Question

Answer the following questions. Please type using a word processing program and bring a printed copy to class. Write as much or as little as you feel necessary to answer each question to the best of your ability. You may use all available resources to complete this case – e.g., lecture slides, notes, your book, and the Accounting Standards Codification. Collaboration with others in your group is allowed to the extent that it is helpful. How you work together is up to you – however, I encourage everyone in the group to take at least some part for every question. Please turn in only one finished assignment for each group. Use appropriate citations where relevant and according to your professional judgment. For questions requiring use of the codification, please use the following style: 1) Cite the ASC down to the Paragraph. For example, (ASC 330-10-05-01) 2) Copy-paste the paragraph you cite from the codification into the word document. 3) Interpret the codification paragraph into ‘plain English’ as best you can. In other words, how would you explain the appropriate accounting treatment to a colleague, boss, or business partner who has a basic understanding of accounting? You may (and are encouraged to) use debits and credits or t-accounts to illustrate the accounting if appropriate.

You are on a plane traveling to visit family (pre-Covid 19) and you scroll through some news headlines on your tablet. You end up reading an editorial that discusses the changing nature of the economy. Specifically, the writer speculates that new technology will make the accounting profession outdated, since computers will automatically track and compile all financial data and make it easy for anyone with an online connection to access any data about a company’s operations that they wish. How will this affect your career prospects, as an accountant-to-be?

Answer 1

Accounting extends into virtually every walk of life. You’re doing accounting

when you make entries in your cheque book and fill out your income tax

return. When you sign a mortgage on your home you should understand the

accounting method the lender uses to calculate the interest amount charged

on your loan each period. Individual investors need to understand some

accounting in order to figure the return on capital invested. And every organi-

sation, profit-motivated or not, needs to know how it stands financially.

Accounting supplies all that information.

Many different kinds of accounting are done by many different kinds of persons

or entities for many different purposes:

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Accounting for organisations and accounting for individuals.

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Accounting for profit-motivated businesses and accounting for non-profit

organisations (such as hospitals, housing associations, churches, schools,

and colleges).

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Income tax accounting while you’re living and estate tax accounting

after you die.

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Accounting for farmers who grow their products, accounting for miners

who extract their products from the earth, accounting for producers who

manufacture products, and accounting for retailers who sell products.

Ais necessary in any free-market, capitalist economic system. It’s

equally necessary in a centrally controlled, socialist economic system. All

economic activity requires information. The more developed the economic

system, the more the system depends on information. Much of the information

comes from the accounting systems used by the businesses, individuals, and

other institutions in the economic system.

You must record credits and debits for each transaction.

The golden rules of accounting also revolve around debits and credits. Take a look at the three main rules of accounting:

Debit the receiver and credit the giver

Debit what comes in and credit what goes out

Debit expenses and losses, credit income and gains

Part II

HOW SOFTWARE WILL AFFECT ACCOUNTANT'S CAREER

It's not a reality—yet—but accounting software is poised to eliminate accountants. We are at a tipping point for many similar professions: online education replacing professors, legal software replacing lawyers. As threatening as this sounds to professionals with many years of education and experience invested in a single field of expertise, the phenomenon of new technologies disrupting the workforce isn't a new concept.

With such a radical technology disruption, there's always the same cycle of debate: outrage, denial, compromise, and defeat. Ironically, accountants are instrumental in consulting with software developers to create the very technology that will replace them.

Of course, accounting software isn't new to the accounting profession, and in fact, it has become very useful for many accountants. Even tax filing software hasn't put accountants out of business. But changes are on the horizon that could likely empower accounting software users to the point when they don't need accountants any longer, and reduce the process to a turnkey program anyone could follow. Again, automation is a common disruptor. Read about how automated cars are closer to reality than most believe, and how that is set to shake up the industries associated, especially insurance.

The latest evolution for accounting software has been in products moving into the "cloud." Some software packages, like QuickBooks Online, offer certification programs, which help set accountants apart as the go-to professionals, but others seem to compel users to do more of the accounting themselves. This act of moving accounting online doesn't precipitate the end of accountants. However, what does push accountants to the margins is how inexpensive and user-friendly the new online accounting software is. Check out FreshBooks, Xero, and Wave, for example.

If that's not enough to instill fear in a well-educated accountant, think about how the Uber app has shaken up the taxi business, and how AirBnB is threatening the tourism industry. Giving consumers a way to do something effectively themselves for cheaper, and with ease, is a recipe for a paradigm shift.

Accounting software won't replace accountants all at once, just like universities won't disappear once Massive Open Online Courses (MOOCs) become the standard fare, and there will be exceptions, just like there will likely always be students who think it's better to pay an amount that exceeds any reasonable ROI to obtain a liberal arts degree in person. Some exceptions will likely outlast predictions, especially for CPAs who play a critical role in large publicly traded organizations, for example, that need credentialed experts to conduct audits and sort through other complex regulatory issues.

Automating accounting for small business owners and entrepreneurs won't be a bad thing either, as many would prefer to have turnkey programs to handle the grunt work of a task that once cost a good bit of a start-up's small budget. Financial advisors will still have a role to play in helping entrepreneurs decipher the numbers, but it's likely the software will come more complete with better industry standards, and give feedback on the financial health of the business being monitored.