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                                   William Larry Gordon, University of Alaska
                                   Henry Wichmann, Jr., University of Alaska
                                 Roger Eichmann, (Student), University of Alaska


The purpose of this paper is to report on the mini/micro-computer
involvement of accounting firms in Alaska that serve small
business clients. A conclusion was drawn from the study
indicating mini/micro-computer development along with better
software should make better accounting services available to more
small businesses.


The mini/micro-computer business might be compared to the
developing automobile business 50 years ago. Many ideas and
manufacturers exist with a range of quality and prices.

In Alaska the top three mini/micro-computer vendors were found to
be IBM, Apple Computer, Inc., and Osborne Computer Corporation
[1]. These vendors have been considered leaders in the
mini/micro-computer industry nationwide [5] [6].

The purpose of this paper is to report on the mini/micro-computer
involvement of 73 CPA firms and 247 other accounting firms
surveyed in Alaska by the authors [1], and to offer suggestions
on how small accounting firms serving small businesses might use
mini/micro-computers. In addition, a comparison will be made
with similar studies conducted in Wyoming [7] [9] and another
study conducted in Alaska [3].

The Need for Accounting Services Provided to Small Business

The Small Business Administration (SBA) estimates that 9 out of
10 businesses fail due to lack of management ability [8].
Management ability is broadly defined by the SBA to include
accounting problem-solving, marketing problem-solving, and other
problem-solving areas. In a recent study of 176 Alaska and
Wyoming Small Business Institute (SBI) cases, accounting was
revealed as the key problem area in management ability [9].

The need for accounting services provided to small businesses is
indicated by the following quote, "... a number of studies have
shown that bankrupt small businesses typically failed to maintain
adequate records." These textbook authors listed the reasons for
failure of small businesses to be 67.3 percent due to inadequate
information concerning sales, operating expenses, receivable,
payables, etc., which are accounting related data necessary for
good management decision making [4].

In another recent study, further evidence indicated the need for
adequate record keeping and financial reporting for small
businesses. This study of 1,000 Colorado borrowers revealed
small business borrowers lacked accounting understanding and
knowledge. Personal interviews with SBA personnel in the same
study revealed it is common knowledge that a need exists for
adequate records kept by small business owner-managers [2].

Small CPA firms and other accounting service firms mainly serve
small business clients. These accounting firms can provide their
small business clients with computerized management information
systems by obtaining a mini/micro-computer system with
supportable software. If accounting information is a key to
small business success, then a computerized accounting system
should help save many small businesses from failure.


In order to focus on the questions the authors are attempting to
answer in this paper, it seems appropriate to define
"minicomputers" and "microcomputers."

Minicomputer - The typical minicomputer is about the size of an
office desk, self-contained with approximately 512,000 bytes of
memory, uses a 16 or 32 bit word length, and usually has 6
input/output peripheral devices attached. The cost averages
about $42,000 for the basic hardware unit, while software
packages average $1,000 each with word processing available [5].

Microcomputer - The typical microcomputer is just a little bit
larger than the average office typewriter, self-contained with
approximately 64,000 bytes of memory, uses an 8 bit word length,
and usually has 1 or 2 input/output peripheral devices attached.
The cost averages about $4,100 for the basic hardware unit, while
software packages average about $400 each with word processing
available [6].

Alaska Survey

The minicomputer is smaller than the expensive mainframe
computers, but larger than the inexpensive microcomputers. Many
microcomputers are more efficient and effective than earlier
minicomputers and some older low-end mainframes. The Alaska
survey of computer usage by accounting firms revealed 56 percent
used microcomputers, 18 percent used minicomputers, and 26
percent used no computer. The accounting firms had owned their
computers an average of 2 years and 8 months.

The Alaska accounting firms were found to be small with 75
percent having no more than 2 partners and 80 percent having no
more than 3 professional staff members. Since 74 percent of
accounting firms owned mini/micro-computer systems, many of these
small firms must have been realizing the benefits of the
inexpensive computers now on the market. One respondent said, "I
would not have begun my practice without the microcomputer
first." Another respondent said in answer to the impact of the
computer on his accounting firm's practice, "... increased
potential for number of clients and increased quality of
information provided to all clients."

A second study of small non-accounting businesses by the authors
in the Anchorage, Alaska, area during 1984, showed 46 percent
computerized accounting systems, 46 percent conventional
accounting systems, 6 percent pegboard systems, and 2 percent
unknown accounting systems. The responses indicate that even if
a mini/micro computer and the accounting software are available,
businesses will still continue to utilize the services of
accounting firms because they don't understand how to fully
utilize their systems or because they prefer to concentrate their
efforts towards producing a product or service while learning the
record keeping and reporting responsibilities with the accounting


Minicomputers were manufactured mainly by IBM with the System 34
dominant in Alaska sales. Microcomputers were purchased by
accounting firms from Apple Computer, Inc. (13); Osborne Computer
Corporation (9); and IBM (7). Exhibit 1 shows the hardware costs
of the IBM Personal Computer and the IBM System 34 minicomputer.


Most software was found to be purchased from software vendors (70
percent) and purchased from manufacturers of computers (15
percent), while only 15 percent were written by someone on the
accounting firm's staff. Exhibit 1 includes a list, with typical
costs, of commonly used software packages.
Questionnaire responses indicated a large number of different
software vendors and a variety of comments concerning the
hardware/software acquisition decision. One accountant indicated
the decision on software should be explored before purchasing the
hardware with the following statement: "I definitely was mislead
when I purchased the ...(microcomputer). I was told all program
packages would work--not true. Only one store handled...
(software) packages--and they were too expensive."

The Computer Language

The programming language BASIC was used by mini/micro-computers
72 percent of the time in Alaska, with RPG II second (7%), COBOL
third (5%), and FORTRAN fourth (4%).

              EXHIBIT I
Hardware Costs of IBM Mini/Micro-Computers Along With Software

   Costs:            Microcomputer Minicomputer
                    (IBM PC) (IBM System 36)
Hardware Costs:
 * 64K memory with CRT video $4,000
 Display and matrix printer,
 two diskette drives
 * Letter quality printer         500
 * 256K Memory with at least
 5 peripherals for specific tasks         $30,000
 * Letter quality printer               5,000
      Subtotal ............ $4,500    $35,000

Software Package Costs:
 * Operating system         $ 60       $ 2,000
 * Word processing             150       1,000
 * Tax return preparation       200       1,500
 * Financial modeling          800       1,500
 * General ledger            750       1,200
 * Payroll                500       2,000
 * Accounts payable            200       1,200
 * Accounts receivable          200       1,000
 * Customer billing           500       1,200
 * Fixed assets and depreciation 500         1,200
Exibit 1 Cont.
* Inventory control             500        1,200
      Subtotal ........... $4,360       $15,000

Annual support costs for supplies
and maintenance**           $1,000          $ 7,000

Grand Total .................. $9,860    $57,000

* Source of Data: Computerworld, August 15, 1983, and August
            22,1983 [4] [5]; telephone interview with IBM
            representative, January 1984.

              Note: All cost amounts are approximate
              figures averaged for the nationwide market.
              Higher and lower hardware, software, and
              support prices may be found, depending upon
              vendor source.

** Annual costs for maintenance typically range from 12 percent
  to 18 percent of hardware costs while supplies costs vary
  with the volume of transactions.

Another 6 computer languages were listed by Alaska's small
accounting firms, representing 12 percent of the respondents.
This data cannot be interpreted as indicating the level of
knowledge of there languages, but does indicate the availability
and popularity of packaged software written in three languages
for use on micro/mini-computers.

Computer Applications

Financial statement preparation was found to be the most common
mini/micro-computer application with 80 percent providing
computer write-up services (monthly or quarterly financial
statements). Exhibit 1 shows the software package costs for
mini/micro-computer applications, while Exhibit 2 shows
applications found common in the Alaska and Wyoming studies.

Fixed asset and depreciation scheduling were the second most
popular application (65%) of the computer, while accounts
receivable records was third (62%) in popularity as a mini/
micro-computer application.

Tax return preparation was done by half (53%) the accounting
firms on the computer for their clients. About 58% of the
accounting firms performed payroll work for clients. Fifty-eight
percent is low for payroll. Another study conducted 5 years ago
by the author indicated that payroll was provided 73 percent of
the time as a computer service to small business clients [7].

Comparing Alaska and Wyoming Accounting Needs for Small Business

In a recent study of 176 Small Business Institute (SBI) cases
conducted at the University of Alaska (three campuses) and
University of Wyoming (one campus) for the 1974-1981 period, 37
percent of SBI cases revealed accounting as a problem area, 35
percent revealed marketing as a problem area, and 28 percent
indicated some other area of management as a problem. Alaska and
Wyoming are states dominated by small businesses and rapid
economic development due to energy related development and are
two of the least populated states in the United States with
populations between 400,000 and 500,000. Small businesses and
small accounting firms serving these businesses are typical in
these frontier states.

The accounting applications shown in Exhibit 2 were found to be
similar for both Alaska and Wyoming. Mini/micro-computers are
being used extensively by small accounting firms to provide
computerized write-up services (bookkeeping tasks) to small
business clients.

The need for accounting services in Alaska and Wyoming is
demonstrated by looking at two separate surveys in Alaska and
Wyoming [1] [7].

The accounting firms were asked in each survey to estimate the
number of write-up (bookkeeping) clients not now receiving such
service and the estimated monthly revenue that might be received
from each. The Wyoming responses were from 5 potential clients
to 150 potential clients in 1979, while the Alaska responses were
from 20 potential clients to 500 potential clients in 1983.
Wyoming revenue for each potential client was estimated to be
$1,356 per year, while Alaska accounting firms anticipated $3,259
per client of added revenue each year. Consequently, the
untapped potential in Wyoming for computerized bookkeeping
services was found to be a maximum of $203,400 (150 x $1,356)
annually per accounting firm, while the untapped potential in
Alaska was found to be from $65,180 (20 x $3,259) to $1,629,500
(500 x $3,259) annually per accounting firm. Even allowing for
Alaska's inflated prices (approximately 25%) and inflation from
1979 to 1983, the need for accounting services is dramatic in
these developing states which are represented mostly by small
business firms.

Accounting may be the key to small business success as shown by
the Alaska and Wyoming Small Business Institute (SBI) cases
studied. The importance of accounting services, such as,
bookkeeping tasks, financial statement write-ups, and tax return
preparation cannot be over emphasized.

Rapid economic growth in Alaska has led to the creation of using
small businesses who rely for their survival upon the
availability of accounting information that increases their
management abilities.

                 EXHIBIT 2

     Mini/Micro-Computer Accounting Applications
    Rendered by Alaska and Wyoming Accounting Firms.*

                     Percent of Respondents
                      Providing Service**

Types of Service     Wyoming Alaska         Other    All
               Small Small       Alaska Alaska
               CPA Firms CPA Firms Small          Acct.
                          Acct. Firms Firms
Monthly Financial Statements 43%       83%     76%      80%
Depreciation Schedules      20     63      67    65
Accounts Receivable        40     50      73    62
Payroll               73    53     63     58
Tax Return Preparation      33     53     53    53
Billings              13    47      50    48
Inventory Control        13     27      40    33

* Source of Data: Alaska survey of 347 licensed accounting
            firms; 73 CPA firms and 274 other accounting
            firms [1]. Wyoming survey of 53 CPA firms
            [7]. The Wyoming survey was conducted in
            1978, while the Alaska survey was done in

** Note: "CPA Firms" are defined as those accounting firms
     providing auditing services in addition to write-up,
     tax, and management advisory services. "Other Small
      Acct. Firms" are defined as those accounting firms not
      providing audits.

The mini/micro-computer development along with better software
packages should make the routine technical accounting tasks
easier and less expensive. Consequently, more and better
accounting services should be provided to small businesses by
small accounting firms.

Better information makes for better decisions; thus, business
failures due to lack of information may be reduced in the future
if mini/micro-computer usage improves accounting services. The
accountant and small business owner-manager should, however, not
forget that the computer is but a tool like a pencil and not a
substitute for good accounting knowledge and understanding. The
owner-manager of a small business should in the future have, by
use of mini/micro-computers, better information to interpret the
firm's results of operation and financial position in order to
make the final decisions regarding the success or failure of the


[1]    A questionnaire was sent to 347 Alaska licensed accounting
      firms, 85 usable questionnaires were returned, representing
      a 25 percent response.

[2]    A questionnaire was sent to a statistical sample of 500 SBA
      borrowers in Colorado: An overall response of 45 percent was
      achieved. The population consisted of 1,000 SBA borrowers
      listed in SBA Annual Reports.

[3]    A questionnaire was sent to all 1,000 members of the Chamber
      of Commerce in Anchorage, Alaska who were considered to be
      small businesses. Thirty percent (300 responses) were
      returned and usable.

[4]   Brown, H.W. , and Justin G. Longeneckor, Small Business
      Management, (South-Western Publishing Company, 1971), p. 310.

[5]    Henkel, Tom, "Minicomputers: A Survey of 59 Machines from
      the Top 20 Mini Makers," Computerworld (CW Communications,
      Inc., August 15, 1983), pp. 43-48.

[6]    Henkel, Tom, "Microcomputers: A Survey of 43 Systems from
      the 20 Vendors," Computerworld, (CW Communications, Inc.,
      August 22, 1983), pp. 29-32.

[7]    McDaniel, Lloyd W., and Henry Wichmann, Jr., "Minicomputers:
      A Boon to Small Public Accounting Firms and Write-up Work,"
      National Public Accountant, (February 1979), pp. 22-26. A
      questionnaire was sent to 53 CPA firms in Wyoming, 32 usable
      questionnaires were returned, representing a 60 percent
      response. A second survey was sent to 23 Wyoming CPA firms
      that owned or leased a mini/micro-computer system, 65
      percent were returned.

[8]    Pratt, Charles M., "Small Business: Washington Begins to
      Take it More Seriously," U.S News & World Report, (August 8,
      1977), p. 78.

[9]    Wichmann, Henry Jr., "Accounting - The Key to Small Business
      Success," National Public Accountant, (June 1983), pp. 26-31.

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