounting or purchasing personnel who are considering using this technology.
