ACCOUNTING IN THE FUTURE (Part B)

One of the biggest problems facing the accounting profession is the necessity of rapid adaptation to the changes taking place in organisational structure and information processing throughout the world. Under modern conditions production and new manufacturing methods are developing very rapidly. And very often these new developments make some accounting methods out of date. That is why in many countries of the world present accounting methods are sometimes criticised. And that is quite justified. The most common criticised point is that traditional accounting methods cannot be applied to production systems which change to adapt to the environment. The reason for that is that production runs have become shorter, because machine tools have to change very rapidly to meet the demands of the time.

Another deficiency for which accounting is often criticised, lies in the fact that management accounting cannot very often measure any costs accurately. Suffice it to say that the present cost accounting systems do not show the cost of particular products. No wonder that production managers find that accountants cannot sometimes give them reliable information to make proper decisions. Some accounting experts think that without rapid changes in their profession, management accountants will not be needed by management in the future. Under the conditions of rapidly developing production, emphasis should be placed on the necessity to make accounting systems consistent with the forms of organisational structure and patterns of responsibility which can cope with the inherent uncertainty and provide necessary elements of adaptability.

Another important trend to play a significant role in accounting throughout the world is certainly connected with computerising accounting work.

There is no doubt that information technology will be more extensively used in accounting practices of the future than it is now. So, accountants of the 21^st century will view themselves in the new role, because they will entirely leave their accounting chores – book-keeping to electronic equipment. Accountants will be exclusively concerned with the valuation techniques that are used in assessing financial condition and results of operations as well as evaluating through analytical review techniques the relevance, reliability and consistency of financial data. As a preparer and user of accounting information, the accountant of the future will be much more involved in system design activities. So, he will have to consider and analyse the organisation's structure and the flow of information through various organisational units, and the implication of internal control.

Exercise 6.7

Match the English words with their definitions:

1.	demand	a)	existing or located on the inside of something
2.	deficiency	b)	a company, business, club, etc., that is formed for a particular purpose
3.	reliable	c)	factual information (as measurements or statistics) used as a basis for reasoning, discussion, or calculation
4.	decision	d)	giving the same result on successive trials
5.	control	e)	a careful study of something to learn about its parts, what they do, and how they are related to each other
6.	organization	f)	the quantity of a commodity or service wanted at a specified price and time
7.	equipment	g)	an amount that is lacking or inadequate
8.	data	h)	giving the same result on successive trials
9.	analysis	i)	the implements used in an operation or activity
10.	internal	j)	power or authority to guide or manage

Exercise 6.8

Make up sentences using the jumbled words:

1.Modern, manufacturing, developing, are, under, conditions, new, production, and, methods, very, rapidly.

2.The, criticized, that, cannot be, systems, accounting, common, traditional, applied to, to adopt, production, is, point, change, most, the, to, methods, which, environment.

3.that, managers, sometimes, information, to make, that, wonder, No, production, give, reliable, proper, decisions, them, cannot, accountants, find.

4.no, doubt, technology, is, There, accounting, than, in, more, will be, information, extensively, of, it, now, is, the, future, used, that, practices.

5.preparer, and, user, a, information, accountant, of, will be, the, future, accounting, of, as, more, in, system, much, the, involved, design, activities, of.

TEXT 7

THE DOUBLE ENTRY SYSTEM – THE BASIC
METHOD OF ACCOUNTING

Exercise 7. 1

Study the vocabulary:

	suffice it to say		достатньо сказати
	a merchant		купець
	prolific		плідний, рясний
	to penetrate		проникати, охоплювати
	to survive		вижити, уціліти
	to abolish confusion		знищити (відмінити) плутанину
	chaos		хаос, повний безпорядок
	sophisticated		витончений, складний
	to acquire		отримати, набути
	significance		значення, важливість, значимість

Exercise 7. 2

Read and translate the text:

About 3,000 B.C., the Sumerians, the Egyptians, and other peoples of the Middle East developed the first known business records. The results of tax collections, farming harvests, and the transactions of merchants were recorded by means of written numbers. The Romans, too, were prolific keepers of records. Indeed, Roman numerals were used in many parts of Europe until the fifteenth century A.D. The stimulus for modern bookkeeping came with the introduction of Arabic, or Hindu-Arabic, numerals and the decimal system in the twelfth century A.D. Most people today use Arabic numerals.

The two basic systems of bookkeeping are double-entry and single-entry. The double-entry system, the backbone of accounting, evolved during the Renaissance. The first systematic presentation of double-entry book-keeping appeared in 1494, two years after Columbus discovered America. It was described in a mathematics book written by Luca Paciolli, a Fransiscan monk who was a friend of Leonardo da Vinci. Goethe, the famous German poet and dramatist, referred to double-entry book-keeping as «one of the finest discoveries of the human intellect». And, indeed, the importance of the double-entry system is difficult to appreciate. Suffice it to say that the double-entry technique made accounting records more comprehensive and orderly. Before the invention of double-entry book-keeping accounting records had been disorganised. Merchants literally had not known the state of their finances. The use of this technique had a positive effect on both business and trade. Some scholars think that there was a close relationship between the adoption of the double-entry system and economic growth in many countries. In the Middle Ages the knowledge of this technique was a pre-condition of rapid economic growth of most European countries. And the other way round, where this technique was lacking or slows to penetrate, economic development was delayed.

In Britain the first book on the double-entry system was written by one Hugh Old-Castle schoolmaster, who taught arithmetic. No copy of this first book has survived. Later some more books describing this new method were published. English businessmen began to employ this recording device. The primary advantage of double-entry accounting, to many historians of accounting, was that it abolished confusion in the accounts by creating order out of chaos.

In Russia double-entry accounting was introduced to the state administration under Peter I. It was first applied for the Admiralty and the army. Peter I required the managers of all the mining and smelting works to maintain records of their operations, thus providing a basis for the collection of national statistics. The first large enterprise to use double-entry was the Demidovs. It had over 50 works, mostly iron-making in the Urals. By the end of the 18th century the Demidov enterprise had acquired sophisticated accounting techniques.

What is the significance of the double-entry system for accounting? The double-entry system is based on the principle of duality, which means that all economic events have two aspects — effort and reward, sources and uses — that offset or balance each other. In the double-entry system each transaction must be recorded with at least one debit and one credit, in such a way that the total amount of debits and the total amount of credits equal each other. Because of the way it is designed, the system as a whole is always in balance.

Exercise 7.3

Read the first and second paragraphs of the text and choose the best variant: