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Accounting existed for centuries before computers. Bookkeepers relied on paper ledgers to record debits and credits, revenue and expenses. Machines began to play a role in the 1800s, then the invention of computers transformed accounting in the 20th century.
American William Burroughs invented the adding machine in the 1880s. Adding machines didn't have the key features of computers, such as internal memory, but they enabled accountants to carry out arithmetic more efficiently and accurately.
By the end of the century, inventor Herman Hollerith had developed a punch-card machine to speed up data handling for the U.S. Census. The tabulating machines recorded data by punching a pattern of holes into cards. The machine could also read the pattern to call up the information.
Hollerith took the punch-card concept into private industry when he founded IBM. By 1907, businesses were using punch-card machines for accounting. By 1928, an IBM tabulator could process 100 cards a minute.
Univac for Accounting
During World War II, John Mauchly and J. Presper Eckert developed the ENIAC computer for the military. After the war they built UNIVAC -- the UNIVersal Automatic Computer -- which stored data on magnetic tape rather than punch-cards. In 1955, a UNIVAC began running payroll for one of General Electric's factories. It marked the first time a company had bought a computer purely for accounting. It took 40 hours to complete the payroll calculations.
Computers were part of accounting long before UNIVAC. Up until World War II, however, "computer" meant a human being who worked crunching numbers.
IBM, however, soon improved on UNIVAC and offered computers that re-established the company as the king of business machines.
The Age of Software
The Accounting Journal describes early accounting software as "handcrafted literally byte by byte over the course of months." Companies relied heavily on proprietary systems. As computers became more powerful, programmers created more generalized software that could serve many different customers.
1978 saw the birth of Visicalc, the first spreadsheet software. Visicalc made it possible to carry out financial modeling on the computer. A growing number of businesses saw a value in buying computers.
Also in 1978, Peachtree Software introduced an accounting software package for the early personal computer. This made it possible for companies to computerize their accounting at a fraction of the cost of buying a mainframe. By 1981, Peachtree offered an integrated office suite that included a word processor and spreadsheet. It eventually began to develop a support team that could explain things to the customers.
The end result was that by the mid-1980s, PCs and accounting programs had become part of millions of business offices.
Another landmark development took place in 1983, when Intuit launched the Quicken line of software. Unlike programs geared for business, Quicken was designed for individuals and families to use. Because Quicken didn't target accounting professionals, Intuit had to develop an interface that non-accountants would find easy to use.
As computerized accounting became more common, it also got more competitive. The Visicalc spreadsheet eventually lost out to Lotus 1-2-3, which then lost out to Excel. Excel started as a product for Apple computers. After the PC became the dominant business platform, Microsoft brought out Excel for PCs. Open source software now offers free alternatives to proprietary accounting programs.
The Internet Era
The Internet brought further changes to accounting. The International Federation of Accountants lists some of the effects online:
- It's possible to manage or audit accounts electronically without being physically present. This makes it easier for an accountant to handle multiple jobs at once, or to run an audit at long-distance.
- Cloud computing, in which data is stored entirely online, makes it even simpler to access and work with the accounts regardless of where the accountant is or which computer she's using.
- Security threats, such as hacking, make it harder to keep client information safe.