CHAPTER ONE

INTRODUCTION

1.1.            Background of study

According to Borhan and Bader (2018) accounting information system is a formal system for identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating accounting information about a particular entity to a particular group. A similar definition of accounting information system was also given by (Samer, 2016). An AIS combines traditional accounting practices, such as the use of Generally Accepted Accounting Principles (GAAP), with modern information technology resources.

AIS is vital to all organizations (Borthick and Clark, 1990; Rahman et al, 1988; Wilkinson et al., 2000) and perhaps, each organization either profit or nonprofit oriented need to maintain the AISs (Wilkinson, 2000: 3-4). On the other hand, an AIS is a whole of the related components that are put together to collect information, raw data or ordinary data and transform them into financial data for the purpose of reporting them to decision makers (LI, M., YE, L.R. 1999). To better understand the term accounting information system, the three words constitute AIS would be elaborated separately. Firstly, literature documented that accounting could be identified into three components, namely information system, language of business and source of financial information (Wilkinson, 1993: 6-7). Secondly, information is a valuable data processing that provides a basis for making decisions, taking action and fulfilling legal obligation. Finally, system is an integrated entity, where the framework is focused on a set of objectives (Watts, 1999).

An optimal implementation of AIS by Micro finance institutions means adapting more successfully to a changing environment and shows a high degree of competiveness, thus enhancing the dynamic character of a company (even when the institution is small, it must assimilate the use of AIS). In other words, there are improvements in administrative management regarding accountancy and finance. By using AIS, it is possible to gauge risk of some operations or predict future earnings with sophisticated statistical software applications.

Accounting information systems records accounting transactions with the utilization of computers and accounting software. This result to quick technology changes needs to attract these micro finance institutions to improvement. AIS will help keep several client’s information and transaction in the business and for several years which is quite important for taxes control and personal business needs.

Computerized accounting information systems automate the accounting process, enhancing productivity and cutting down expenses. What’s more, it has a tendency to be more exact, quicker to utilize, and less subjected to error than the manual system (Alexis, 2010)

In Cameroon the microfinance institution has given a bravo to the coming of computerized accounting. This is because it has developed their bookkeeping and has help removed them from paper work to an electronic system method which is more effective and efficient. Therefore, making financial information to be gotten on time and without errors therefore making management to present good and reliable decisions

1.2. Problem Statement

Today, information technology and increasingly transparent, financial sector have become key driving forces in business operations, strategies, structures, ownership, and performance. These forces cut across many industries to force changes that, in turn, have had significant economic and social impacts on the organizational effectiveness (Doms, Jarmin and Klimek, 2004). Structurally, the process which has gradually grown out of the need to increase efficiency and cut on the operations costs in the industry.

The use of AIS as a computer-based application brings a new trend of change from the conventional way of accounting to a computerized way which most people ae not prepared for or find it difficult to adapt. Yet, Organizations are designing more sophisticated accounting information systems to meet strategic goals and enhanced performance (Eb, Pretorious, Awesejo, and Zuva, 2013).

Research is needed to discover new potentials and or benefits that these systems can bring to the organization’s management and how they impact the role of the accounting function. The quality of accounting information systems can be improved through management commitment and user competence (Iskandar, 2015)

Typical problems faced with micro finance institutions in the adoption of computerized accounting systems are lack of capital and technological obsolescence, limited financial resources, management information, limited scale economies and management’s IT-oriented behavior, and lack of funds to improve skills (Malaranggeng, 2009; Levy, Powel, Yetton, and Francalanci 2011; and Morabito, 2008; Marriot and Marriot, 2000).

There is a need for specialized accountants with the mastery of the system software being used so that appropriate decision can be gotten from the system. In fact, they are the basis to any business. Maintenance of sound accounting records is a major factor that contributes proper decision making process since it’s the roots through which relevant informational requirement is derived (Alphonce, 2014).

Research Questions

The following research questions were formulated to guide this study:

• To what extent does Batch processing system effect performance of Micro Finance Institutions in Buea?
• What is the effect of legacy systems on the performance of micro finance institutions in Buea?

1.3. Objectives of the study

1.3.1. Main Objectives

The main objective of this research is to examine the effect of accounting information system on the performance of Micro Finance Institution in Buea.

1.3.2. Specific Objectives

• To determine how Batch processing system effect performance of Micro Finance Institutions in Buea.
• To examine the effect of legacy systems on the performance of MFIs in Buea

1.4. Research Hypothesis

This purpose is to put the research objectives into testable terms since for a problem to exist there must be an uncertainty over the best alternative for satisfactory attainment. The hypothesis is as follows:

H₀: Batch processing system has no significant effect on performance of Micro Finance Institutions in Buea

H₁: Batch processing system has significant effect on performance of micro finance institutions in Buea.

H₀: There is no significant effect of legacy systems on the performance of micro finance institutions in Buea.

H₂: There is significant effect of legacy systems on the performance of Micro Finance Institutions in Buea

1.5. Significance of the study

The study will show how modern technology has improved banking performance in retail commercial banking. It also investigates how frontline banking personnel has been affected by (Accounting Information System) AIS such as that performance is now with greater speed and efficiency.

The study would provide a theoretical basis about accounting information system successful adoption dimension to firms. It would provide practical guardians for accounting information system, implementation in other areas and it would also provide empirical and practical; contributions for organization in effectively applying accounting information system in their operations.

Accounting information system provides information about the financial resources, obligations, and activities of an enterprise that is intended for use primarily by external decision makers, investors and creditors. This study provides useful information in making investment and credit decision