CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Accounting system according to an Italian monk, Luca Pacioli (1491), is the combination of personnel records and procedures that a business uses to meet its need for financial data. Financial accounting also encompasses the summary of information and presentation of periodic reports such as profit and loss statement and balance sheet. The historical firms of accounting were of different degree of sophistication according to the need and techniques of the time. This is why modern accounting is based on the double entry system and the recognition of the dual nature of each transaction and this gives a co-ordinate support for the control of all the transaction of a business.
Accounting system according to business dictionary is an organized set of manual and computerized accounting methods, procedures and controls established to gather, record, classify, analyze, summarize, interpret and present accurate and timely financial data for management decisions.
In spite of this, there are policies for reporting an organizational performance and current conditions. These policies increase the usefulness of report including their reliability and comparability. The policy that makes up acceptable accounting practices are determined by many individuals and groups and those policies are referred to as Generally Accepted Accounting Principles (GAAP).Since accounting is a service activity, these rules reflect our society’s needs and not only on those of accountants. The Financial Accounting Standard Board (FASB) is another body or group that is seen as an independent group of seven full-time members with a large staff. This body has issued six statements of accounting concepts which help in guiding accounting standard setting. Many companies and organizations involve themselves in setting accounting rules/policies. They include investors, government agencies, politicians, unions, lenders and other business and non-business organizations.
Furthermore, there are two major types of methods used in recording accounting information, such methods are;
- Manual Accounting System and
- Software Accounting System or Computerized Accounting System.
Manual Accounting System extends and includes the method of processing, recording, journalizing transactions, posting to the ledgers and preparing the financial statements which provide decision makers with useful information in making decisions. These decisions relate to the allocation and use of scarce economic resources such as money, land, labour and capital. These manual accounting systems are wholly used for preparing income tax returns, reports to managers, bills to customers and other forms of providing accounting information.
In addition, with manual accounting system, accountants and managers usually inspect the documents, journal ledgers and reports in the performance of testing and verification. Transaction can be traced from source documents to journals, general ledgers, printed report etc. Subsidiary ledgers can be posted and the total can be compared with control accounts. It is visually observed by the auditors or accountants to determine whether proper books of accounts or is being followed.
In Computerized Accounting System, technology is the main part of our modern society and business practices. It also plays a major important role in accounting as it helps in reducing the time, effort and cost of record keeping while improving clerical accuracy. Technology has distinct the way we store, process and summarize large masses of data which makes accounting free to increase its field.
The origin of software could be traced back to early 1960’s. Historically, emphasis in computer industry was on programming and was seen as the biggest single problem in the implementation of a computer system. Computer has the ability to add and subtract, but frequently not to multiply or divide, the computer run with relatively simple software routines.
However, this study tends to analyze the comparison between manual accounting and software accounting which are the two types of accounting system used by various organizations and companies.
STATEMENT OF THE PROBLEMS
In recent times, most companies and organizations have been using the manual form of operations in their accounting systems. Primarily, these manual accounting systems used to meet the organizational information requirement but this has been on consistent failure in recent times as a result of growth and diversification of business and technological advancement complexities in information technology to meet the current business demands.
This companies and organization had usually been faced with numbers of problem in the use of this manual accounting system which involves;
1: Lack of ability to handle sufficient or large volume of data: this implies the ability to handle large volume of data or files which manual accounting system faces.
2: Insufficient data storage and retrieval system often resulting to loss of vital records or information: this implies that there is lack of sufficient storage facilities in either the two accounting system which normally lead to file lost.
Rampant report of forgeries which might lead to fraud: to ascertain the proper accounting system that will be effective in the effort of forgeries in other to prevent fraud.
OBJECTIVE OF THE STUDY
The main objective of this study is a comparative analysis of software accounting system and manual accounting system.The study aims at ascertaining the following;
- To ensure that software accounting system can handle large volume of data or information more than the manual accounting system.
- To assure that sufficient storage devices or means is provided by either manual or computerized system of accounting which might lead to fraud as a result of file lost or inadequate retrieval system.
- To ascertain that the manual or computerized accounting system can offer quick report of forgeries in other to fight and prevent corruption and fraud
RESEARCH QUESTION
The course of this research has picked up some interesting enquires and discussions which centered more on a comparative analysis of software accounting and manual accounting system in Forte Oil Plc, Enugu Branch.
The following questions are put forward for the purpose of the study:
- Is software accounting system able to handle large volume of data or information more than the manual accounting system.
- Can software accounting system be more effective in easy retrieval and also provide sufficient storage means for the storing of data than the manual accounting system.
- How can software accounting system of accounting provide quick report of forgeries in an organization in other to fight frauds and corruptions more than the manual accounting system.
RESEARCH HYPOTHESES
Here are the following hypotheses that were formulated, tested and validated in the study.
Hypothesis One
H0: Software accounting system is able to handle large volume of data or information than the manual accounting system.
H1: Software accounting system is not able to handle large volume of data than the manual system
Hypothesis Two
H0: Software accounting system is more effective in easy file retrieval and also provide sufficient storage means than the manual accounting system.
H1: Software accounting system is not more effective in easy file retrieval and also cannot provide sufficient storage means than the manual accounting system
Hypothesis Three
H0: Software accounting system can provide quick report of forgeries in an organization more than the manual accounting system
H1: Software accounting system cannot provide quick report of forgeries in an organization more than the manual accounting system
SIGNIFICANCE OF THE STUDY
This study has a lot of significance to the educational system and industrial environments.
- It imparts hold knowledge to the general public who may not have theopportunity of reading some relevant test on software accounting system as well as manual accounting system.
- It creates new initiative in information expertise sub-sector.
- Non-computer experts with little or no assistance will be exposed and encourage through this study.
- It provides important literature for other researchers.
- It will promote productivity, efficiency and effectiveness in industries since user’s satisfaction is assured as well as error free and speeding reporting system.
SCOPE OF THE STUDY
The coverage of this study is limited to the study of a comparative analysis of software accounting system and manual accounting system of which particular attention is given using Forte Oil Plc, Enugu.
LIMITATION OF THE STUDY
There is no research work or study that is entirely hitch-free. During the course of this study, a lot of problems prompted up. The main limitation of this research work is time factor. The researcher had limited time with which he used in completing the study. This also created a room for other problems and made data collection a difficult task.
The problem of finance cannot be ruled out any research work of this entails typing, photocopying, transportation etc. The unavailability of material with which to work with constituted the limitation of the research work.
The study is however limited to Forte Oil Plc, Enugu. As well as the following financial areas: Such as general ledger, account payable, account receivable, purchasing, inventory control and cash resources. The research will also provide overall information on software such as peach tree accounting system for windows implementation procedures involved.
DEFINITION OF TERMS
SYSTEM: It is an interrelated or interacting element organized into a complex whole. A system is a group of interrelated components working together towards a common goal by accepting inputs and producing outputs in an organized transformation process.
SOFTWARE: It is a general term for the various kinds of programs used to operate computers and related devices. Software is the programs and symbolic languages that control the function of the hardware.
MANUAL ACCOUNTING SYSTEM: These are those systems in which source document are posted by hands which extends and includes method of processing, recording, journalizing transactions posting to the ledgers, sales, cash receipt and other type of journals.
ACCOUNTING SYSTEM: It is an organized set of manual and computerized accounting methods, procedures and controls established to gather, record, classify, analyze, summarize, interpret and present accurate and timely financial data for management decisions.
ACCOUNTING: It is a system for recording; classifying, measuring, interpreting financial data for an organization to enable users make assessment and decision making.
COMPUTERIZED ACCOUNTING: It is what businesses used to track their financial information.
COMPUTERIZED ACCOUNTING SYSTEM: It is a system used by business for recording their financial information. Every time a transaction happens, an entry is made into the system.