The practice of accounting goes as far back as 7,000 years ago, when the ancient Mesopotamians documented their bartering system with picture symbols on clay tablets. The first formal double-book accounting system was invented by Italian friar and mathematician Luca Bartolomeo de Pacioli in 1494, and the profession of chartered accounting was formalized into the mainstream in the 1800s.
With the dawn of the Information Age in the 1950s and the widespread use of computers in the decades that followed, the field of accounting subsequently underwent a huge transformation. Manual accounting methods gave way to digitized accounting processes, eventually culminating in what we now know as the computerized accounting system or CAS.
In this article, let’s take a quick look at the history and evolution of computerized accounting systems that are used in Filipino businesses. This should give you some perspective on what a BIR CAS compliant system entails and why you should consider onboarding one for your company in the near future.
Accounting in the Age of Information: A Recap
Even if the Information Age formally kicked off as early as the 1950s, manual accounting was still the predominant method for keeping business finances in order circa 1980. Accountants would reconcile items like accounts payable, accounts receivable, and stockholder equity by hand and manually update their companies’ general ledgers every month.
In the 1990s, it became more common for businesses to incorporate computers into their general workflow. One of the major business processes to be digitized was, of course, accounting. Even then, however, many accountants would still perform their functions via longhand. Although it was now easier at this point to type accounting data into spreadsheets and calculate outstanding balances using automated functions, the manual element of accounting stayed more or less the same. Staff would still consolidate accounting records one by one, and as a consequence, the final numbers would still be subject to the risk of great delay or grave human error.
The real turning point for the emergence of computerized accounting solutions occurred in the 2000s. These two decades saw the advent of key business technologies that made accounting faster, easier, more accurate, and more efficient. Perhaps the biggest influence to modern, computer-powered, and data-driven accounting is the enterprise resource planning (ERP) solution. The multi-module ERPs of today draw their power from high-tech automation, calculation, analytics, and reporting capabilities. All of these have factored into the significant improvement of computerized accounting.
The Rise of the Transaction Processing System
The biggest difference between the simple digitized accounting system (which is analog in principle) and the fully digitalized CAS is that the latter deploys a transaction processing system, or TPS. This type of system is engineered to do the following for its users:
- Facilitate data entry with input devices like computer keyboards, computer mouses, barcode scanners, and mobile or tablet touch screens
- Validate the data entered into the system to see if it matches the system’s specifications
- Process data and automatically reconcile it with existing data within the system
- Store data in either a short-term or long-term memory
- Report information using a predetermined template format
The TPS has widespread applications in enterprise accounting. Iterations of it are used in groceries, retail stores, restaurants, hotels, factories, logistics facilities, and other settings where companies have to deal with huge volumes of sales and accounting data. TPS-driven computerized accounting solutions have helped businesses attain mastery of their financial situation, stay compliant to their regulators in the finance sector, and make important financial decisions to drive up their revenues.
Considering the benefits that a CAS is able to impart, it’s no wonder that businesses have begun to invest in their own CASs. Now is arguably the best time to do so given the affordability and wealth of customization options available on solutions like SAP Business One.
How Computerized Accounting Systems Are Implemented in the Philippines
Many Filipino businesses use CASs for their accounting operations. The use of computerized accounting systems is a requirement for the country’s largest taxpayers. It’s an option for small and medium-sized businesses that want to modernize their accounting processes, albeit one that needs to be officially documented by the Philippines’s Bureau of Internal Revenue (BIR).
For you to be able to use this technology for your own company without incurring a penalty from the Philippine government, you must first register your CAS with the BIR. Luckily, the process is not as complicated or as time-consuming as it may have been prior to the COVID-19 pandemic. BIR no longer requires CAS-owning businesses to schedule a system demo with their oversight body or to wait for an official Permit to Use (PTU). The client business need only register their system and pass their digitized accounting books and records soon after the end of the taxable year.
Accounting technology has evolved by leaps and bounds over the decades, much to the benefit of global and local businesses. You will be able to harness its potential through the use of your own BIR compliant CAS system, which should be onboarded by a reliable software vendor.
It’s high time to consider investing in your own CAS and making the necessary preps to register it with the BIR. When you do, many of the accounting problems that plague your business will soon be history.