ADAMA UNIVERSITYSCHOOL OF BUSINESS ADMINISTRATION,MANAGEMENT AND TRADE DEPARTMENT OF BUSINESS ADMINISTRATION AND ACCOUNTING RESEARCH PROPOSAL ON 'THE CONTRIBUTION OF COMPUTERIZED ACCOUNTING SYSTEM IN THE PERFORMANCE OF FINANCIAL STATEMENTS' Case Study Dejenna Endowment SUBMITTED TO: SOLOMON ALEMU (PhD.) SUBMITTED BY: NIGUS G/GEORGIS ID.02025676 JANUARY, 2010 ADAMA UNIVERSITY A secondary objective was to learn more about the influence and role (if any) played by their accountant in their decision. Those that currently use a CAS and those that do not. The purpose of this comparison is to determine what will the major influences in their decision to use or not use accounting software for their business. Two groups of businesses will be surveyed.Abstract This paper is based on a research project which will design to investigate business usage of a computerized accounting system (CAS) to ascertain if there are obstacles that prevent businesses from migrating to such a system. . The development of an understanding of the obstacles that inhibit the use of a CAS will be useful in the building of strategies to encourage greater efficiency in business record keeping. ...10..........1...........9 1..........................Specific Objectives........................................................................................5 1.......................................................................Out line of The paper...................................2........................Objectives of The Study...................5 1..........................................................................................................................Table of content Content Page Abstract.......................................II ..............6 1..........................................8 1...............1 1........5................................4 1.........................7..........5-6 1............................3..................Statement of the Problem.3................................6 1.................................6..8............Time budget.Method of Sampling.........4.................5 1..........Significance of the study....................4...... Introduction..........2....................2-3 1.....................................Material and methodology of The Study.........................................4.............................................9......Scope of the study......................7 1........2.......................1..........Method of data Analysis...........................................................................................................................................................................10 References........................................6 1.......................Background of the study...............................I 1...............5 1...........Limitation of the Study.....1..............................................3..................General objectives.................................Cost budget............................ Introduction The traditional view of business record keeping suggests that it is paper based and filed in a shoe box until such time that it is placed in the hands of the accountant for the preparation of the annual taxation return. It concludes with a discussion of the issues that are associated with the usage of CAS and provides some direction for those organizations involved in advising business operators about their record keeping.( 16th Annual Conference of Small Enterprise Association of Australia and New Zealand. Over the years the accounting profession and business training providers have been trying to change the approach to record keeping adopted by small business operators.1. It begins with a review of the literature on the adoption of Information Technology (IT) and then considers the findings of the study in the context of the adoption factors identified. This paper will report on the findings of a study that investigated business usage of CAS. With the introduction of lower-cost and more user-friendly computerized accounting systems (CAS) there appears to be fewer obstacles to improved record keeping practices. with a view to them holding better records and ultimately improving the management of their business.28 September – 1 October 2003) -1- . accounts are accessed and updated immediately to reflect activity. The closing process at the end of the period can also be done automatically by the computer.2007) Computers may also be programmed to record some adjustments automatically at the end of the period. can easily be handled by the computer. The mechanics of the system. thus combining steps 2 and 3 as discussed in the preceding section. Since the computer is programmed to post amounts to the various accounts and calculate the new balances as new entries are made. Indira. the accountant’s knowledge and judgment are frequently required to determine the adjustments that are needed at the end of the reporting period. Computerized accounting implies that the only thing that employees do is recording transactions into the computer which processes the other steps of accounting cycle automatically or by a request.1 Background of the study The primary objectives of the accounting function in an organization are to process financial information and to prepare financial statements at the end of the accounting period.2006) A computerized accounting system saves a great deal of time and effort. Additionally.A. premiums and wages calculation. and/or annual basis. (experience. Most software programs are also able to prepare the financial statement once it has been determined the account balances are correct. To meet these primary objectives. dividends etc. The need to test for equality of debits and credits through trial balances is usually not required in a computerized system accounting since most systems test for equality of debit and credit amounts as they are entered.1. resources and effort in large organizations. but depreciation. In a real-time environment. Of course it takes much time.(Walter Henson. But this is a very simplified view on the computerized accounting because transaction is a complex category which includes not only sales or acquisitions. quarterly. resources and effort too and it's difficult to assess which accounting type is more fast and economic. prepare financial statement reports and other routines.(Ms. the possibility of mathematical error is markedly reduced. If someone were to attempt to input data containing an inequality. journalize transactions. So computers provide accurate calculations and smart reports but it takes much time. and allows for much more timely information than does a manual system. Human judgment is still required to analyze the data for entry into the computer system correctly. a series of steps is required. -2- . the system would not accept the input. considerably reduces (if not eliminates) mathematical errors.com by Max Weber) Manual accounting implies that employees perform the whole accounting cycle manually on a periodic basis: they calculate trial balances. however. Companies must systematically process financial information and must have staff who prepare financial statements on a monthly. while manual control takes more time.tution. computerized requires accountants which can use specific software and thus they cost more. -3- .(www. Computer software calculates faster but it does not know what you need until you can clearly explain what exactly you need.com. depending on the complexity and the size of organization.hk/computerized -accounting. Computerized accounting provides better internal control report system for any given period of time (computer can control thousands indicators simultaneously and create notifications to the appropriate departments or workers if some indicators do not correspond to the normal state). In addition good computerized accounting system can cost thousands and even millions dollars.html).If manual accounting requires qualified accountants to keep a record of business transactions. Statement of the Problem Every company applies accounting because it is generally accepted that companies have to reveal certain financial and management information to the government and public users and of course because accounting is indispensable tool in business decisionmaking process.com by Max Weber) Since the computers do all calculations and processing errors can occur due to bad design of the program. With the development of information technologies there were developed many computer products (software) that make accounting as easy as ABC for those who uses them. This makes it very difficult to determine who is responsible for errors or fraud. increased effort of accountants. Computerized accounting system also have problems like: extremely high costs on developing. introducing and using the system. Another problem of computer systems is the fact that there can be difficulty in determining who entered the data. In a manual system there is a paper trail for the internal auditor to follow. This can be difficult to detect especially if the error does not occur frequently and only does so under particular conditions.1.com). Computer systems also offer new opportunities for fraud. The fact that it is difficult to trace who enters the data only adds to the magnitude of this.(Max Weber experience. -4- . All records and transactions are kept on paper and so an auditor has difficulty to examine them. relatively slower internal control reporting. From this point accounting can be divided into two basic categories: those which apply manual accounting and those which prefer computerized accounting systems. dependence on machines etc. special trainings for personnel. Even though accounting system is very important in producing relevant financial statements they have the following problems. This cannot be done in a computerized system. The problem of manual accounting system includes:reduced speed. This paper will target on the main features of manual and computerized accounting. increased personnel costs.(experience. and their comparison.2. routine work and some others. In a manual system the identity of the person entering the data can be identified possibly by the person's handwriting. their benefits and shortcomings. If a computerized system is not set up properly and certain checks not put in then the computer system can be used to defraud the company. the performance of the reports and records will be compared after and before introducing computerized accounting system. Two separate questionnaires were developed.4. To understand the role of financial statements in making a difference in decisionmaking and its helpfulness to external and internal users of information. Material and methodology of The Study To achieve the objectives mentioned earlier. -5- .1. To evaluate the effectiveness of computerized accounting system in preparing financial reports. The manual systems the non-users of computerized accounting system will be assessed. primary data will be gathered through questionnaire.observation. one for CAS users and the other for non-users. Secondary data will be collected through an examination of business records and reports.Specific Objectives To analyze the advantages and disadvantages of manual accounting system.Method of Sampling This study involved a telephone-based interview of both users of computerized accounting systems (CAS) and non-users.Objectives of The Study The objectives of the study has two categories:General and specific objectives: 1.finance heads and accountants who are involved in preparing and using of financial statements.the researcher will mainly employ both primary and secondary data sources. To assess the trend of changing from manual to computerized accounting system. 1.1.discussion with accounting information users like. this study will be expected to complete with in 4 months. The questionnaire for CAS users focused on the motivation for using a CAS to perform the accounting function.1.4.3. The non-user’s questionnaire concentrated on the impediments to CAS use and the incentives that would encourage CAS use.2. To compare the manual and computerized accounting system and to select the best.General objectives To examine the over all contribution of computerized accounting system in the performance of financial statements and its usefulness in decision-making. 1. To examine the negative and positive side of computerized accounting system. 1.auditors.3.3.managers. Percentages. 1.4.the capital city of Tigray.Tigray region.Significance of the study Above all.this paper will help to the formulation of relevant information for decision making at local and regional levels.Method of data Analysis In this study a simple quantitative analytical tools like tabulation.Finance heads.From the users of computerized accounting system out of Corporate Dejenna Endowment companies(has 7 private limited companies) in Mekelle town.also the researcher can use qualitative description. Also it will pave the way for conducting similar study by others in much more detail and deeper analysis. it is significant not only for local investigation to help bring the issue in to focus but also as a reference to researchers as a source of secondary data.Graphs etc will be used to analyze the data collected through primary and secondary sources.Diagrams.auditors and accountants of each company.this paper is limited to Dejenna Endowment companies to evaluate the effectiveness of their computerized system and the Enderta union to encourage in order to change from manual to computerized accounting system in Mekelle. -6- .6. three(3) companies will be selected randomly and questionnaire will distribute to managers.5. The study will able to generate awareness for all levels of management decision makers. 1. Scope of the study Although all business organizations of our country need to asses their accounting system. 1.non-governmental organizations and users of accounting information for rethinking the specific issues to address and take necessary actions. And the same thing is true for the Enderta union from the non-users of computerized accounting system. Incorporated with other similar studies. It will also help as a partial requirement for the masters degree in accounting and finance.this research will serve for academic purposes enriching the theoretical knowledge with more practical and real world problems.2. lack of availability of enough secondary data and it may be inconsistent with the study. -7- . It may cost more to collect necessary data (information)concerning with the study objectives and asking information about the accounting system may so difficult because the employ can not be willing to give the right evidence. Limitation of the Study In conducting this paper the researcher may face many constraints like.1. but the researcher will try to keep the quality of the research at its bet level as much as possible.7. 8.1. Time Budget Activity Time in Days February Proposal(ch-1) 1-30 Literature review(ch-2) Organizational profile(ch-3) Discussion and Analysis Conclusion and recommendatio ns Final paper submission 1-18 19-30 1-30 1-15 16-28 March April May June June-5 -8- . 9.1.437 -9- .30 20 16 60 134 90 Photo copy(questinnaire& page other related materials) 2 Supportive services secretary Internet 3 4 Transportation Data collection costs Training(5 persons 1week 100 per day) service payment(birr200 each) Travel expense Contingencies(10%) Total cost page Hours KM 100 20 1000 3. Cost Budget S/N Items Unit of Quantity (Q) measurement(U N) Pc pc pc pkt 5 4 3 2 300 Unit Cost(UC) Total cost(TC) 1 Stationery items: Disk CD-R CD-RW Computer paper 4 4 20 67 0.5 10 350 200 2000 3500 1000 300 767 8. scope of the study and methodology. The third chapter will involve the organizational profile of the host organization.1. the first chapter will introduce the study with its background of the study. The last fifth chapter will wind up with the already stated theme the study through conclusions and recommendations to the investigated problems. -10- . organizational structure and other necessary information will be stated here.10.significance of the study.objectives.statement of the problem. The second chapter will deal with review of the literature.which is viewed as a basic of or point of references to the discussion and analysis of the study.that is discussion and analysis concerning the data obtained. Out line of The paper This paper will organize and categorize in to five chapters. The fourth chapter will cover the main framework of the study. com 5.Walter Henson.com) 2.Indira. ( 16th Annual Conference of Small Enterprise Association of Australia and New Zealand.References 1.mba.28 September – 1 October 2003) II . 2007.com.The use of Computerized Accounting system in small business.Steps of accounting cycle and computerized accounting systems.www.tuition.Advantage of using computerized Accounting package.hk) 3.indian.Experience.Month 8) 4. A. Ms.article published:2006.Compuetrized Accounting System.www.Max Weber.