"does that mean double entry is no longer as important as it once was?"
What are the alternatives? Sure, you could do single entry accounting (making an entry corresponding to each cash movement, but then you'd need a separate system to keep track of
- money the business owes
- money the business is owed
- inventory
- other assets
I don't know much of the history, but I can say:
- I've found it helpful to compare to look at the income statement alongside the opening and closing balance sheets. I've even found errors this way.
- AFAIK all business accounting systems are based on double-entry accounting, so the existence of these systems can't obviate the need for double-entry accounting.
If you have a cash business where you hold almost no inventory, e.g. if you're a baker who buys flour at the beginning of each day, and close your shop when you've sold out of bread, you might not care about tracking assets, accounts payable etc.
Even in an SME I would also need a system for accruals and prepayments as well.
Simple example
I need to know my profit this month. I have added up my cashbook for the month and it contains an entry for 3 months of rent in advance for my office. It is September and that is the rent for October, November, December. How do I get it out of my profit calculation for September and split into the correct months? This is important, my bonus is based on profit. My bank loan covenants are based on profit. My equity split with my investors is too, as is my tax payable. In double entry I would move this into my prepayments account and move it back in 3 tranches.
REA accounting is one of the alternatives [1]. It is used in some managerial accounting systems. I would imagine you could make it generate a set of double entry records to make regulating authorities for financial accounting happy, but you'd have to extend it a bit to add the unnecessary properties.
That is not really what the accounting standards are for. The people that need to be kept happy are the users of the accounts. The standards are there to stop me misleading, or defrauding them.
Here is a list of some users of my accounts:
Managers: need to know how their business unit is performing so they can take action
Shareholders: need to know how the directors are managing their money
Banks: I borrow money from them, and they want to see that I can pay it back
Tax authorities: I collect sales tax for them. I collect payroll taxes for them. I have to pay taxes on my profit
Creditors: I need suppliers to advance me credit. They need to work out the risk of giving it to me.
Employees: before I joined the company I wanted to know it was solvent
Imagine how I could manipulate them if there wasn't a standard way of communicating the accounts.
What are the alternatives? Sure, you could do single entry accounting (making an entry corresponding to each cash movement, but then you'd need a separate system to keep track of
- money the business owes
- money the business is owed
- inventory
- other assets
I don't know much of the history, but I can say:
- I've found it helpful to compare to look at the income statement alongside the opening and closing balance sheets. I've even found errors this way.
- AFAIK all business accounting systems are based on double-entry accounting, so the existence of these systems can't obviate the need for double-entry accounting.
If you have a cash business where you hold almost no inventory, e.g. if you're a baker who buys flour at the beginning of each day, and close your shop when you've sold out of bread, you might not care about tracking assets, accounts payable etc.