Definition: The compatibility principle is an information system concept that suggests the accounting system of any company should adapt to their operations, employees, and business structure. In other words, the accounting system should be capable of handling a company’s accounting and be able to change as the business changes throughout time. This is one of the five main system principles of any accounting system.
This might sound like common sense at first, but it can be much more complex in the real world of business. Take a start up Tech Company for example. An entrepreneur writes a piece of software in his parents’ basement. At first, he doesn’t sell many copies of it and can account for the sales, customers, and cash activity with a simple accounting program.
Then Microsoft becomes a partner in the software company and his sales skyrocket. Now the small accounting program that he used to use, can’t handle the mass amount of sales and shipments that the new business demands. Obviously, this company needs to upgrade its accounting program as well as develop a comprehensive system that can record sales, track inventory, order shipments, and the rest of the day to day operations.
What Does Compatibility Principle Mean?
The compatibility principle is an all-encompassing concept that extends throughout the entire system. For example, if inventory sales are being sold so quickly that orders can’t be processed fast enough, new technology should be added to the system like bar code scanners and a list of vendor SKU codes. These input devices scan orders and shipments instantly, so more orders can be entered and processed in a much shorter amount of time. Output devices like monitors and printers can also be added to speed up the system and make it more adaptive the needed of the company.