Effectiveness of Computerized Accounting System over Manual Accounting System: the Case of Developing Economies.

  • June 14, 2019

Subject

The subject of the proposed research project is “Effectiveness of Computerized Accounting System over Manual Accounting System: the Case of Developing Economies.” As such, the proposed research study seeks to examine the effectiveness of computerized accounting systems in view of financial reporting in comparison with manual accounting methods. It is important to note that technological advancement has led to the invention of accounting systems that are highly efficient. However, the manual accounting systems are still popular in various places across the world especially in the developing countries.

Aims and Objectives

  1. Aims

From the outset, a significant number of business organizations in the developing countries still use the manual accounting systems whose level of efficiency is way lower compared to the computerized accounting systems. Additionally, the challenge of sticking to the manual accounting systems is prevalent in both the private sector and public sector. Therefore, one of the aims of this research study is help uncover the disadvantages of the manual accounting system and compare with the benefits that come with using the computerized accounting system. This is bound to offer compelling insight necessary for the adoption of the modern systems of financial reporting and accounting. It is important to note that the research project also aims at promoting far-reaching changes in regards to government policy guiding the accounting and financial management practices of public sector as well as private sector agencies/business organizations.

  • Project Deliverables

The proposed study intends to answer three significant questions;

1.    What are the uses of a computerized accounting system?

2.    What are the advantages and disadvantages of a computerized accounting system and a manual accounting system?

3.    What are the qualities of financial reports generated by a computerized accounting system?

       The three questions above will guide the research. While answering the first question on the use of a computerized system in financial reporting, the study will attempt to acknowledge the recent innovation and the increased integration of technology not only in the financial sector but also in other areas including business production processes and consumer relationship management. In the second question, the research will assess the uses of both computerized and manual accounting systems based on their merits and demerits in financial reporting. On the features of the financial statements associated with a computerized accounting system, the pros and the roles of the system mentioned under the first and second question will be helpful because they still apply in describing the characteristics of these financial reports. In this respect, the research will attest that tests reports are efficient and accurate, have minimal errors, no figure manipulations, and provides room for easy auditing (Di Wang & Geok 2016, p. 477).

       It is important to note that the research project has a number of deliverables. The deliverables in this case refers to the specific outcomes that would be achieved after the research study has been conducted. One of the deliverables is coming up with recommendations on how countries/entities using the manual accounting system can upgrade as well as promote the use of the computerized accounting systems. Additionally, the other deliverable will be a comparison table or schedule detailing the advantages and disadvantages of using the computerized accounting system on one hand, and the advantages and disadvantages of using the manual accounting system on the other hand. More importantly, the other deliverable will be highlighting the features and/or the qualities of financial reports generated by a computerized accounting system. The other deliverable is listing down the expected implications of adopting the computerized accounting system on policy and practice.

Statement of Appropriateness

       The research study fits into the MSc programme in terms of knowledge growth and development in the field of accounting and financial management. Systems of accounting play an integral role in view of accounting and financial management and thus the more effective and efficient the systems, the better the management. As such, the research will promote knowledge growth and development by developing a body of literature and findings that will fill up the existing gaps in view of the knowledge base on accounting systems. Considerably, the research is also relevant bearing in mind that seeks to influence or instigate further research regarding the computerized and manual accounting systems. This will go a long way in improving the curriculum of the accounting and financial management course work. Through this change in the curriculum as a result of the outcome of the research study, it can be stated that the research would have impacted a policy change.

Theories Applicable

The research will rely on approaches such as the monetary unit assumption, matching principle of accounting, and the cost principle theory. While exemplifying the importance, the definition, conjectures and the relevance of these theories to the proposed research, secondary sources will be necessary. For instance, on cost principle theory, Unegbu (2014, p. 1) attests that modern accounting systems and financial institutions rely on technology to record and assess their assets on the books of accounts depending on the nature of the assets. The publication will be helpful because it provides the financial assessment and the discussions on financial theories and their relevance in contemporary finance management.

The journal by Mccaffrey and Israel (2018) will also be relevant in discussing the financial and accounting theories because it examines the different approaches applied in the determination of costs to assess the performance of institutions. On the monetary unit assumption, the proposed research will contend that the approach assesses the financial changes in the currencies over a while. A discussion of these theories will be meaningful in determining the various metrics that are useful in understanding the financial performance and indicators in a business or a bank. While relating the performance of these theories into the proposed research, an establishment will be made on how various organizations in the developing economies manage financial accounts and verification of how the management processes and the variables used in the management of such statements relate to the theories discussed.

Background

       The research study is based on a number of challenges experienced by foreign entities trading in a number of developing countries where the accounting systems used are manual. Solving this challenge presented by the manual system of accounting would lead to a high level of efficiency and thus ease the process of managing accounts and finances. Furthermore, the topic is interesting bearing in mind that in some other parts of the world it is still common to find various entities in the public sector and in the private sector still using the manual system of accounting which may be considered to be outdated. More importantly, the research topic is also interesting in the sense that it involves exploration of knowledge and also development of knew knowledge that would add to what currently exists. It is important to note that the research topic is also interesting since it will involve drawing up of logical conclusions geared towards informing policy. As such, the motivation and interest in carrying out the project is rooted in the quest to generate additional information in regards to the efficiency of the accounting systems as well as the opportunity to be able to influence and/or change policy.

Literature Review

       Various research studies have been conducted to ascertain the level of efficiency of the computerized system of accounting and the manual system. For instance, a research study entitled “Comparative Analysis of Computerized Accounting System and Manual Accounting System of Quoted Microfinance Banks (MFBs) in Nigeria” (Ndubuisi, Chidoziem and Chinyere, (2017), it is clearly illustrated that using the computerized system of accounting more advantageous compared to the manual system of accounting. Among the findings of this particular research study is that microfinance banks in Nigeria which use the computerized accounting system tend to have higher profit margins compared to those using the manual accounting systems. In yet another research study conducted by Ware (2015) on the effectiveness of computerized accounting systems on Ghana, it is evident that the bank used for the study located in a rural setting of the country, as recommended by the researcher, would be able to improve its productivity in the event that it adopts the computerized system of accounting.

       Ware (2015) notes that the computerized accounting system since it is incorporated with ICT boosts performance of the bank personnel and the overall business performance. From this, it is evident that the computerized system of accounting more efficient and more effective in terms of productivity and/or performance compared to the manual system of accounting. Additionally, a research study by Arcega et al. (2015) established that the computerized system of accounting is more effective than the non-computerized or manual accounting system. Arcega et al. (2015) carried out the research study in Lipa City in the Philippines among small and medium enterprises ascertaining those using the computerized system of accounting and those that do not. According to the research study by Arcega et al. (2015), the computerized system of accounting leads to faster completion of work assignments and handling a higher volume of tasks as well as high quality of work. Therefore, from the various research studies conducted with some mentioned above, the research study to be carried out is relevant and worthwhile in the sense that it will add information to the existing body of knowledge.

Project Approach & Methodology

The research approach for this particular study will focus on data collection and data analysis. Regarding the data collection aspect, the study will focus on both qualitative and quantitative methods of data collection. The quantitative methods to be used include conducting surveys and administering questionnaires bearing close-ended questions. The qualitative methods to be used include case studies, and conducting interviews with open-ended questions. It is important to note that the research will primarily focus on the effectiveness of computerized accounting systems over the manual accounting systems. More specifically, the surveys will be conducted in at least five countries where computerized accounting systems are not common. The surveys will be carried out in both the private sector and the public sector to ascertain the extent to which the computerized accounting system is used. Furthermore, the questionnaires with open-ended questions will be administered to at least twenty organizations in at least five countries where the manual system of accounting is still popular and some which have embraced the computerized accounting system. Such questionnaires will target organizations operating in the private sector and the public sector.

The interviews will be conducted among organizations using the computerized accounting systems and the manual accounting systems in the private sector and the public sector. It is important to note that the interviews will be conducted in twenty developing countries across the world in at least twenty different organizations. The questions to be answered during the interviews will be open-ended and geared towards obtaining information regarding the policy implications of changing the accounting systems from manual to computerized systems. Additionally, the case studies will be conducted among organizations in the public and private sectors in around five developing countries. The case study will involve studying two organizations using the computerized accounting system and two firms using the manual accounting systems.

Equally important other methods of data collection can also be used in conducting the research but they are deemed as being not suitable. One such method could be the ethnographical research method. As much as this method could be effective in collecting data by way of observation, it is unsuitable in view of geographical challenges. This research study intends to collect information from a host of countries and thus ethnography cannot be used. The process of observation cannot also be used since it is time consuming and may be costly given it will involve a lot of traveling to the countries where the study of the types of accounting systems used. As such, this implies that ethnography and observation would not be used to collect data regarding the computerized accounting system and the manual accounting system.

Competencies

The research is precise in the skills needed for practical completion. Tersely, the study demands a profound knowledge of finance and accounts management. At the same time, the study requires an individual to have sufficient information on how to prepare accounting documents, how to record transactions, preparation of trial balance and financial statements, and how to use computers. I am fit to undertake the proposed research because I am currently a student in the finance and accounting class where most of these essential competencies are covered in details. For instance, I can record financial transactions in different accounts with the help of a computer software. After registering, I can refer to all the transactions made when requested by the management. On the preparation of trial balance and financial statements, I am well-informed that after recording the transactions, the data recorded is transferred to ledger accounts automatically with the aid of computers. The trial balance will be prepared electronically to be used further in checking the accuracy of the records. At the same time, I can also program my computer to prepare the statement of comprehensive income and the statement of the financial position of different financial institutions automatically. Therefore, having these competencies are essential in ensuring the effective use of the software and the completion of the research because it involves the assessment of the workability of computerized accounting system in comparison to the manual accounting systems.

Apart from having knowledge in finance and accounts management, I have excellent interpersonal skills that are important for the interactions and discussing the interviews, which are considered the main sources of primary data in the proposed research. Riley and Simons (2016, p. 239) confirm that an accountant must have excellent communication skills to ensure effectiveness and good customer relations. In this regard, I can maintain effective communication and live interaction with the respondents which is essential for eliminating boredom during the interview process.

Data Sources

       In terms of the data analysis, both the quantitative and qualitative methods of data analysis will be used to analyze the data collected. The quantitative method of data analysis will entail the following:

  • Exploration of a set of theories
  • Listing and development of hypotheses and theoretical framework
  • Testing of hypotheses
  • Development of a conclusion to influence policy

More importantly, the qualitative research method will entail establishing the links or connection between the aims and/or objectives of the research study and the outcome from the data collected and analyzed. Furthermore, the qualitative research method will involve developing a theory in line with the information presented in the data collection process.

       The sources for the data would be both the primary and secondary sources. In regards to the primary sources of data, the data will be collected using methods such as interviews, administering questionnaires as well as surveys. Secondary sources that will be used in collecting data for the research study include financial reports of companies and/or organizations in developing economies to ascertain if they use manual or computerized accounting systems. Additionally, findings from other similar research studies will also be used as secondary sources of information. The sources of data are easily accessible to be used for the research study.

Ethical Considerations

Besides, being a professional, I can guarantee and protect all the information presented by the individual participants with utmost privacy and credibility. Ensuring the confidentiality of participants’ data is an integral part of ethical practice in research. Therefore, I will encourage the researchers that the information provided to the research team will not be used for unlawful purposes but solely for understanding the effectiveness of a computerized accounting system in the banking sector. Data analysis is another critical part of the research that requires specific skills to increase the credibility and validity of the information generated. Having adequate knowledge of computers and the utilization of the SPSS software, I will effectively contribute to the analysis process and enhance the credibility of data. I can also assemble other team members and orient them on how to use the software in preparing data for the study. Team management is another vital success factor in the research (Strnadova, et al. 2018, p. 13; Moog & Soost 2018, p. 83). As the leader of the team, I am required to have exceptional personal values and attributes that foster interpersonal communication and the continued interactions between the research organizers and the participants. In this regard, I have excellent interpersonal skills, and I am aware that team management and collaboration strategies increase the effectiveness of the research through joint decision-making and problem-solving (Jia & Liden 2015, p. 1102). In this way, I will minimize conflicts between the research organizers and while interacting with the participants from the various entities participating or engaging in the research study.

Timescale

       The proposed research will cover the financial reports generated between 2017 and 2018. The considerations are because the documents are the most recent and give n the limited time available for completing the research. The researchers also considered the tight schedule that the accounting clerks, the management and the support staff had in comparison to participation in the study. Therefore, given this timeframe, the time allocated for the research was one week where the determined accounts and reports were accessed, the identified personality approached for the study through interviews and administration of questionnaires and other relevant outputs in the study generated for the basis of analysis and further interpretation.

       It is important to note that there are certain tasks which if not executed within the specified timeframe may lead to a backlog in conducting the research study. For instance, one of the high risk tasks that is time critical is the collection of data. Since data is to be collected from various developing economies or countries, then it implies that data collection has to be fast-tracked. Furthermore, another high risk task is data analysis which if not carried out in the expected way may lead to distortion of information thus affecting the results of the research study.

References

Arcega, C., Datinguinoo, E., Guerra, J., Guno, C., Mayuga, H., Villamena, E. and Manongsong, J. (2015). Computerized vs. Non-computerized Accounting System of Small and Medium Enterprises in Lipa City, Philippines: A Comparative Analysis, Asia Pacific Journal, 1(1), p48-55. Available at https://research.lpubatangas.edu.ph/wp-content/uploads/2015/05/APJARBA-2015-1-006-Computerized-vs.-Non-computerized-Accounting-System.pdf

Ndubuisi, A., Chidoziem, A. and Chinyere, O. (2017). Comparative Analysis of Computerized Accounting System of Quoted Microfinance Banks in Nigeria, International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(2), p.30-43. Available at http://hrmars.com/hrmars_papers/Article_04_Comparative_Analysis_of_Computerized_Accounting_System.pdf

Ware, E. (2015). Computerised Accounting System an Effective Means of Keeping Accounting Records in Ghanaian Banks: a Case Study of the Ga Rural Bank, International Journal of Research in Business Studies and Management, 2(11), p.111-141. Available at http://www.ijrbsm.org/pdf/v2-i11/8.pdf

Jia, H, and Liden, R. (2015). Making a difference in the teamwork: linking team prosocial motivation to team processes and effectiveness, Academy of Management Journal, 58(4), pp. 1102-1127. Doi: 10.5465/amj.2012.1142.

Moog, P. & Soost, C. (2018). Do teams really matter?’ Annual International Conference on Qualitative & Quantitative Economics Research, pp. 83-90. Doi: 10.5176/2251-2012_QQE14.23.

Dieltjens, S., Heynderickx, P., Dees, M., & Vissers, K. (2014). Linguistic analysis of face to face interviews with patients with an explicit request for euthanasia, tier closets relatives, and their attending physicians: the use of modal verbs in Dutch, Pain Practice, 14(4), pp. 324-331. Available at: http://eds.a.ebscohost.com/eds/pdfviewer/pdfviewer?vid=26&sid=e5c87695-3182-4d3d-b4dc-bfcefc0ed395%40sessionmgr4007

Strnadova, I. (2014). Building an inclusive research team: the importance of team building and skills training, Journal of Applied Research in Intellectual Disabilities, 27(1), pp. 13-22. Doi: 10.1111/jar.12076.

Unegbu, A. (2014). Theories of accounting: evolution & developments, income determination, and diversities in use,’ Research Journal of Finance and Accounting, 5(19), pp. 1-13. Available at: https://arxiv.org/ftp/arxiv/papers/1411/1411.4633.pdf

Bitnami