CHAPTER ONE
INTRODUCTION
1.1 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 on an organization 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.
Technology is a main part of our modern
society and business practices. It also plays a major important in accounting
as it help 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 dated back to
early 1960s. 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.
1.2 STATEMENT
OF THE PROBLEM
In recent times, most companies and
organizations have been using the manual form of operations in their accounting
systems. Primarily, this 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.
Thus, companies and organizations had usually
been faced with a number of problems in the use of this manual accounting
system which involve lack of ability to handle sufficient volume of data in
terms of speed and accuracy, insufficient data storage and retrieval system
often resulting in loss of vital records, incorporating final updates, rampant
report of frauds and forgeries in the use of the system, unseemliness of
information which implies that information needed for effective decision making
. This is repeatedly, as a result of poor retrieval and inability to collect
large volume of data within the required time. All these problems include consequence
in great loss of scarce resources and impeded organization growth, steadiness
and advancement.
Hence, in attendance to affect these problems
related with the manual accounting system and substitute it with the
development of an integrated accounting software system where financial and
non-financial accounting transaction are recorded, analyzed, retrieved,
reported, interpreted, summarized and processed.
1.3 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 objectives:
1.
To evaluate whether frauds and forgeries are encourage
in computerized accounting system i.e. software accounting system than the
manual accounting system.
2.
To examine whether software accounting system can
handle large volume of data than the manual accounting system.
3.
To study whether the use of software accounting system
increases effectiveness and efficiency in organizations or companies than
manual accounting system in reducing the amount of funds lost through frauds
and forgeries.
4.
To examine whether software accounting system is capable of storing, retrieving,
analyzing, processing, summarizing and reporting rapidly than manual accounting
system.
5.
To show the operational and reporting system in both
the manual accounting system and software accounting system.
1.4 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 two companies Nigeria Breweries Plc. and
Africa Petroleum Plc in Enugu State.
The following
questions are put forward for the purpose of the study:
i.
What are the measures taken to ascertain the extent to
which fraud and forgery can be prevented and controlled using either of the
accounting system?
ii.
Can software accounting system handle large volume of
data more than the manual accounting system? iii.How effective and efficient is the use
of software accounting system or manual accounting system?
1.5 RESEARCH
HYPOTHESES
Here
the following hypotheses were formulated, tested and validated in the study.
Hypothesis One
H0:
frauds and forgeries are not encouraged with the use of software accounting
system than manual accounting system.
H1: frauds and forgeries are encouraged with the use of
software accounting system than manual accounting system.
Hypothesis Two
H0: Software accounting system is not able to handle
large volume of data than the manual accounting system.
H1: Software accounting system is able to handle large
volume data than the manual accounting system.
Hypothesis Three
H0: Manual accounting system is not effective and
efficient than the software accounting system in reducing the amount of funds
lost frauds and forgeries.
H1: Manual accounting system is more effective and
efficient than the software accounting system in reducing the amount of fund
lost through frauds and
forgeries.
1.6 SIGNIFICANCE
OF THE STUDY
This
study has a lot of significance to the educational system and industrial
environments.
1.
It impart hold knowledge to the general public who may
not have the opportunity of reading some relevant test on software accounting
system as well as manual accounting system.
2.
It creates new initiative in information expertise
sub-sector.
3.
Non-computer experts with little or no assistance will
be exposed and encourage through this study.
4.
It provides important literature for other
researchers.
5.
It will promote productivity, efficiency and
effectiveness in industries since users satisfaction is assured as well as
error free and speeding reporting system.
1.7
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 two companies in
Enugu as study. These companies are Nigeria breweries PLC (Enugu), African
Petroleum PLC (Enugu).
1.8
COMPANIES
PROFILE
NIGERIA BREWERIES PLC
Nigeria Breweries
Plc. was incorporated on November 6th, 1996 as Nigeria
Breweries limited and was first commissioned in Lagos on 2nd
June 1949, while other branches were established such as Aba branch in 1957,
Kaduna 1963, Ibadan in 1982 and Enugu in 1995.
AFRICAN PETROLEUM PLC
The history of African petroleum Plc. dates back
to 1945 when the British petroleum company limited bought up the assets of the
Atlantic Refining Company on the West Africa coast. In1964, AP Nigerian limited
was incorporated in Nigeria. As an associate of the world wide AP group, it
marketed petroleum throughout the federal Republic of Nigeria. In 1973, the
company changed from a private company to public company, when 40% of its
shares were sold to Nigerian citizens in compliance with provisions of Nigerian
Enterprises promotion decree of 1977.
1.9 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 these companies. Nigeria Breweries Plc. 9th mile Enugu metropolis,
African Petroleum Plc. Presidential road, 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.
1.9 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 system 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.