I was trawling Amazon a couple of years ago. One little book that landed on the doormat touched on Luca Paciolito and double-entry providing a check against error and fraud. It went on to say
"...the advent of the computer has destroyed this control aspect of double-entry bookkeeping. The computer will make the second entry automatically. The bookkeeper now only has one chance to get it right rather than two."
Computers obviously bring speed and accuracy in other ways. I'd be curious to hear how true or untrue the above statement in italics is of the software you use.
There wil always be restrictions on accuracy associated with the human element of getting the information into the system. However, once in I think that it's true to say that modern software internally audits its own data so verification is maintained at evvery step.
From the entry perspective, taking an example of a bank teller entering data into the system and two characters are transposed. At the end of the day the tills will not tally to the system report and the errors would be tracked and rectified.
From a double entry perspective if money comes from one file then by definition it must automatically go to another or system reports will not balance. From banking of course the Cr and Dr are the opposit way around but the idea remains the same. For each Credit there is an equal Debits (or series of debits) and the files must always remain in balance.
In many ways technology has moved on and the initial entry is only made once but the reality is that the opposit side of the double entry is simply automated. It is still there. So the person makig the data entry only has the opportunity to make one mistake rather than two and other controls ensure that where mistakes are made in the one entry they are detected and corrected with far greater speed than would normally be possible under a manual system.
In this instance the person writing the book is wrong. The control aspects of double entry are still there but the person making the data entry does not see them.
I suspect that the books author doesn't actually work in a corporate finance operations department and their line relates to what they feel has disappeared rather than having an appreciation of the fact that the process has simply been automated to improve efficiency and accuracy bu the checks and balances in the system are still there.
Kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
"...the advent of the computer has destroyed this control aspect of double-entry bookkeeping. The computer will make the second entry automatically. The bookkeeper now only has one chance to get it right rather than two."
Perhaps the potential exists, to a degree but a lot depends on how the computer system is set up.
A personal bugbear of mine, is setting up default nominal codes on purchase ledger accounts. In my experience, users often assume that the code must be correct and stop looking at what the invoice is actually for.
The bigger problem for me, is that some software companies encourage people to learn their software and call themselves bookkeepers without understanding the basics of manual books and therefore exactly what the software is trying to achieve.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
From banking of course the Cr and Dr are the opposit way around but the idea remains the same.
"but when I put money in my business account it's a credit not a debit. That's what my bank says"
-- Edited by ADAS on Thursday 13th of October 2011 11:47:59 PM
This concept confused Redlady in another post.
So just for the novice/ non bookkeeper/ casual visitor that may not understand the reasoning, it's because in most cases bank statements are (as Shaun has said) written from the view point of the banks books of accounts, so when we are in debit in our own accounts and the therefore have an asset in the bank, we are creditors to the bank, therefore in credit with the bank, and a liability on their books.
Hope that reads OK? and not made it more confusing.
