Data Processing Technology and Accounting: A Historical Perspective

Article excerpt

Abstract: Accounting has evolved over thousands of years from record keeping systems designed to document to systems designed to measure changes in economic activity. Similarly, the technology used to manage economic data has evolved from clay tokens and jars to punched card and computer systems. Throughout their development, changes in data processing technology and accounting frequently have been interrelated. Punched card and computer systems, in particular, have led to significant changes in many of the data management and information system functions of accounting. Current advances in information technology indicate that more profound changes may occur in the future. Insights into how information technology may impact accounting can be gained by examining the historical relationship between data processing technology and accounting.

Archaeological evidence indicates that record keeping was an integral aspect of man's early economic activity. Record keeping in early societies was implemented through clay tokens and pictorial markings on clay tablets [Schmandt-Besserat, 1978, p. 52 and Green, 1989, p. 51-53]. Today, records are maintained on magnetic storage devices and processed on microprocessors made of silicon. Discussions of the evolution of accounting generally stress the commercial and societal factors influencing its development. While attention to these factors is crucial to understanding the current state and possible future directions of the discipline, scant attention has been devoted to its data processing aspects. Because accounting is a data management function dependent upon information technology, the evolution of accounting reflects, in part, advancements in the methods and methodology of data processing.

During this century, the term "data processing" has become synonymous with the application of the computer. However, data processing was an integral aspect of accounting prior to the computer and earlier punched card systems. Accounting is a system for organizing, storing, retrieving and processing recorded data. These data management functions are the means through which accountants maintain financial records to account for economic activity.

The data management functions which underlie accounting are implemented through data processing technology. This technology is frequently thought of in terms of material objects such as mechanical devices. However, it encompasses much more than this. Westrum notes that "technology consists of those material objects, techniques and knowledge that allow human beings to transform and control the inanimate world" [1991, p. 7]. Rogoff [1990, p. 51] suggests that many technologies support learning and problem solving and that objects, such as an alphabet system and paper, are material support for these activities. The definition of technology that will be used throughout the paper is the use of ideas that are embodied in physical objects, techniques and knowledge to solve problems. Thus, advances in written communication during antiquity would be considered data processing technology in the same sense as computer hardware from the twentieth century.

The purpose of this paper is to trace the historical development of data processing technology and to examine its impact on accounting. The paper will discuss the development of data processing technology from antiquity to the present and will examine the evolving role of computer technology and accounting. An understanding of this history is needed for interpreting and understanding the evolution of accounting from record keeping during antiquity to modern computer based information systems. The evolution of data processing technology provides a perspective needed for the analysis of technological developments and trends that have shaped and been shaped by the accounting profession. It may also aid in understanding the background of many of the problematic issues facing accounting today, such as the profession's concern with internal control in an electronic data processing environment. …