Give a Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting
Prior to the evolution of computer software and eventually to the creation of electronic spreadsheets, accountants relied heavily on manual calculations for financial reports, budgetary projections, incomplete records accounting ect. As Ballantine explains, “much valuable time had been spent on repetitive calculations [...] if one or more input values were altered and the entire worksheet had to be recalculated manually.” (1991, p.204). Today the same logic behind manual worksheets apply but with the added power of spreadsheets. The development of electronic spreadsheet programs some 40 years ago has helped change the way in which an organisation operates in terms of its financial position. Information could be presented in a similar way to the traditional – a large sheet of paper structured in rows and columns – but “yet allowing sensitivity analysis or ‘what if’ analysis to be performed.” (Ballantine, 1991, p.204). Visicalc was the first program designed by Bricklin –an MBA student at Harvard Business – that included sensitivity analysis, interrelationship of cells but most importantly a reduction in computational time for repetitive calculations. Leading to the success of Visicalc, several other programs emerged of similar use with enhanced features such as graphical representation and macro languages. Even though the impact upon businesses has been tremendous, there are several drawbacks that even today raise the question whether companies should continue the use of spreadsheets as their main software. As Ballantine stated “spreadsheets have been used successfully in many different fields to help solve a wide range of problems.” involving repetitive calculations. (1991, p.205) Budgetary development is one the application spreadsheets evolved in terms of time management since manual worksheets where the main tool, involving a lengthy and hence error-prone procedure since lack of time did not allow extensive testing of the model. Spreadsheets allowed a better