Abstract

Computerised accounting has become a vital tool for better financial reporting in many organisations today. Computers are now smaller, faster and easier to use leading to computerisation of the accounting system. This study was therefore structured to assess the effects of computerised accounting on financial reporting on Small Business Support Centre Buea.

The study was divided into five chapters explaining the variable and outcomes of the research. Data was gathered through distribution of 7 questionnaires to 7 employees in the enterprise and the responses were then analysed to test hypothesis.

Descriptive statistical tables of frequency and regression analysis were used for data analysis with the help of SPSS. The findings revealed that there is a significant positive relationship between computerised accounting and financial reporting. However, in the case of Small Business Support Centre, Buea.

It was concluded that computerised accounting factoring in its speed, timeliness, accuracy and the possibility of producing quality information affects the quality of financial reports of small and medium-sized enterprises in Buea. It is along this finding that it was recommended, small and medium-sized enterprises invest in computerised accounting as it affects financial reports to a great extent and transparency should continue being stable.

CHAPTER ONE

GENERAL INTRODUCTION

This study was carried out to assess the effects of computerised accounting on the quality of financial reporting in Small Business Support Centre, Buea. This chapter presents the background of the study, the research problem, the research questions, the research objectives, and the research hypothesis, the significance of the study and the scope and the limitation of the study.

1.1 Background to the study

Accounting is an essential part of any business, large or small owners, profit making or not for profit organisations. From experience it can be seen that many small enterprises do their accounting manually and they are satisfied. Others may be considering using a computerised system, since accounting software is much affordable.

Manual and computerised accounting systems perform basically the same processes, the accounting principles and concepts are the same with differences lying in the technicalities of the process. Although computerised accounting system is expensive, its advantages lie on speed and the ability to store larger quantities of information in smaller spaces than with the manual system.

According to (Kogan, 1986), accountability refers to a condition under which a role holder renders account to another so that judgment may be made about the adequacy of performance. (Lerner, 1999), equate accountability not only to reporting but also to the justification of performance, they continue to describe accountability as the implicit and explicit expectations that anyone may be called.

According to (Pandey, 1981), Financial reporting to the company’s stakeholders for instance the government, public, donors is a statutory obligation for every organisation.

(Saleemi, 1981) Defined financial reporting as the process of supplying financial information which is reliable, accurate and complete to the various stakeholders for making economic decisions. This is always inform of financial statements such as statement of comprehensive income, statement of financial position and cash flow statement and other financial annually reports which provide an overview of the company’s financial strength.

A small and medium-sized enterprise is defined as non-subsidiary, independent firms which employ less than a given number of employees. This number varies across national statistical systems.

SMEs play a major role in the economic growth of developing countries, providing the source for newest jobs. Over 95% of enterprises in most developed countries are SMEs which account for 60%-70% of employment. As larger firms downsize and outsource more functions, the weight of SMEs in the economy is increasing. (OECD SME and Entrepreneurship Outlook, 2005).

Computerised accounting system is the application of the computer based software used to input, process, store, and output accounting information (Millichamp, 1995). The application is to support, advancing technologies that enable firms to use computer programs to perform tasks, which were previously done manually.

The need for computerization of the accounting system is due to increase in the number of transactions, as a result of the policy of continuous expansion of the business. It is noted that, business accounting records cannot be accurately maintained when the firm expands and when the system is not computerised.

It is the computer based system that the firm can use to post numerous transactions to the right ledgers and prepare proper financial statements. It is from this need that SMEs consider it very important to computerise its systems and different functions as it considers two mandatory rules that govern its operations. These rules are:

• Technology must benefit your business and,
• If technology does not benefit your business then you don’t need it.

For this reason, the accounting section which the institution considers very important is highly computerised for the purpose of improving on record keeping, proper maintenance of different loss of cash or loss of accounting records. Computerised accounting system in commercial organisation, which will help to integrate, simplify and streamline all the business processes and transaction cost effectively and easily (Indira, 2008).

Business organisations should adopt a suitable accounting package in order to derive benefits from it (al, 2006) for instance for small business, personal finance organiser like quicken, Microsoft money and quick books are usually good enough to handle accounts of small businesses. It’s however noted that the way accounting data is entered, processed and stored has considerably changed.

It is no longer necessary to have a huge room full of ledgers and records; there is accuracy and efficiency in keeping records, low case of omission and loss of accounting records using computers. These changes in financial reporting might be due to several factors.

In Cameroon, many SMEs have adopted the use of computers in many sections of their activities such as recording of daily transactions, such as sales, services rendered, preparation and presentation of financial reports.

Therefore, the researcher focuses on investigating the influence of computerised accounting on the quality of financial reporting in SBSC.

1.2 Research Problem

As information technologies grow more progressively, the manual accounting systems have become gradually inadequate for decision needs (Martin, 1996). Consequently, public and private sector firms in both developing and developed economies view CAIS (Computerised Accounting Systems) to ensure effective and efficient information flow in the recording, processing and analysis of financial data. Effective and efficient information flow enhances managerial decision making, thereby increasing the firm’s ability to achieve corporate business strategy objectives (Manson, 2001)

The experience of advance country is that managing complex FMIS (Financial Managerial Information Systems) projects requires considerable management skill. However, this is typically in short supply in DCs (Distributed Control System). Top managers may not be computer literate. The consequence is always the binding constraint; when introducing FMISs it is not the technical capacity to create them but the capacity to manage them. (Keating & Frumkin 2003).

In most SMEs activities of the business are poorly organized and their accounting systems are in poor order. Many SMEs do not have qualified accountants and have problems preparing accurate and timely financial reports, which is one of the major customer and stakeholders requirements.

Since the 1950s, when technology started to be applied in business (Otieno and Oima, 2013), most developing countries have moved away from the use of pen and paper and started to adapt to the use of accounting software to facilitate generation of quality, quick and accurate financial reports. However, due to other poverty related issues, there is lack of consistency coupled with irregularities registered in the field of technology which handicap the regular use of computerised accounting system. Studies to evaluate the impact of using this technology to generate financial reports are limited.

A few studies have been done on the effects of computerised accounting systems on the quality of financial reports which included; Mwaura (2013), the study assessed Financial Accountability on the Performance of Non-Governmental Organisations in Kenya, (Otieno and Oima 2013) studied the implementation of the computerised system in Kisumu country, Kenya. Another study by Byenkya Denis Mark (2011), the study was conducted to assess the impact of computerised accounting on financial reporting in Uganda Breweries Limited.

Thus this study intended to address the following main research question: Does the use of Computerised Accounting System influence the quality of financial reports in Small Business Support Centre, Buea?

1.3 Research Questions

This study is proponed to answer the following specific questions:

1. What are the qualities of financial reports prepared by Small Business Support Centre, Buea?
2. What is the relationship between computerised accounting and financial reporting in Small Business Support Centre, Buea?
3. What are the benefits of using computerised accounting over manual systems of accounting in preparing financial reports in Small Business Support Centre, Buea?

1.4 The Research Objective

In every research, the objectives are the aims or reasons for carrying out the research. These objectives are therefore divided into main and specific.

The main objective of this study is to examine the influence of computerised accounting system on the quality of financial reports in SBSC.

The specific objectives are:

1. To examine the quality of financial reports prepared by Small Business Support Centre, Buea.
2. To compare the level of benefits in using computerised accounting over manual systems of accounting and preparation of financial reports in Small Business Support Centre, Buea.
3. To assess the relationship between computerised accounting and the quality of financial reports in Small Business Support Centre, Buea.

1.5 Research Hypothesis

In order to ensure the verification and validation of the primary data gathered through administration of questionnaires. A research hypothesis is formed comprising the null Hypothesis (Ho) and the alternative hypothesis (Hi).

H0: Computerised accounting does not significantly influence the quality of financial reporting in SBSC.

H1: Computerised accounting significantly influences the quality of financial reporting in SBSC.