CHAPTER ONE

INTRODUCTION

1.1 Background of Study

Accounting plays a critical role in the functioning of all business institutions in one way or the other. Accounting systems are responsible for recording, analyzing, monitoring and evaluating the financial position of business organization, preparation of documents necessary for the tax purpose, providing information support to many other organizational functional areas, and so on. Prior to the advent of personal computers, businesses were limited to manual methods for keeping track of financial data.

Over the past years, there have been changes in technology which have greatly increased development in our society. Accounting traditionally has played a stewardship role as depicted by Morgan (Morgan et al, 1982, p309) when he uses the image of accounting as a historical record to demonstrate accounting as an extension of the owner’s personal memory. However society and business practices have changed.

The growth of global business and the emergence of new sectors such as ecommerce have led to complex transactions being undertaken. This in turn has unearthed problems of subjectivity and inconsistency in the application of traditional accounting techniques.

However, accounting started with bookkeeping while the society was still in the trade by barter system (pre-2000 B.C.) rather than a cash and commerce economy. Ledgers from these times read like narratives with dates and descriptions of trades made or terms for services rendered. This system of detailing every engagement was ideal because long periods of time could pass before transactions were completed although it was tiresome.

As currencies became available and trade MFIs and merchants began to build material wealth, bookkeeping also evolved. Then, as now, business sense and ability with numbers were not always found in one person, so math-phobic merchants would employ bookkeepers to keep a record of what they owed and who owed them.

Up until the late 1400s, this information was still arranged in a narrative style with all numbers in a single column whether an amount paid, owed or otherwise. This is called single-entry bookkeeping and is similar to what many of us do to keep track of our checkbooks. It was necessary for the bookkeepers to read the description of each to decide whether to deduct or add it when calculating something as simple as monthly profit or loss. This was a very time consuming and inefficient way to go about tallying thing.

As time went on, bookkeeping migrated to America with the European colonization for business owners. The businesses in question were small enough that the owners were personally involved and aware of the health of their companies. They didn’t need accountants to create complex financial statements or cost-benefit analysis.

The appearance of corporations in the U.S. and the creation of the railroad were the catalysts that transformed bookkeeping into the practice of accounting. Corporations, eager to expand their operations, began to publish their financials in the form of a balance sheet, income statement and cash flow statement.

E-Accounting or online accounting is the application of online and internet technologies to the business accounting function. Similar to e-mail being an electronic version of traditional mail, e-accounting is “electronic enablement” of lawful accounting and traceable accounting processes which were traditionally manual and paper-based.

E-accounting involves performing regular accounting functions, accounting research and the accounting training and education through various computer based /internet based accounting tools such as digital tool kits, various internet resources, international web-based materials, institute and company databases which are internet based, web links, internet based accounting software and electronic financial spreadsheet tools to provide efficient decision making.

Information has become one of the main tools for decision making in organizations (Arias, 2002). Accounting is the methodical record-keeping of the transactions of a company, and it is important in helping the organization control the movement of its assets, the results of its operations, and to act at all times as a means of testing commercial performance.

Although accounting has achieved its most notable achievements in the field of business, the accounting function is vital in all sections of our society. All citizens need a certain amount of accounting knowledge if they wish to act in an intelligent way and accept the challenges that society imposes on them (Josar, 2001; cited in Nuñez, 2013).

For years, accounting has been considered a formal and generalized source of information within organizations (Chapellier, 1994). According to norms and regulations, accounting provides a representation of the financial situations of companies. This representation is communicated through financial statement presented at the end of each accounting period and conforms to the legal and tax requirements (Daoud & Triki, 2013).

 

Mexico has been characterized by constant change. Globalization obliges the country to be permanently ready to respond to the diverse needs of the organization, which is why it is vital to constantly update financial accounting. Therefore, accountants must be able to attend to the laws for registering transactions and adequately present financial statements, which are consulted by the users who make the decisions to achieve the objectives of their organizations.

Any organization, whether a company or a natural person, must understand and manage their resources in the most effective way possible, which is why they must have adequate information and accounting control (Núñez, 2013), which represents something optional for the businessperson as the administration of information internally with their accountant or an external accountant through an accounting firm.

An accounting firm is formed by a public accountant, either alone or partnered with other colleagues, where management consulting, audits, tax, and financial services are provided to the general public and to businesses.

According to INEGI (2016), in Mexico there are 19,082 economic units that offer accounting and audit services, and are registered in the National Statistical Directory of Economic Units (DENUE) in which states such as Guanajuato, Jalisco, Mexico City, Veracruz, and the State of Mexico have the greatest numbers of registered economic units.

It is notable that accounting firms contribute 19.7% of the economic units that offer professional, scientific, and technological services of the total GDP that the country generates, according to information provided by INEGI.

Furthermore, as Mexico is part of the Organization for Economic Cooperation and Development (OECD) and based on the recommendations made in 2012 in the document Getting It Right, a fiscal reform was put into place that directly affected public accountants because it established a set of new obligations for taxpayers that must provide accounting information electronically before the Mexican tax authority.

The obligation to keep electronic books arises as a measure for the construction of a more agile fiscal system, making the base of the tax income broader and more stable, in conjunction with the use of information technologies to facilitate the adequate compliance and presentation of information based on accounting and fiscal norms.

Today, accounting is a business unto itself, with thousands of practitioners worldwide and a large number of professional organizations and official guidelines to codify practices and requirements. Particularly in the United States during the Great Depression, demands were made for better standardization of accounting practices and a set code of professional guidelines.

Today, the Generally Accepted Accounting Principles (GAAP) set forth the standards by which public accountants must do business. Every country has a similar set of accounting guidelines.

Due to the complex nature of today’s economic system, specialized branches of accounting have developed. In addition to traditional financial accounting, there are now subdivisions, such as tax accounting, management accounting, lean accounting, fund accounting and project accounting. Professional accountants are required for these fields, as they involve the need for a thorough and specific understanding of business needs and accountancy practices. (Kindig 2017)

Nevertheless, in Africa, Micro Finance Institutions are notably the engines that drive economic development.  The businesses account for almost 90% of businesses in both leading and developing economies through job creations, employment, tax provision and contribution to Gross Domestic Product (GDP).  However, in Africa, besides their critical and positive role, many some Micro Finances face numerous challenges ranging from  power shortage, lack  of capital, poor management  skills  and  competencies,  and  inadequate  information  and  corruption.  It is notable that most African governments give very little support to MFIs thereby neglecting a vital economic trigger and should form pillars of development.

This thesis explored the role played by Micro Finances, their contributions, challenges and solutions.  The thesis is based on empirical evidence and current research on Micro Finances in general with a major focus on Microfinances in Cameroon and to analyze how they use e-accounting and the perceptions about it.

In Cameroon, data from the Banking commission of Central Africa States, industry sources confirmed by various focus groups show that the activity of microfinance is growing rapidly in Cameroon. In the phase of growing consolidation and restructuring in 2006, there were about 490 Micro Finance Institutions in Cameroon.

However, despite the strong role of Microfinances play in the economy, these companies, which are unanimously considered to be engines of growth, only make up 36% of Cameroon’s GDP.

Accounting has been done manually till the 1980s, when the advent of fast computers and easy-to-use, accurate and reliable software started Romano (2013). This implied maintaining books of ac¬counts such as journal, cash book, special purpose books, and ledger and so on manually. Cameroon has a large number of Micro Finances relative to the size of their economies, but these are almost exclusively micro enterprises and are often not part of the formal economy. World Bank doing business 2014 ranks Cameroon at 168th position out of 189 in the business environment category, 109th in getting credit category and 175th in the enforcing contract category.

However, the start of the usage of computers in many fields from daily activities of enterprises to generating statements made processing and  storing  information  in  electronic  environment  and  carrying  out  many  transactions  in  electronic  environments  indispensable. As a result of  developments  in  computer  technologies  and  their  reflections  in  the  occupation, using computer effectively and efficiently of occupational accounting personnel became obligatory.

In front of new formations that information and communication technologies caused and facilities created by such technologies, “a strategic alteration” in accounting education and applications became indispensable.

E-accounting became an important need in educational system because it enables those learning and to learn accounting limitless and many information sources and versatile interaction. People/companies then started practicing e-accounting more often since you could access data with internet connection which could save time, resources and reduce thesis work too. Along with a company’s main activities, a company also has to manage the processing of a huge amount of data, prepare statements and submit them.

1.2 Problem Statement

Some Micro Finances are not aware of e-accounting practices before being able to perform or apply it making less people in this sector to use it. They have no idea about e-accounting which could help them even better their businesses in the future.

The introduction of ICT in accounting processes in relation to accounting applications like the use of spreadsheets; off- the- shelve accounting software (e.g. Sage, Peachtree MYOB Quick Books); in-house-built Accounting Software; Web-based Accounting Software and ICT devices like the use of mobile phone; computer and the internet. These innovations in accounting have brought sophistication, speed and flexibility to all the functional areas of accounting. Yet some Micro Finances are still at crossroads in terms of implementing e-Accounting system.

Although some small business accounting packages are reasonably priced, the cost of the software is not the only cost of using the software. Accounting software requires minimum standards for computer use in regards to RAM, processor speed and hard drive memory.

Making a backup of your accounting data may also require more storage space than an Excel spreadsheet, which is easily copied to a flash drive. Technical support for the software may cost extra, and you can incur annual licensing fees in order to receive upgrades. If you are not skilled in software installation or accounting setup, you may also incur the cost of hiring a consultant to perform those tasks for you. Kaye (2018)

So many MFIs lack the experience in e-accounting practices and implementation. Many accounting software packages have been designed specifically for non-accountants, but you will need experience as learning curve when converting to any software package. If you have never used accounting software before, learning the accounting terms, layouts and determining a proper setup may be more difficult than the benefits received from utilizing the software.

Processing expenses and invoices in accounting software will usually take more time than simply logging the expense on a ledger pad or spreadsheet software and creating handwritten invoices or spreadsheet-based invoices. If using the computer is not a large part of your daily routine, the time required to process basic daily financial data may outweigh any benefit gained from the software.

Maintaining accounting software not only includes performing upgrades to the accounting software package, but also maintaining and upgrading all the necessary equipment to utilize the accounting software as new versions can require upgraded equipment which many MFIs fail to understand. This equipment often include your PC or laptop, monitor, printer, Internet connection and modem, backup drive and operating system.

The lack of expertise or knowledge to be acquired in e-accounting is absent in so many businesses today. A limited or no amount of microfinances even trains their staff in this sector.

Data security is another big problem faced my MFIs in Cameroon. The lack of software that could easily track the where about of probably a missing computer to avoid access to private information of microfinance is a problem. We have many hackers in our society today and so every work done online is exposed to some dangers and should therefore be taken care of.

1.3 Objectives of the Study

1.3.1. Main Objective

The main objective of this study is to analyze the personality traits and practices of e-account practices and methods of some selected Micro Finances in Yaoundé.

1.3.2. Specific Objectives     

This study has the following as specific objectives:

1. To investigate the knowledge of e-account practices and methods of some selected Micro Finances in Yaoundé;
2. To analyse the behaviors and attitudes of e-account practices and methods of some selected Micro Finances in Yaoundé;
3. To find out the perceptions on the e-account practices and methods of some selected Micro Finances in Yaoundé;
4. To assess the level of implementation of e-accounting practices and methods of some selected Micro Finances in Yaoundé.