DESIGN AND IMPLEMENTATION OF A COMPUTERIZED ACCOUNTING INFORMATION SYSTEM

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

An accounting as an information system (AIS) is a system of collecting, storing and processing financial and accounting data that are used by decision makers. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. The resulting financial reports can be used internally by management or externally by other interested parties including investors, creditors and tax authorities. Accounting information systems are designed to support all accounting functions and activities including auditing, financial accounting & reporting, -managerial/ management accounting and tax. The most widely adopted accounting information systems are auditing and financial reporting modules.

Accounting is a system in which an organization normally use to measure its financial performance by recording, classifying, interpreting and reporting all the transactions like purchases, sales, assets, and liabilities in compliance to a certain accepted standard formats. It provides an avenue to evaluate a Ministry, Department or Agency’s past, present and future in order to ascertained performance, condition and prospects respectively. According to Hanini, E (2012). A more formal definition of accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof. The Advent of information and communication technology (ICT) has transformed many firms in professional service industries, but perhaps few as much as in the public accounting industry. Therefore, in the public accounting underwent tremendous changes at the turn of the millennium, sparked largely by the rapid changes in its environment contributed by Tarmidi, M., Rashid, A., Deris, M., & Roni, R. (2013) [4] . It was premised by Polo, J., & Oima, D (2009) , that Audit software and knowledge-sharing applications are two crucial components of these changes. Automation of audit tasks and use of specialized audit software has substituted ICT for labor and changed the structure of audit teams and other inputs. Equally important is the use of advanced systems to share knowledge base across different parts of the Ministry, Department or Agency that has enabled professional services or firms to leverage their human resources more effectively.

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. 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.

Accounting Software is a class of computer programs that perform accounting operations. Accounting Software is an application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, payroll, and trial balance. Thus, these software packages allow the whole accounting system to be run on a computer hence the name Computerised Accounting System.

A computerized accounting system records accounting transactions using a computer and accounting software. 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 computerised accounting 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.

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 Computerised 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. 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. Computerized accounting 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.  However, the study tends to examine the implementation of a computerized accounting information system.