CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Generally, accounting is an essential part of any large or small, profit making or not for profit organizations. Individuals and companies hire accountants to help them carry out the mathematical requirements of accounting and the balancing of books. They record, report and analyze their company’s financial information and in doing this, companies often generate several pieces of financial information from business transactions and compile this information into general ledgers and journals, Osmond (2011). Before the introduction of information technology into accounting, these processes were done manually using paper books and documents. These processes were inefficient and slow and even a minor mistake or inaccuracy in these led to long time spent for recalculations because it was done manually. From the aforementioned statement, one is able to identify how significant computerized accounting is on the quality of accounting information in micro-finance institutions.

Through the 20th century, developments in computing, data modeling and communications had influenced accounting processes significantly. Business technology has created significant advances in the area of financial management and account software. Invention of accounting software have revolutionized accounting processes. One response to this change is the development of accounting programs that emphasize accounting information system, Strong et al (2006). The rapid change in information technology, the wide spread of user- friendly systems and the great desire of organizations to acquire and implement up to date computerized systems and softwares have made computers much easier to be used and enabled accounting tasks to be accomplished faster and accurate than before. Meanwhile this advance technology has also created significant risk related to ensuring the security and integrity of computerized accounting information system Abu-Musa (2005).

Gone are the days when accountants use to record accounting transactions using the ledger books and pen/pencils. Computer technology was mostly used in the field of science and technology but recently organizations are now finding the importance of modern computers for carrying out economic planning and forecasting processes and they are now using computers in the field of accounting too. According to Brecht and Martin (2013), manual accounting systems have become gradually inadequate for decision needs as information technology grow more progressively. Therefore it is convenient to set a computerized accounting system to record, analyse and interpret accounting information to management. This is due to the fact that the computerized accounting system ensures speed, accuracy and reliability of accounting information compared to other traditional manual systems of accounting Ware (2015).

Government agencies in most developing countries have created computerized accounting information system to improve their public financial management, such as budget management and decision, relieve fiduciary responsibilities and organize financial reports for ministries, board agencies and other government agencies Baker and Powell (2009).

A computerized accounting system consists of software designed to track all of your company’s accounting transactions, with the goal of producing financial output for monthly reports, annual financial statements, tax return information, and other report configurations used to analyze your company’s operations, efficiency, and profitability. Computerization of accounting information is an automobile mechanism to ensure effective and efficient information flow in the recording, processing and analysis of financial data. According to Manson, McCartney and Sherer (2001), effective and efficient information flow enhances managerial decision-making, thereby increasing the firm’s ability to achieve corporate and business strategy objectives.

Computerized accounting system refers to the application of computer based software used to input, process, store and output accounting information. Meigs et al (1998) states that computerized accounting system is a system that uses computers to input, process, store and output accounting information. He adds that accounting system records all transactions that routinely deals with events that affect financial position of an entity.

Accounting software is a computer program that helps accountants and bookkeepers monitor and disclose financial transactions of a company. Accounting software defines a category of application software that tracks and processes financial modules accounting transactions such as accounts payable, accounts receivables, payroll and trial balance, Carlos, F. Ricardo, S. (2004).

Accounting information refers to the consolidated statement of all financial information of a business organization. Business transactions are the main source of accounting information. From the business transactions, various accounting statements are prepared and published.

Robinson (2001), defined microfinance as small scale financial services offered to people into a small businesses in both rural and urban societies. He went further to point that the aim of microfinance institutions is to improve living standards or get rid of poverty through the provision of small business financing and consumer credit to bring financial services to poor and vulnerable people in the society.

1.2 Statement of the Problem

Microfinance Institutions (MFIs) nowadays use computerized accounting systems in carrying out their daily transactions in both developing countries and developed countries. In the case of Cameroon, some of this institutions are unable to meet up with the requirements needed to input a computerized accounting system despite the advantages that it has on the quality of information. This can be due to ignorance, lack of resources to input this system or resistance to embrace technology.

However, there has always been incomplete recording of transactions, lack of secured record-keeping as well as delay in the preparation of financial information which led to the need of the creation of a more secured way of preserving financial records as well as more timely delivery of accounting information. Some organizations still use the manual means of presenting accounting information. Majority of the MFIs in Cameroon that uses the computerized accounting system to record accounting information benefit from it’s advantages but some may not know the effect that this system has on the quality of their accounting information. Accounting information must have qualities such as reliability, timeliness, accuracy, relevance and precise. For microfinance institutions to survive in the provision of their services, they need to be conversant with accurate and timely accounting information. This study seeks to identify to what extend does the computerized accounting system have effects on the quality of accounting information in microfinance institutions in Bamenda.

1.3. Research Questions

This research is based on the following questions:

1.3.1 Main Research Question

What are the effects of computerized accounting system on the quality of accounting information?

1.3.2 Specific Research Questions

1. Are there any effects of automated data processing on the quality of accounting information?
2. Can there be effects of relational data base on the quality of accounting information?

• Can automated reporting have effects on the quality of accounting information?

1.4 Research Objectives

1.4.1 Main Research Objective

To assess the effects of computerized accounting system on the quality of accounting information.

1.4.2 Specific Research Objectives

1. To examine the effects of automated data processing on the quality of accounting information.
2. To assess the effects of relational data base on the quality of accounting information.

• To examine the effects of automated reporting on the quality of accounting information.