From the paper "spreadsheet" to Excel: how did the electronic spreadsheet change the accountant's work?

The English word "spreadsheet" appeared long before the computer. Britannica writes that historically it was a sheet of an accounting ledger: a large piece of paper ruled into columns and rows, with figures written in by hand. The whole history of the electronic spreadsheet is an attempt to make this simple sheet "calculate by itself".

The problem with the paper sheet

What happens when one figure changes in a paper spreadsheet? For example, in the middle of the month it turns out that one expense amount was entered incorrectly. The accountant takes an eraser and recalculates, one by one, the row total, the column total, then the overall result, and then the percentages and indicators derived from it. A single correction turns into rewriting the whole sheet. The abacus and the arithmometer, which we looked at in earlier articles, speeded up calculation, but they could not solve this chain of recalculation.

The idea at Harvard and VisiCalc

The Harvard Business School alumni page says the idea was born in 1978 during MBA student Dan Bricklin's daily case preparation: instead of recalculating figures by hand over and over, he needed a program in which they could be changed quickly on screen. Interestingly, Bricklin himself stresses in a note on his website that VisiCalc's novelty did not lie in being the first calculation program with rows and columns. From the accountant's point of view, though, the main novelty was this: when one value changes, every result that depends on it is recalculated automatically.

Together with his friend Bob Frankston he founded the Software Arts company (Computer History Museum). The VisiCalc program they created was designed for the Apple II computer and cost 100 dollars (HBS).

What changed for accountants? Now changing a single figure in a monthly report or budget no longer meant rewriting the whole sheet: the question "what if the price rises by 5%?" could be answered in a few seconds.

The rivalry between Lotus and Excel

Britannica writes that in the mid-1980s Lotus 1-2-3 led the market for IBM PC and MS-DOS computers. Microsoft Excel came in by another route: according to Microsoft, it was released for the Macintosh computer on 30 September 1985. Britannica notes that Lotus 1-2-3 was not available for the Macintosh, and this helped Excel find its following.

Excel's first Windows version came out in 1987 (Britannica). As Windows computers spread, Excel too became popular and later turned into the most widely used spreadsheet in offices.

The risk: an error in a single cell

A spreadsheet calculates fast, but it also "multiplies" an error fast. Two famous examples:

An economic study. The Conversation writes that in April 2013 University of Massachusetts (Amherst) researchers Thomas Herndon, Michael Ash and Robert Pollin checked the spreadsheet of a 2010 paper by the well-known economists Reinhart and Rogoff and found that the range of the averaging formula did not cover five countries (Australia, Austria, Belgium, Canada and Denmark).
Bank risk. According to economist James Kwak's analysis based on JPMorgan's internal review report, a spreadsheet in a risk model divided the difference between rates by their sum rather than their average. The report noted that this error may have understated volatility by roughly a factor of two.

In both cases the program worked "correctly": a person wrote the wrong formula. That is why having another employee check a spreadsheet is an important part of internal control.

The move to the cloud

According to Google's press service, on 6 June 2006 Google Spreadsheets began a limited test on Google Labs: it became possible to create a spreadsheet on the internet, save it and share it with others. Now several people can edit one file at the same time, and the file sits not on a computer but on a server.

Then and now

Aspect	Paper spreadsheet	1980s electronic spreadsheet	Today
Recalculation	By hand, each total separately	When one cell changes, everything is automatic	Automatic, with several users at once
Where the file is	In a folder and on a shelf	On a floppy disk, on one computer	In the cloud, from any device
Source of errors	Calculation and copying	A wrong formula or range	The same errors, now in larger spreadsheets
Method of control	Recounting	Manual checking	Checking formulas, change history, access rights

Example: a bakery's monthly totals

A hypothetical bakery called "Chilonzor non" adds up its monthly expenses (compiled by the author, hypothetical figures).

Item	Amount (soum)
Flour	18 000 000
Gas and electricity	4 500 000
Wages	12 000 000
Rent	5 000 000
Total	39 500 000

At the end of the month another invoice for flour worth 1 200 000 soum turned up. On paper the accountant Gulnora recalculates by hand the "Flour" row, the "Total", and then the cost of one loaf (for example, dividing by 26 000 loaves): the old result was 39 500 000 ÷ 26 000 ≈ 1 519 soum. In the spreadsheet, however, she changes only one cell to 19 200 000, the "Total" immediately updates to 40 700 000, and the cost to 40 700 000 ÷ 26 000 ≈ 1 565 soum.

But there is a trap too: if the formula in the "Total" cell adds up only the first three rows (leaving out rent), the spreadsheet will show 35 700 000 and an expense of 5 million soum will remain invisible. That is why every month Gulnora compares the spreadsheet total with the balance in the general ledger.

Link with the previous and next periods: mechanical machines and the abacus speeded up manual calculation, while the electronic spreadsheet turned the accounts into a recalculable "model". At the next stage this model was built into accounting software and cloud services.