ASSESSING THE IMPACT OF ACCOUNTING SOFTWARES IN THE PROCESSING OF ACCOUNTING INFORMATION

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Accounting takes an important role in operating an organization. Every business must keep track of financial information that relates to its business activities. It also has numerous processes; some simple, others complex and burdensome. But as the business grows, acquires new customers, enters new markets and keeps pace with constant changes in information technology, companies need to maintain highly accurate and up-to-date accounting, inventory and statutory records (Igbaria et al, 1997). With a substantial increase in the volume of accounting transactions and increase in exposure of information to errors due to complexity of these accounting systems, there was a need for a system which could store and process accounting data with increased speed, storage, and processing capacity. This led to the development and introduction of accounting software packages (Igbaria et al, 1997).

Accounting software describes a type of application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, payroll, and trial balance. It functions as an accounting information system. It may be developed in-house by the organization using it, may be purchased from a third party, or may be a combination of a third-party application software package with local modifications (Wikipedia, 2016). Accounting software may be on-line based, accessed anywhere at anytime with any device which is Internet enabled, or may be desktop based. It varies greatly in its complexity and cost. The market has been undergoing considerable consolidation since the mid-1990s, with many suppliers ceasing to trade or being bought by larger groups.

In many cases, implementation of accounting software (i.e. the installation and configuration of the system at the client) can be a bigger consideration than the actual software chosen when it comes down to the total cost of ownership for the business. Most midmarket and larger applications are sold exclusively through resellers, developers and consultants. Those organizations generally pass on a license fee to the software vendor and then charge the client for installation, customization and support services. Clients can normally count on paying roughly 50-200% of the price of the software in implementation and consulting fees.

With the advent of faster computers and internet connections, accounting software companies have been able to create accounting software paid for on a monthly recurring charge instead of a larger upfront license fee. The rate of adoption of this new business model has increased steadily to the point where legacy players have been forced to come out with their own online versions. Cloud accounting software seems to more rapidly adopted by areas where prices are generally higher due to higher shipping costs and price discrimination practices (Chau, 2001).

The use of accounting software will shorten the data processing time that usually takes a longer time if it is done manually and processing can be accelerated significantly and with a better level of accuracy. American institute of Certified Public Accountant (AICPA) has created a new certificate of Certified Information Technology Professional (CITP). The CITP is certification for the accountants who have a broad knowledge in the field of technology and understand how the information system technology can be used in a variety of organizations. This reflects the AICPA recognition of the importance of information technology systems in relation to accounting (Agarwal & Prasad, 1997).

An accounting student is required to be able to follow information technology developments because by understanding and knowing the technology progress and development, students can implement the accounting information system technology, which is expected to make the student more competent, especially in the field of information systems technology. Accounting students are required to become competent accountants, for example, in the field of information systems technology. This is supported by the number of companies that expect accounting graduates to have a good knowledge of accounting, which is supported with specific expertise (soft skills) in the information systems technology field, such as accounting software.

1.2   STATEMENT OF THE PROBLEM

Accounting Software is a class of computer programs that perform accounting operations. It is one of the database-oriented applications wherein the transaction data is stored in well- organized database. The user operates on such database using the required interface and also takes the required reports by suitable transformations of stored data into information. Therefore, the fundamentals of accounting information system include all the basic requirements of any database-oriented application in computers. It helps simplify, integrate, and streamline all the business processes, cost-effectively and easily and helps presents the true picture of all the  business undertakings to users of financial reports. The advancements in information technology have eventually led to the introduction of Accounting Information Systems to help produce relevant and faithful representative financial reports for both management and external users for decision making. Accounting information system 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. Not only has it revolutionized the traditional paper methods of accounting, but it has also created new types of accounting applications for business. Companies now create entire accounting information systems that integrate all business operations, including external suppliers and vendors. Accounting information systems have replaced manual-based accounting in virtually all businesses and organizations, providing accountants, managers, employees and stockholder’s access to vital accounting information at the touch of a button.

Accounting information 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. In today's computerized, interconnected, global business environment, Accounting Information Systems became the ‘engine of growth’ in business organizations. It therefore involves the computerization of accounting information systems which is established in order to facilitate decision making. These are associated with a numbers of benefits like speed of carrying out routine transactions, timeliness, quick analysis, accuracy and reporting.

1.3   OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To examine the impact of accounting software on the accounting information system.
2. To examine the benefits of accounting software on financial reporting.
3. To identify the disadvantages of accounting software on the accounting information system.

1.4   RESEARCH QUESTIONS

1. What is the impact of accounting software on the accounting information system?
2. What are the benefits of accounting software on financial reporting?
3. What are the disadvantages of accounting software on the accounting information system?

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The results from this study will educate on the impact of accounting software on the processing and management of accounting information system.
2. This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study will cover the benefits and the disadvantages of accounting software on the processing of accounting information system.

LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

 Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work