(PDF) The Impact of Accounting Systems for Improving the Performance of Private Businesses in Imo State

CHAPTER ONE

INTRODUCTION

Background of the study

Accounting is essential to a business’s success. It is critical for every business to keep up-to-date and monitor financial information related to its operations. Accounting entails a wide range of procedures, from simple to complex and even time-consuming. In order to maintain highly accurate and up-to-date accounting, statutory records, and inventory, companies must keep up with constant changes in information technology ( Wickramsainghe, D. Pemarathna, R.. Cooray, N. and Dissanayake, T. 2017). More importantly, due to the complexity of manual accounting, the increased risk of errors, and the growing volume of accounting transactions, a system that could process and store accounting data at a faster rate, as well as a large amount of storage and processing capacity, was required. As a result, accounting software, which combines accounting and information technology, was introduced to the world to meet the growing demand for up-to-date and accurate information (Wickramsainghe, et al., 2017). Accounting systems are in charge of recording, analyzing, monitoring, and evaluating the financial condition of businesses, as well as preparing tax documents and providing information support to a variety of other functions (Ali, A., Rahman, M. & Ismail, W. 2012). Accounting information is important in the context of private businesses because it can assist firms in resolving short-term issues in critical areas such as costing, expenditure, and cash flow by providing data that can be used to support monitoring and control (Olatunji, T. E. 2013). A privately held company, also known as a private company, is one that does not sell or trade its stock on the stock exchanges to the general public, but instead sells, owns, and trades or exchanges its stock privately or over-the-counter. Private businesses are typically owned by one or a few people. A private company is one whose stock is not publicly traded on the open market but is held internally by a small number of people and is classified as a small or medium-sized business.

Firms that implement accounting systems optimally adapt more successfully to changing environments and demonstrate a high level of competitiveness, enhancing a company’s dynamic character through the use of AIS. To put it another way, there have been advancements in accountancy and finance administrative management. The primary goal of an accounting information system is to collect and record data and information about events that have a financial impact on businesses, as well as to maintain, process, and communicate that data to internal and external stakeholders for proper decision making (Dandago, K. & Rufai, A. 2014). With sophisticated statistical software applications and an accounting system, it is possible to assess the risk of certain operations and forecast future earnings. As a result, SMEs will have a hard time determining performance, identifying customer and supplier account balances, and forecasting future performance without such a system.

Statement of problem

The Nigerian economy’s moving train is believed to be powered by private firms. Despite the necessity of accounting systems in the light of technology innovation, most businesses do not give them much thought when it comes to their financial operations. This might be due to the owners’ or respective managers’ lack of understanding of proper bookkeeping procedures. It is difficult to determine the extent to which SMEs are unaware of the importance of accounting data to their survival and growth. The generation of incorrect accounting or financial statements has been influenced by the owners’ low educational backgrounds and the hiring of incompetent accounting employees, which has influenced managerial decision making. Most private enterprises fail to keep appropriate books of account and follow basic accounting practices, according to Ali, A., Rahman, M., and Ismail, W. (2012). As a result, they are unable to accurately depict the company’s financial status, limiting the company’s capacity to secure critical loans from financial institutions and other sources for growth and diversification. As a result, yearly earnings are difficult to calculate in such conditions. Privately owned businesses Due to these difficulties, researchers have proposed that efficient use of accounting-related technological applications might help private companies function better. This is supported by Hla and Teru’s (2015) assertion that accounting information systems are extremely important to both businesses and organizations because they help with management decision-making, financial report quality, internal controls, and company transactions, in addition to playing a critical role in the economy. While this is disputed, the researcher wanted to see if using an accounting system would increase the operation of a private firm, so he could agree or disagree with other researchers’ opinions on the subject.This this study is focused on impact of accounting systems for improving the performance of private businesses in Imo State.

Objective of the study

The broad objective of this study is to examine the impact of accounting systems for improving the performance of private businesses in Imo state. Specifically the study sought to:

Research questions

The research is guided by the following question:

1. Would the efficiency of accounting software improve the performance of businesses?

2. Would accounting software reliability impact decision making in private businesses?

3. Does data quality of accounting system enhance record keeping efficiency in Private organization?

4. Does software accuracy of accounting system have any significant impact of the financial positions of private businesses?

Significance of the Study

A good accounting information system operated in a company is an indispensable aid to effective management. It assures management of the reliability of decision taken by them and that these decisions are in accordance with goals to be attained. Findings from this study create great awareness to the management of the firms or various businesses or other managers, the importance of appropriate, complete and reliable set of records using accounting information system for such purpose as quick, correct decision making and effective planning and control of activities of their business. The result of the study will be helpful to the government a dn in terms of having a financial statement upon which they can facilitate tax collection and the regulation of private business activities in the country. Finally, the study will contribute to the body of the existing literatures and serve as a reference material to both scholars and student who wishes to conduct further studies in related field.

Scope of the study

The scope of this study borders on the impact of accounting systems for improving the performance of private businesses . The study would further examine how Software reliability, accounting system efficiency, data quality and accounting system accuracy would affect decision making, record keeping and financial positions of Private businesses. The study is however delimited to selected businesses in Owerri municipal in Imo State.

Limitation of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that it is a new discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. Additionally, the researcher will simultaneously engage in this study with other academic work. Despite the constraint encountered during the research, all factors were downplayed in other to give the best and make the research successful.

Definition of terms

Accounting: It’s the systematic process of recording, communicating, summarizing, analyzing and reporting of financial information.

Accounting information: This refers to the system of storing, processing of financial and accounting data that are used by decision makers.

Accounting information system: it’s defined as a computer based system that increases the control and enhance the cooperation in the companies.

Private Business: A private company is a firm held under private ownership. Private companies may issue stock and have shareholders, but their shares do not trade on public exchanges and are not issued through an initial public offering.