How software undermines double-entry skills

Automated accounting software has dumbed down the profession to such an extent that many accountants no longer understand the basic principles of double-entry bookkeeping, AccountingWEB members have claimed.

It began last month in the Sage 50 Accounts discussion group with a tricky bit of reconstruction work to reallocate a couple of invoices in a bank reconciliation completed during the previous financial year, but escalated into a diatribe against falling professional standards and the havoc wrought by over-reliance on computer software.

Some members of the group looked for ways to delete and re-enter the transactions to reallocate payments against particular invoices, and another member suggested a way to do this by going into the Sage Maintenance module and editing the transactions there.

But witch-queen, a bookkeeper and Sage trainer advised that while “VAT Cash Accounting in Sage can be a pain, but if you just stop and think for a second, there is always a way to manually correct things. Bank Payments can be reversed with a Bank Receipt (and vice versa) and the corrected transaction entered,” she wrote.

Invoices on both sides can be reversed with a credit note (and vice versa) via the suspense account and the corrected transaction entered.

Using credit notes, misallocated invoices in the bank reconciliation could be put back to how the accountant wanted to see them, as long as the software user ensures that the reversals match the exact references, dates and amounts of the original transactions, and using T9 for the tax code in Sage. It is also a good idea to enter a note in the Description box to explain the reason for the posting, witch-queen added.

“This way these transactions do not affect your profit and loss or your VAT returns, and, when looking at the supplier/customer account, it is obvious what has been done and why.”

But the episode prompted a rant from AccountingWEB member Lloyd Sherwood. “What really amazes me [is] the lack of understanding of double entry principle which needs to be applied prior to processing of financial data onto a computerised accounting software,” he wrote.

Journals are the correct way to fix errors within expense and revenue accounts, not maintenance modules which will produce financials/audit trails peppered with deleted transactions.

“If you put garbage entries in the accounting software you get garbage out of the system. If unsure of processing a transaction and its net effect, then use the Demo Data to test and see results before processing on the live data,” he advised.

The purist perspective is one that occasions quite a lot of “in my day” reminiscences, but for Peter Saxon the problem stems from computerisation and lack of proper training.

“When I did a degree in accountancy in the mid-70s I think I was the only person on the course who knew any bookkeeping. The three year course covered bookkeeping in a couple of hours and spent a lot longer on theory and concepts,” Saxton wrote.  “In the late 70s at the start of my training contract with an international firm of accountants all trainees were sent on a two week bookkeeping course but I wonder how often that happens now…  It is very difficult to understand bookkeeping from solely using Sage or QuickBooks.”

According to witch-queen, the accounting blind-spot isn’t just educational, but cultural, and has to do with the fact that many accountants have little day-to-day involvement with sets of accounts. She advises against asking accountants how to do things in Sage. Where a bookkeeper is concerned with where every penny comes from and goes to, she argued, “the accountant is only interested in the year-end figures”.