THE EFFECTIVENESS OF ACCOUNTING SOFTWARE IN THE PREPARATION OF FINANCIAL STATEMENTS

Abstract

Many businesses, organizations, and non-governmental organizations (NGO) have established the use of computers and accounting software that will aid in the creation of various books of accounts, such as the general ledger, accounts receivable, accounts payable, and inventory control, which will aid in the creation of financial statements. Larger businesses may decide to use a tailored solution that combines a significant amount of data from numerous departments. Select an off-the-shelf product frequently for smaller businesses. With the advent of computers, accounting software and data storage have become more effective and efficient in all financial institutions. The majority of organizations had different information systems before computers were invented. The adoption of centralized information systems across all organizational functions is made easier by the arrival of computer technology.

Chapter one

Introduction

1.1Background of the study

A new set of accounting challenges, such as dealing with multiple currencies and adhering to a plethora of accounting and tax regulations, have emerged as a result of the growing globalization of the world economy and the need for organizations from all over the world to compete in the global marketplace. Consequently, there is an increasing need for more advanced accounting software programs capable of handling complex international accounting challenges (Adhikari, Lebow & Zhang, 2004). However, thanks to significant technological improvement, there are now fewer alternatives for employing accounting data strategically. The adoption of Accounting Software becomes major aspect in determining the survival, growth and success of an organization as firms require more information, be it monetary or non-monetary, to deal with a higher scale of uncertainties in the competitive market and require data processing capacity and system to ameliorate to suit their information needs (Van de Ven & Drazin, 1984) in this global economy era.

The digitalization of accounting is a necessity in today’s era of digitalization. Numerous advantages and favorable features, including speed and accuracy of operation, simplicity and dependability of operation, etc., have changed the course of the accounting industry globally with the introduction of computerized accounting systems and the most recent accounting software. A group of computer programs known as accounting software let you control the financial operations of your company. Using accounting software helps businesses make efficient and effective use of the resources in their accounting departments and also helps them avoid expensive bookkeeping or accounting errors. The use of computer software to facilitate quick reporting, simple processing, and storage of financial information has replaced the practice of manually reporting financial statements in the fields of accounting and finance. As a result, preparation and access of financial statements as well as the use of accounting procedures have been made easier thanks to accounting software (Kharuddin et al., 2010). In the present business world, the failure to apply and use computer software indicates that financial information may not be accurate, delays in financial reporting, and that financial information may not be stored for a long time

Accounting is the systematic art of recording, classifying and summarizing in a significant manner and in terms of monetary, transactions and events which are, in part at least, of financial character, and interpreting the results thereof. Accounting can also be referred to as an information system that measures, processes and communicates financial information about an economic entity. Information technology advancements have substantially enhanced accounting processes and changed economic life (Adefila, 2008). Computers and other digital technology have improved workplace performance and productivity by enabling quick document interchange, research, remote partner collaboration, and data collection and analysis. Information technology provided new, useful tools for locating and pursuing economic and business prospects to all different types of individual economic actors..

Financial Statements deals with the application of computers to process financial transaction, such as retrieve, transmit and manipulate data. This could also be described as anything that renders data, information, or perceived knowledge in any visual format through any multimedia distribution mechanism, (Shanker, S. 2013).

In running a corporation, accounting is essential. Every firm is required to maintain track of the financial data related to its operations. There are several processes as well; some are simple, while others are difficult and time-consuming. However, organizations need to retain extremely precise and up-to-date accounting, inventory, and statutory records as their firm grows, attracts new clients or customers, expands into new markets, and keeps up with the rapid developments in information technology (Igbaria et al, 1997). There was a need for a system that could store and process accounting data with increased speed, storage, and processing capacity due to a significant increase in the volume of accounting transactions and an increase in the exposure of information to errors as a result of the complexity of these accounting systems. This led to the rise in the development and introduction of accounting software packages (Igbaria et al, 1997).

Accounts payable, accounts receivable, payroll, and trial balance are just a few examples of functional modules in accounting software that record and perform accounting transactions. It serves as an information system for accounting. It may have been created internally by the company utilizing it, purchased from a third party, or combined with local modifications from a third-party application software package (Wikipedia, 2016). Accounting software can be desktop-based or online-based, accessible from any location at any time using any Internet-enabled device. In terms of intricacy and price, it varies tremendously. Since the middle of the 1990s, the market has undergone significant consolidation, with numerous providers ceasing to operate or being acquired by larger organizations.

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 companies generally pass on a license fee to the software vendor and then apply charges to 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.

Accounting software businesses have been able to develop accounting software that is paid for on a monthly recurring charge rather of a larger upfront license cost because to the development of faster computers and internet connections. As this new revenue model has been used more frequently, established players have been compelled to release their own online editions. Due of greater transportation costs and price discrimination activities, areas with generally higher pricing seem to embrace cloud accounting software more quickly (Chau, 2001).

The use of accounting software will lessen the data processing time that usually takes a longer time if done manually or by hand 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 must be able to keep up with information technology advancements since doing so will enable them to adopt accounting information system technology, which is predicted to increase their competence in general and in information systems technology in particular. For instance, in the area of information systems technology, accounting students are expected to become proficient accountants. This is corroborated by the sheer number of employers who want solid accounting knowledge from recent accounting graduates as well as specialized competence (soft skills) in the field of information systems technology, such as accounting software.

1.2 Statement of the Problem

Since the 1950s, when technology began to be used in business (Otieno and Oima, 2013), the majority of developing nations have stopped using pens and paper in favor of accounting software, which makes it easier to generate high-quality, timely, and accurate financial reports. The regular usage of accounting software and computerized accounting systems is hindered by a lack of consistency and anomalies registered in the field of technology as a result of other poverty and related difficulties. There aren’t many studies that look at the effects of employing this technology to produce financial reports. This study aims to evaluate how well accounting software produces financial statements.

1.3 Objectives of the Study

The following are the objectives of this study:

1. .

1.5. Research Hypotheses

The following hypotheses were tested in their null form

Ho: There is no significant impact of accounting software on the banks payroll financial preparation and reporting in Mmockmbie Credit Union.

Ho: There is no significant benefit on the use of accounting software on financial reporting in Mmockmbie Credit Union

Ho: There is no significant effect of the disadvantages of accounting software on the accounting information reporting in Mmockmbie Credit Union.

1.6. Operationalization of Variables

Efficiency of accounting software in the preparation of financial statements.

The above topic have two variables, namely; Accounting Software (independent) and financial statements (dependent variables), to be represented as X and Y respectively.

X = Independent (Accounting Software)

Y = Dependent (Financial Statements)

The independent variable (accounting software) will be a constant variable

Elements of (X) Accounting software

X1 = Accounting Software

X2 = Benefits of Accounting Software

X3 = Disadvantages of Accounting Software

Element of (Y) Financial Statements

Y1 = Payroll

Y2 = Financial Reporting

Y3 = Accounting Information System

1.7. 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 financial statement.
2. In today’s business environment, most financial accounting systems have been computerized and automated with little or no paper documentation. Technologies have greatly changed the nature of audits which have so long relied on paper documents. Auditors or Accountant performing attest services for clients that process financial transactions electronically therefore need to go extra miles to be professionally and technically competent in order to perform an acceptable audit.

1.8. Scope of the study

This study is on the efficiency of accounting software in the preparation of financial statement Mmockmbie Credit Union.

1.9. Definition of terms

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.

Accounting Information System: is a structure that a business uses to collect, store, manage, process, retrieve and report its financial data so that it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors and regulatory and tax agencies.

Trial Balance: is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements

Financial Statement: is a formal record of the financial activities and position of a business, person, or other entity.

1.10. Chapterization

The research understudy shall encompass 5 chapters, which are as follows; Chapter one shall comprise the introduction and body of the topic; Chapter two entails the literature review, empirical framework, conceptual framework and theoretical framework; Chapter three consists of the research methodology and design, research instrument, sample and sampling size; Chapter four entails data presentation and analysis, while Chapter five shall be the concluding part, which includes the summary of findings, conclusion and recommendation.

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