Tools for Accounting - Research Paper Example

? Tools for Accounting Accounting is one profession that is extensively in demand in the growing economies of the world today. This profession with the passage of time has come into the need of different innovations that assist this profession from different aspect. Like all professionals, accountants rely on various tools to help them perform various accounting tasks. Looking back at the history of the accounting profession, it can be said that the types of tools used for accounting have increased in number as well as they have become sophisticated with developing business markets and their implementation is becoming complicated. This brief paper will highlight and discuss the use of a current technology XBRL for accounting purposes. Individuals and business organizations may use tags to design business and financial software. The use of XBRL is highly recommended to accountants and organizations as the software makes its easier to handle different items of financial information, just like a barcode make its easier for the supply management to handle assets. XBRL software increases accessibility and reliability of the financial data. It also reduces the costs ad efforts of the organization to gather data for analysis. There are different accounting communities encourage the adaptation of XBRL, including major accounting companies that are members of XBRL Consortium. The use of XBRL in the business and accounting field is wide, it is recommended that use of XBRL can enhance the efficiency and reliability of the financial data. The use of XBRL in the accounting field is listed below: Unique tags can be designed to identify ratios and basic information for the auditors It provides a range of information related to accounting items, identifies either the item shall be credit or debit, currency or period It further provides a range of formula and calculation related to one another (that is, ratios or indicators) to determine the categories or its presentational purposes. Historical use Business entities are highly influenced with the development of technology. The history of XBRL begins with the efforts of an American person named Charles Hoffman. He was a Certified Public Accountant (CPA) from Tacoma, Washington. The American Institute of Certified Public Accountants (AICPA) also played a vital role in making XBRL, what it is today. In 1998 Charles enlisted the support of AICPA to lead the development of XBRL with the goal of providing a standard, XML-based language for digitalizing business reports in accordance with the rules of accounting in every country around the globe. XBRL International is a global consortium with over 250 leading organizations concerned with the exchange and timeliness of financial and business reporting data. With the efforts of the institute and its members a framework of specifications and taxonomies was introduced providing a standard XML-based language for digitalizing business reports. XBRL operates under the United States jurisdiction globally and in the supervision of a committee of AICPA structured from 1999-2006, until it became a separate non-profit organization in 2006 (Debreceny, Felden and Piechocki). In the recent years, XBRL has become one of the most common and advanced technologies that is being used at major corporations and professional accountants worldwide. Its use is likely to continue to grow over the next years. XBRL (Extensible Business Reporting Language) is a standard form of electronic medium to change and share business and financial information. XBRL use ‘tags’ to describe the work like a bar code and defines each of these tags by using a number of dictionaries called ‘taxonomies’. XBRL taxonomies are collections of taxonomy schemas and linkbases. Taxonomy schema is an XML schema document file. Linkbases are XML document file. Theses follow the Xlink specifications. XBRL Instance XBRL Instance is extensively used in the business organization, it allows the organization to embed its financial information and facts, into to processed collection of taxonomies known as ‘Discoverable Taxonomy Set’ (DTS) (Debreceny, Felden and Piechocki). It included all the financial information like business facts like 1) Items, accounting values having single value 2) Tuples, accounting facts that have multiple values (Debreceny, Felden and Piechocki). XBRL instance includes accounting facts. It allows defining entity, its proprietorship, period of fact and scenarios relating to business values (Debreceny, Felden and Piechocki). The XBRL instance is highly effective in determining and analyzing Financial Reporting Standards. XBRL Taxonomy A collection of taxonomy scheme and linkbases developed to define specific tags is known as XBRL taxonomy. These tags are designed considering specific dictionary, the main objective of these tags is to specify interrelationship between financial items and data (such as ratios, net profits). Different business reporting purposes are designed to assess different taxonomies. There are different local accounting and reporting regulation in different countries. In order to address these business principles and accounting regulation different taxonomies are developed to address their own reporting regulations. Taxonomies do not identify items but also embed concepts, also known as Tuples. Different organizations, companies or any specific industry may require different taxonomy as the nature of the business and accounting regulation vary among business entities. Label Linkbase XBRL is predicted to be a worldwide standard for electronic business reporting. Linkbase is considered to be human readable concepts, it supports multiple languages that can further embed multiple strings within each language. Reference Linkbase: The development in the accounting regulations is constant and dynamic. In order to associate the concepts from different accounting authorities literature (IFRS, GAAP) it allows references to the relative accounting standards. It allows determining the relationship with the financial elements and external regulation or standards. Calculation Linkbase: Calculation Linkbase enhances the idea of calculation and to improve the reporting of XBRL. It enhances the document referring of the basic valid rules to a particular taxonomy. Definition Linkbase: Definition Linkbase allows accountants understand different kinds of relations and oppurtunites between elements. Through this accounts are able to distinguish between concepts and develop more relative financial data. Presentation Linkbase: It is essential for accounts to follow the presentation and reporting formats. Presentation Linkbas allows accountants to report in general prepared format. The main purpose of the Presentation Linkbase allows elements to structure according to the proper taxonomy content. Work Cited Debreceny, Roger, Carden Felden and M Piechocki. New dimensions of business reporting and XBRL. 2007. Print. Read More