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presents the true picture of all the business undertakings to users of financial
reports.
Due to the rapid change in technology, many small businesses prefer to track
monetary transactions with computerized software than keep track of all financial
activity manually through the use of a physical ledger. The advancements in
information technology have eventually led to the introduction of Computerized
Accounting Systems to help produce relevant and faithful representative financial
reports for both management and external users for decision making.
Computerized accounting tends to involve dedicated accounting software and
digital spreadsheets to keep track of a business or client's financial transactions. It
is a beneficial use of current technological advances. Companies now create entire
accounting information systems that integrate all business operations, including
external suppliers and vendors. Computerized accounting systems have replaced
manual-based accounting in virtually all businesses and organizations, providing
accountants, managers, employees and stockholders access to vital accounting
information at the touch of a button. Computerized accounting systems automate
the accounting process--improving efficiency and cutting down costs. And it tends
to be more accurate, faster to use, and less subject to error than its manual
counterpart.
DEFINITION OF TERMS
The following terms are defined operationally/conceptually for the better
understanding of the study.
Accounting:
The systematic and comprehensive recording of financial transactions
pertaining to a business. Accounting also refers to the process of summarizing,
analyzing and reporting these transactions.
Accounting information systems:
A framework for coordination of resources (human and mechanical) for
converting input (data) to the output (the information) to achieve the objectives of
the project.
Accounting Software:
It refers to application software that records & processes accounting
transactions within functional modules such as accounts payable, accounts
receivable, payroll, and trial balance.
Bookkeeping:
It is the context of a business is simply the recording of financial transactions.
Computerized Accounting System:
It refers to a system used by businesses for recording their financial
information.
Financial Report:
It is a formal record of the financial activities of a business, person, or other
entity. It is presented in a structured manner and in a form easy to understand.
Financial Transaction:
It is an agreement, communication, or movement carried out between a
buyer and a seller to exchange anasset for payment. It involves a change in the
status of the finances of two or more businesses or individuals. The buyer and
seller are separate entities or objects, often involving the exchange of items of
value, such as information, goods, services, and money.
proprietorship, cooperative,
partnership, or corporation.
Spreadsheet:
It is an interactive computer application program for organization, analysis
and storage of data in tabular form. Developed as computerized simulations of
paper accounting worksheets.
DISCUSSION
With the substantial increase in the number of transactions and increase in the
need for real time information, maintenance of accounting data on a real time basis
has
promoting the quality of financial reporting. Carol (2002) says that computerizing
business general ledger, payroll and other accounting tasks increases office
efficiency.
Lancouch (2003) says that computerized accounting systems have also been
credited for their quick processing speed and large storage capacity. Using
computerized accounting systems ensure up to date account balances are
available at any time to aid management in decision making.
Lewis (1999) also stated that computerization saves time on transaction hence
leading to quality of financial reporting for instance timely, accurate and reliable
information can be generated. The influence of computerized accounting systems
depends on the end users satisfaction.
Mihir (2002) stressed that higher end users satisfaction leads to a positive
attitude towards using the satisfaction and in turn increases the voluntary usage of
the system.
Nash (2003) noted that the quality of accounting information and performance
of the accounting systems is a great concern to management. A computerized
accounting system is a delivery system of accounting information for purposes such
as providing reliable accounting information to users, protecting the organization
from possible risks arising as a result of abuse of accounting data and system
among others.
Computerized accounting system is the application of the computer based
software used to input process, store out put accounting information (Millichamp
1995).
The application is to support advancing technologies that enable firms to use
computer programs to perform tasks that were previously done manually. The need
for computerization of accounting system is due to increase in the number of
transactions as a result of the policy of continuous expansion of the business. It is
noted that business accounting records can not be accurately maintained when the
firm expands and when the system is not computerized it is the computer based
system that the firm can use to post numerous transaction to the right ledgers and
prepare proper financial statements.
Computerized accounting system in commercial organization that will help to
integrate, simplify and streamline all the business processes and transaction cost
effectively and easily (Indira 2008) Business organization should adopt a suitable
accounting package in order to derive benefits from it (Mike et al 2006) for instance
for a small business, personal finance organizer like 3 - quicken, Microsoft money
and quick books are usually good enough to handle accounts of a small
businesses.
ILLUSTRATION
Adjeis case study (2013) shows the result of his study in through the following
graphical presentation:
Six (6) out of the ten (10) said they have realized a very tremendous changes
in their daily working activities as it has positively improved since the introduction of
the computerized accounting system. Three (3) said comparably, they do not see
much difference thus, comparing the traditional or the manual banking system
previously in place whilst the remaining one (1) said no improvement at all and is
probably because of lack of computer literacy since the aforementioned staff was
not privy to basics in computing. The response here is depicted in a form of a chart
as shown below:
Customers were asked about the number of minutes it takes them to make
deposits and withdrawals from the bank, 70% of the sample size said it took them
over an hour for them to be attended to whilst the remaining thirty percent (30) said
it took them 35 minutes for the services to be delivered to them. When the
customers were asked why it took a longer time for the bank to deliver these
services to them, the following responses were given in a charted form below:
About the factors concerning the manual banking system that would encourage
them to choose or not to choose a bank to save with the following responses were
identified.
The above data shows that 65% of the customers interviewed consider
computerized banking system as a key factor that would influence their decision in
choosing a bank to bank with. 15% also chose good customer services as the
bases before deciding to save with the bank. Ten percent (10%) of the customers
were very much interested in the interest rate on deposits and loans and actually
emphasized that the lower the interest rate the higher their level of attraction
towards that bank. About the innovative service provisions, 7% said they would like
to have prior knowledge about how creative the bank is and also the advice that
would be given to them free of charge before, whilst the remaining 3% of the
customers were much particular about the location of the bank. There was no
indication that the customers would give credence to any form of a bank operating
on a manual banking system as a factor that would influence their decision to bank
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The interview conducted indicated what customers and the workers have to say
about the system, there was a clear indication that the system enables them to
have easy access to their money and customers information at any given time.
90% of the customers said the system is very fast, whilst some 85% of the
customers identified the computerized banking system as providing them with
convenience banking. When the workers were asked how efficient the system is in
terms of cash distribution, deposits and account inquiries, there was a 100%
response as very efficient. In reference to how accurate the computerized
banking/accounting system presents account balances and statement of account,
95% of the customers said very accurate whilst 5% were undetermined. The
following is the result I had when the customers were asked about the number of
minutes or hours it takes to make deposit and withdrawals since the introduction of
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CONCLUSION
The researcher when assessing the benefits of computerized accounting on
financial reporting found out the following:
Quick financial reports. The researcher found out that through computerized
accounting financial reports can be generated very quickly. The quickness in
generation of reports is due to the fact that through computerized accounting, data
processing and analysis are faster and more accurate. With such advantage,
managers can instantly access different information which leads to easy and quick
decision making.
Improvement in business performance. The researcher observed that
computerized
accounting
system
results
into
improvement
in
business
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RECOMMENDATION
Based on the findings of the study, the researcher made the following
recommendations for the firm and similar organizations in improving on their
financial reporting:
The firm should recruit a professional to handle computerized accounting
systems. This is because any wrong entry of data will certainly generate inaccurate
and unreliable results. Staff must therefore be adequately trained to enable them
efficiently operate the system.
The firm should select packages or software that are user friendly and should
consider customization of the systems to fit specific needs. Other than adopting off14
shelf packages with customized packages, training costs will be reduced. The
systems should suit business environment adapt to changes.
There should be routine system maintenance programs put in place so that the
system can be rid of shortfalls such as viruses and fraud among others that may
affect the system operations. This should be done so that the system can operate
to the expectation of management.
The firm should ensure that deadlines within which a report should be ready.
This will enable the accountant to work within the set schedules.
The firm should set aside budgets for research and development specifically for
its computerized projects. These will improve and update the computerized
accounting system.
Data manager of the firm should ensure that all financial information capture
and backed up, computerized systems security is sometimes prone to threats such
as virus attacks. It is important that the data is backed up so that in case of a
system breakdown, the data would have been secured.
Internal control system also needs to be put in place so that in case errors
occur, they can be traced and corrected.
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The researcher also recommends that the firm should run the computerized
accounting systems alongside the manual system where some data can be
captured manually. This is important because should the computerized system
breakdown, important source information can still remain available. One other fact
is that the computerized system very much relies on human effort which justifies
the simultaneous run with the manual system.
BIBLIOGRAPHY
Books, Articles and Journals:
Lancouch,
Computerized
Academy of
A. A.
(2003). The
Perceived
Threat to the
Security of
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Dictionary.com
http://www.business
2013.
Accounting
system.
URL:
dictionary.com/
definition/accountingsystem.html#ixzz2IvMRtsJ 4
Quoted: 24.01.2013
Byenka, Denis Mark, The Impact of Computerized Accounting on Financial
Reporting in Manufacturing Firms in Uganda July 2011. URL:
http://distance .mak .ac.ug/sites/default/files/ publications/BYENKYA.pdf
Indira, A. (2008). Computerized Accounting System. Retrieved on May, 6,
2011
URL: http://www.indianmba.com/faculty_column/fc584/fc584.html
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