Accounting Professionals Guide to Data Analytics and Cloud Computing

Unit-5 Recent Trends in Accounting
Prof. Lakshmi V. MBA, M.Com, PGDHRM, MPhil, NET-JRF-(PhD)
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FINANCIAL ACCOUNTING
LECTURE NOTES
UNIT-5 RECENT TRENDS IN ACCOUNTING
Data Analytics in Accounting:
Analytical thinking has long been a part of Accounting. Accounting skills have progressed
over time from pencil and paper to typewriters and calculators, and finally to spread sheets
and Accounting software. Accounting Data Analytics is a new skill set that is becoming
increasingly important in almost every aspect of Accounting. Today, Accounting firms are
incorporating Data Analytics into their Business Models in order to stay ahead of the
competition.
Accounting Data Analytics has aided in identifying the patterns and metrics that would help
in strategic decision making and draw suitable conclusions. Moreover, companies can utilize
these valuable insights to make improvements in several areas such as improving internal
processes, identifying risks, monitoring Business Performance, etc. Thus, Data Analytics in
Accounting has boosted the Accounting industry and raised competition in the market.
This article will give you a comprehensive guide to Data Analytics in Accounting. You will
also explore the increasing need for Accounting Data Analytics. It will also give you an
understanding of the key tools used in Accounting Data Analytics and the challenges you
might face while implementing them. Read along to know about the role of Data Analytics in
Accounting.
Need for Data Analytics in Accounting
In the current business climate, almost every industry is being driven by Big Data, including
Accounting. Accounting Data Analytics can help to make effective business decisions and
meet client expectations. Below are some of the benefits of incorporating Data Analytics in
Accounting:
1) Monitoring and Improving Business Performance

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Every industry must regularly evaluate their Business Performance if they want to stay
profitable. Accounting Data Analytics can help to ensure that the company is running
smoothly, goals are being met, and performance is being maintained or improved. This
knowledge is critical for a company’s long-term viability and survival.
2) Improving the Client Experience
Data Analytics in Accounting can be used to improve Client Experience by examining
parameters such as the turnover of tax returns, the time it takes to perform an audit, or general
client satisfaction surveys. This can help the company to bring new clients and improve the
client Retention Rate. Retention Rate is one of the important business metrics that refers to
the percentage of clients retained by the company over a given period of time.
3) Identifying and Managing Risks
A Risk can originate from a multitude of sources both inside and outside the company.
Anyone in the Accounting department of a company must know how to deal with risk. Data
Analytics in Accounting can help in analyzing the areas of risk that are faced by the company
and use Predictive Analytics to make business decisions around specific risks.
4) Generating Higher Profit Margins
Data Analytics in Accounting can be used to uncover the behavioral patterns of your
customers. These patterns can aid businesses in developing Analytical Models, which can
then be used to discover investment opportunities and improve Profit Margins. Thus,
Accounting Data Analytics also helps in generating higher Profit Margins.
5) Cash Flow Analysis
Data Analytics in Accounting can also assist in tracking your Cash Flow and identifying
places where a company can reduce losses or invest profits more wisely. Thus, Accounting
Data Analytics has a profound impact in analyzing the Cast Flow and transforming the
business.

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Key Tools Used in Accounting Data Analytics
Accounting Professionals can use a variety of tools to examine a company’s financial
situation from numerous angles. The Data Analytics tools can be broadly categorized into 4
types:
 Excel
 Business Intelligence Tools
 Proprietory Tools
 R and Python
1) Excel
Excel is a spreadsheet application for Windows, macOS, Android, and iOS that is created by
Microsoft. It provides a varied range of features including Calculations, Pivot Tables,
Graphing Tools, etc. It is one of the robust Data Analysis tools in the market that supports
multiple plug-ins to enhance the efficiency and user experience. It is a widely used tool in
almost every business or organization.
2) Business Intelligence Tools
Business Intelligence Tools allow Accounting Professionals to extract actionable business
insights from a data set. These tools help in cleaning the data, modeling data, and deliver
easy-to-understand visualizations. These visualizations provide in-depth insights and help in
identifying the areas of improvement. Moreover, these tools provide easy to share features
with other members. Some of the popular BI tools include Tableau, Power BI, FineReport,
etc.
3) Proprietary Tools
A Proprietary Tool can be termed as a tool that belongs solely to a company. Internally, these
are often developed and used by the owner to generate and sell products or services to the
user or consumer. Large corporations and firms typically employ Proprietary Tools like
Interactive Data Extraction and Analysis (IDEA) and w. Moreover, these tools are constantly
evolving based on the requirements.

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4) R and Python
R and Python are advanced and sophisticated Accounting Data Analytics tools used in many
companies. These programming languages are used to do highly customized and advanced
statistical analyses. Moreover, these languages are used to create algorithms that perform
Regression Analysis, identify Data Clusters, and other tasks.
Major Challenges Faced in Implementing Data Analytics in Accounting
Data Analytics in Accounting has helped large enterprises and businesses scale up and
achieve optimal Revenue and Growth rates. However, there are few major challenges that
you may face while implementing Accounting Data Analytics, these include:
 Inaccurate Data
 Lack of Support
 Lack of Expertise
1) Inaccurate Data
Manual data entry is the major key cause of Inaccurate Data. Inaccurate Data may lead to
serious consequences and may also influence the decisions. However, acquiring a centralized
system with a validation check can be used to eliminate these issues.
2) Lack of Support
For Accounting Data Analytics, organizational support is a must. Every employee plays an
important role in the Data Analytics process. It will be very difficult to generate any
actionable information if they do not submit data for analysis. Thus, there should be proper
coordination among the teams.

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3) Lack of Expertise
Due to a Lack of Expertise, several firms struggle with analysis. Employees may lack the
skills or knowledge to conduct in-depth Data Analysis. However, this challenge can be
mitigated by emphasizing Analytical Ability during the hiring process.
Conclusion
This article gave a comprehensive guide to Data Analytics in Accounting. It also provided an
outline of the importance and emerging approaches in Accounting Data Analytics. You also
got insights into the key tools and challenges that you might face while implementing it.
Thus, Data Analytics plays a very critical role in the field of Accounting.
Businesses can use automated platforms like Hevo Data to set this integration and handle the
ETL process. It helps you directly transfer data from a source of your choice to a Data
Warehouse, Business Intelligence tools, or any other desired destination in a fully automated
and secure manner without having to write any code and will provide you a hassle-free
experience.
Cloud Computing in accounting-
The accounting industry has welcomed technologies and innovations such as cloud
computing that make the lives of accounting professionals easier. Unlike traditional
accounting, which involves a lot of manual data entry, cloud-based accounting dramatically
reduces the time accountants need to perform basic tasks. Besides shortening the accounting
processes, cloud computing ensures improved accuracy and automates some of its functions
for streamlined operations.Cloud computing is revolutionizing the way accountants operate
and manage financial data. Below are the benefits of cloud computing for accountants.
1. Improved data security
Customer data can easily be compromised when filing taxes or handling any other high-value
company data. This is why accountants should be careful of the threats associated with the
software, hardware, and communication channels. Cyber security for accountants is of great
concern because they handle sensitive client and company data vulnerable to cyberattacks.

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With cloud computing, confidential information can be stored in the cloud where data
security and privacy are assured, while scheduled upgrades can guarantee it.
Storing financial data in the clouds also protects it from natural disasters because it’s
automatically backed up for easy retrieval in case of a calamity. You can hide all accounting
data from prying eyes by using security safeguards like firewall, data encryption, and multi-
factor authentication.
2. Easy data access
With the desktop-based accounting system, accountants are tied to an office, as their data,
software, and accounts are saved in a local drive. Cloud computing allows fast access to data
from anywhere. When accounting data and other applications are stored in the cloud,
accountants can access them provided they have internet-connected devices. Cloud-based
accounting software allows 24/7 accessibility, making it easy for accountants to access
records, reports, and receipts on the go. This makes it possible for accounting professionals to
work remotely.
3. Improves accuracy
Since cloud computing allows for the automation of most accounting functions, human error
is reduced. Using journal templates, repetitive invoices, and auto reserved accrual journal
ensures the accuracy and efficiency of financial records. Accountants also get comfort in that
every transaction processed through a bank account is displayed and reconciled in the cloud
accounting file, ensuring that they don’t miss any financial events.
4. Enhances speed
The automation feature in the cloud computing system fastens routine tasks, giving
accountants more time to concentrate on other functions, increasing productivity. Besides
eliminating human error, automation of key processes prevents data duplication, saving time
and effort.
With cloud accounting, data is automatically saved and backed up as you go, so accounting
professionals don’t have to waste time-saving data or doing data back-ups. Since software
updates and back-ups are no longer necessary on a cloud platform, accountants are always
logged into the latest software with all the updated features.

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5. Facilitates collaboration
Accessibility enhances collaboration. When working with desktops, you have limited access
to your statements and records, making it challenging to collaborate with colleagues and
advisers. Since several stakeholders such as team members, management, and advisors can
access books online, the workload can be delegated.
Since the accountants handle the most complex functions such as long-term forecasting, in-
depth reporting, and planning, bookkeepers and small business owners can handle basic tasks
like paying bills and bank reconciliations. Cloud computing software lessens accountants’
work, enabling them to offer more services to their clients.
6. Reduces paperwork
In a traditional accounting system, accountants have to deal with paperwork and manual data
entry, which leads to slow and ineffective processes. With cloud accounting, accountants can
significantly reduce reliance on paperwork because they email invoices to clients, eliminating
printing and postage costs, accelerating the payment process.
Incoming receipts and bills can be scanned and saved with the associated transactions in the
accounting software. With your financial statements, reports, and other financial data stored
in the cloud, accountants don’t need to keep original paperwork, saving storage and filing
space costs.
7. Improved customer relationships
Accountants need to maintain good relationships with their customers. Cloud computing
allows them to collaborate with clients across any device virtually. Accountants working with
vendors, distributors, and other colleagues, can easily find any bills, invoices or identify if a
payment was missed. This helps accountants to ensure that all records are up-to-date, easing
the tax filing process.

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8. Flexible and scalable operations
Cloud computing allows accountants to scale their resources up or down whenever necessary
to ensure they only pay for what they need. With cloud computing, accountants can meet the
requirements and demands of a growing business. This is because the scalability feature of
cloud computing allows them to transition to a more comprehensive accounting solution as
the business grows. It also allows you to integrate add-ons and software options to customize
your accounting solution
9. Enhances centralization
With cloud computing, all financial data is stored in one database, allowing everyone
accesses to similar information. Accountants working from different sections don’t have to
waste time figuring out which spreadsheet is suitable. This ensures consistency across all
financial processes and reports.
Green Accounting-
Green accounting is a type of accounting that attempts to factor environmental costs into the
financial results of operations. It has been argued that gross domestic product ignores the
environment and therefore policymakers need a revised model that incorporates green
accounting. The major purpose of green accounting is to help businesses understand and
manage the potential quid pro quo between traditional economics goals and environmental
goals. It also increases the important information available for analyzing policy issues,
especially when those vital pieces of information are often overlooked. Green accounting is
said to only ensure weak sustainability, which should be considered as a step toward
ultimately a strong sustainability.
It is a controversial practice however, since depletion may be already factored into
accounting for the extraction industries and the accounting for externalities may be arbitrary.
It is obvious therefore that a standard practice would need to be established in order for it to
gain both credibility and use. Depletion is not the whole of environmental accounting
however, with pollution being but one factor of business that is almost never accounted for
specifically.

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Challenges
Environmental protection and economic growth
The effect of environmental policies on the economy has always been a controversial topic.
Many economists argue that sanctioned limits on pollution curtail economic growth. For
instance, between 1973 and 1982, the United States imposed stricter regulations on pollution,
which led to a 0.09% decrease per year in the national output growth.] A study conducted in
1990 also analyzed the economic growth with during the time period between 1973 and
1980s. The result indicated that the government regulation reduced the annual GNP by 0.19%
per year. Other researchers argue that those number is insignificant compared to protecting
and sustaining the priceless environment.
Distributional impacts of environmental and natural resource policies
Not all industries pollute the same amount; chemical and paper manufacturing industries, for
example, tend to pollute more than others. It is difficult to accurately measure the pollution
level of each industry in order to categorize and to set up a fair set of policies. In particular,
improved water quality might highly favor the higher income groups due to the fact that most
improvements are done in the urban areas.
Links between trade and environmental and natural resource policies
During the time of globalization and the rapid expansion of the international market, the US
policymakers have come to realize the importance of what is happening in other countries.
Before making any decision and submitting the final draft to Congress, the policymakers
were concerned about the effects of the North American Free Trade Agreement on the
environment. National accounting systems that include environmental and natural resources
could provide useful information during negotiations over the nations' commitments to
restore or maintain natural capital.
Trade restrictions have not been used when a country's production and processing methods
result in excessive discharges of pollutants (carbon, sulfur, nitrogen
oxides, chlorofluorocarbons) across national boundaries. The difficulty comes in when
determining the effects of trans-boundary pollutants on industry costs.

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Human Resource Accounting:
Human Resource Accounting (HRA) is the process of identifying and
reporting investments made in the human resources of an organisation that are presently
unaccounted for in the conventional accounting practice. It is an extension of standard
accounting principles. Measuring the value of the human resources can assist organisations in
accurately documenting their assets. In other words, human resource accounting is a process
of measuring the cost incurred by the organisation to recruit, select, train, and develop human
assets.
Objectives
The human resource process was established to fulfill a number of objectives within the
organization. These include:
1. To furnish cost value information for making proper and effective management
decisions about acquiring, allocating, developing, and maintaining human resources
in order to achieve cost effective organizational objectives.
2. To monitor effectively the use of human resources by the management.
3. To have an analysis of the Human Asset, i.e. whether such assets are conserved,
depleted, or appreciated.
4. To aid in the development of management principles and proper decision making for
the future, by classifying the financial consequences of various practices.
Inflation Accounting:
Inflation accounting is used during times of increasing or plummeting prices in certain areas
of the world, usually with respect to multinational corporations and their financial reporting.
Most often, it is seen in countries with high inflation. As a result, some accounting standards
boards and countries permit or require the companies to restate their financial statements.

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Understanding Inflation Accounting
Inflation or deflation can cause a significant impact on an organization’s historical
information and financial reports. Due to the relative change in value from inflation/deflation,
the financial data ceases to be relevant and, as a result, provides very little use or value to the
individuals using them.
Inflationary accounting uses index prices to create a more realistic picture of how companies
and their financial positions are doing in inflationary settings. It provides more information
than basic cost accounting can supply. It allows the business income and expenses to be
representative and comparable with other companies and historical information.
Depending on the location, accounting standards boards (IFRS, GAAP, etc.) allow or require
adjustments of financial statements in specific situations. Depending on the company and the
particular standards that apply to them, they may be required to restate their financial
statements periodically in order to provide reliable and valuable information about the
company.
Inflation and Deflation
Inflation accounting is used directly to compensate for the effects of inflation or deflation.
Inflation is the gradual decline of purchasing power each dollar has due to price increases
over time. Deflation is a similar concept; it is the gradual decline in purchasing power over
time. Both inflation and deflation are not specific to one product or service, but rather, entire
industries and markets.
Benefits and Drawbacks
Inflation accounting comes with both benefits and drawbacks. The main benefit comes from
the adjusted numbers’ value to internal users, external users, and the government. It allows
for more realistic and comparable data relative to other companies and historical financial
statements of the same company.

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Current revenues for a period are hard to compare to historical costs if inflation or deflation is
too great. Therefore, inflation accounting provides a significant benefit to its users in such
situations.
Contrary, inflation accounting can actually complicate the financial statements and make it
harder for investors and other users of the statements to understand what the numbers mean.
It can also create a moral hazard issue for companies that try to mislead individuals with their
financials by seeing them from this different perspective. As well, it can lead to many
restatements and constantly changing financial statements.
Database Accounting:
A database is a shared collection of inter-related data tables which meet the various
informational needs of an organization. Thus, an accounting database stores the accounting
data. It is a collection of accounting data which is inter-related to depict the various aspects of
the accounting information system.

Accounting Professionals Guide to Data Analytics and Cloud Computing

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