IMPACT OF COMPUTERISED ACCOUNTING SYSTEM ON PERFORMANCE OF PAYROLL ACCOUNTING (A CASE OF URBAN WATER SUPPLY AND SEWERAGE AUTHORITIES)


IMPACT OF COMPUTERISED ACCOUNTING SYSTEM ON PERFORMANCE OF PAYROLL ACCOUNTING (A CASE OF URBAN WATER SUPPLY AND SEWERAGE AUTHORITIES)  

ABSTRACT

The study examined the impact of computerized accounting system on performance of payroll accounting in Urban Water and Sewerage Authorities. The study aims to assess the performance of payroll accounting after adoption of Computerized Accounting system and to identify the positive and negative impact of adoption of Computerized Accounting system in performance of payroll accounting in UWASAs.The study made use the primary data collection which includes questionnaires and personal interview

,also the secondary data collected from official document of UWASAs, various research work on computerizes accounting system, accounting journal, text books and Open University of Tanzania Library. The main findings indicate that adoption of CAS in accounting practice has both positive and negative impact. Based on this findings its recommended that the UWASAs should continue to adopt the use of CAS, providing training to the staff of Finance and Human Resources on how to use computerized accounting software package, and to put security mechanism to prevent losses of financial data or risk of fraud.

TABLE OF CONTENTS

CERTIFICATION ii

COPYRIGHT iii

DECLARATION iv

DEDICATION v

ABSTRACT vi

ACKNOWLEDGEMENT vii

TABLE OF CONTENTS viii

LIST OF TABLE xii

LIST OF FIGURES xiii

APPENDICES xiv

LIST OF ABBREVIATIONS xv

CHAPTER ONE 1

INTRODUCTION1

Background of the Research1

Computerized Accounting1

Functions of Computerized Accounting Software2

Manual Accounting Versus Computerized Accounting3

Background to Computerized Accounting Systems in Tanzania3

Statement of the Problem4

Objectives of the Study4

Main Objectives4

1.3.2 Specific Objectives 5

Research Questions5

Significance of the Study5

Limitations of the Study6

1.7 Definition of Terms 6

CHAPTER TWO 8

LITERATURE REVIEW8

Overview8

Theoretical Literature Review8

Technology Acceptance Model8

Diffusion of Innovation Theory9

Unified Technology Acceptance user Theory11

The Concept of Accounting11

Basics of Accounting11

Characteristics of a quality accounting practice12

2.3.4 Disadvantages of Computerized Accounting System 14

Empirical Literature Review14

Adoption of Computerized Accounting System14

Factors that Determine Adoption of Computerized Accounting System16

Impact of Computerized Accounting Systems19

Challenges encountered with the Use of Computerized Accounting Systems25

Research Gap25

CHAPTER THREE 26

RESEARCH METHODOLOGY26

Overview26

Research Approach26

Conceptual Framework26

Research Population/Area of the Study27

Sampling Design and Procedure28

Variables and Measurement Procedures29

Methods of Data Collection29

Questionnaire29

Interview29

Documentation30

Data Processing and Analysis30

CHAPTER FOUR 31

DATA ANALYSIS, PRESENTATION AND DISCUSSIONS31

Age profile of respondents31

Gender profile of respondents31

Level of education of respondents32

Level of awareness of respondents on application of Computerized Accounting Systems in payroll32

Level of work experience of respondents33

Extent of adoption of Computerized Accounting Systems in payroll processing33

Type of Computerized Accounting Systems used33

Adoption of Computerized Accounting Systems in payroll processing34

Frequency of using Computerized Accounting Systems S in payroll processing35

Effectiveness of payroll processing after adoption of Computerized Accounting Systems35

Impact of Computerized Accounting Systems on performance of payroll

accounting 36

Positive impacts of Computerized Accounting Systems on payroll accountings37

Simplification of payroll processing37

Timely preparation of payroll38

Accuracy of payroll38

Accessibility of payroll information39

Traceability of payroll deductions40

Negative impacts of Computerized Accounting Systems on payroll accounting40

Risk of fraud40

Requires additional costs41

Requires additional training42

Risk of data loss42

Risk of entry of wrong data43

CHAPTER FIVE 45

CONCLUSION AND RECOMMENDATION45

Discussion of major findings from the Study45

5.1:1 The use of a computerized accounting system on performance of payroll

accounting 45

5.1:2 The pros and cons of computerized accounting system on performance of

payroll accounting 45

:3To establish the qualities of payroll reports generated by a computerized

accounting system. 46

Overall Findings46

Recommendations47

Areas of Further Studies48

REFERENCES 49

LIST OF TABLE

Table 3.1 : Sampling Distribution 28

Table 4.1 : Age profile of respondents 31

Table 4 2 : Gender profile of respondents 31

Table 4.3 : Level of education of respondents 32

Table 4.4 : Level of awareness of respondents on application of Computerized Accounting Systems in payroll 32

Table 4.5 : Level of work experience of respondents 33

Table 4.6 : Type of Computerized Accounting Systems used 34

Table 4.7 : Adoption of Computerized Accounting Systems in payroll processing 34

Table 4.8 : Frequency of using Computerized Accounting Systems in payroll processing 35

Table 4.9 : Effectiveness of payroll processing after adoption of Computerized Accounting Systems 36

Table 4.10 : Adoption of Computerized Accounting Systems has improved performance of payroll accounting 36

Table 4.11 : Simplification of payroll processing 37

Table 4.12 : Timely preparation of payroll 38

Table 4.13 : Accuracy of payroll 38

Table 4.14 : Accessibility of payroll information 39

Table 4.15 : Traceability of payroll deductions 40

Table 4.16 : Risk of fraud 41

Table 4.17 : 1 Requires additional costs 41

Table 4.18 : Requires additional training 42

Table 4.19 : Risk of data loss 43

Table 4.20 : Risk of entry of wrong data 43

TABLE OF FIGURES

Figure 2.1 : Technology Acceptance Model (Adapted from Davis, 1989). 10

APPENDICES

Appendix 1  :  Questionnaire 55

Appendix 2 : Interview Quetions 60

LIST OF ABBREVIATIONS

CAG Controller and Auditor General

CAS Computerized Accounting System

DoI Diffusion of Innovation

GAAP Generally Accepted Accounting Principles

ICT Information and Communication Technology

IDT Innovation Diffusion Theory

IT Information Technology

MBA Masters in Business Administration

MYOB Mind Your Own Business

OUT Open University of Tanzania

SMEs Small and Medium Enterprises

SPSS Software Package for Social Scientists

TAM Technology Acceptance Model

UTAUT Unified Technology Acceptance and User Theory

UWASA Urban Water and Sewerage Authority

CHAPTER ONE

INTRODUCTION

Background of the Research

This study aims to assess the impact of Computerized Accounting Systems (CAS) on performance of payroll accounting in selected Urban Water and Sewerage Authorities (UWASAs). Specifically, the study aims to assess the extent of adoption of CAS in payroll accounting, performance of payroll accounting, identify impact of adoption of CAS in payroll accounting and challenges facing adopting CAS in payroll accounting.

Computerized Accounting

Accounting is a manual process using paper books and documents for financial information. Advances in ICT have created significant changes in the area of financial management and accounting software. It has been proved that a computerized accounting system has several advantages such as speed, accuracy and reliability of financial information compared to a manual accounting system (Osmond, 2011).

Before the advent of ICT in accounting practice, these accounting protocols were being performed manually. However, today many accountants and non-accountants prefer to use computer software to record, report and analyze their company’s financial information. This information is collected from transactions and is compiled into financial reports (Weber, 2011).

The impact of CAS on accounting practice in public institutions can be measured by the extent to which the institutions have adopted the use of computerized accounting systems. Alan and Frank Wood (2005) define a computerized accounting system as a

total suit of components that together comprises all inputs, storage, transactions, processing, collecting and reporting of financial transaction data.

A Computerized accounting system involves the use of computers in processing accounting data into information to facilitate quick decision making through timely preparation of financial reports and financial reporting in this case refers to the way in which financial information is recorded, processed and conveyed to the end users of this information in particular (Weber, 2011).

A number of Software packages have been developed to assist in the accounting field and some of such packages are QuickBooks, Mind Your Own Business (MYOB), EPICOR (formerly Platinum), Tally ERP, PASTEL and SUN. Even though some of these software mentioned here are developed for small businesses, they are also designed specifically for accounting purposes in the banks.

Functions of Computerized Accounting Software

Accounting software’s are used to implement computerized accounting system. The computerized accounting is based on the concept of database; it is basic software which allows access to the data contained in the database. The following are the functions of computerized accounting software.

a) Preparation of accounting documents;

Computers help in preparing accounting documents like cash memo, bills, invoices and accounting vouchers. Here computerized accounting systems have user defined templates which will provide faster, accurate entry of transaction and therefore all documentation and reports can be generated automatically.

b) Recording of transactions

Everyday business transactions are recorded with the help of computer software. Every account and transactions is assigned a unique code where the grouping of account is

done at the first stage. This process simplifies the work of recording the transaction. Marivic (2009) argued that computerized packages will minimize human errors in transactions recording.

c) Preparation of trial balance and financial statements

After recording of transactions, the data is transferred into ledger accounts automatically by the computer. Trial balance is prepared by the computer to check accuracy of records, with the help of trial balance; the computer can be programmed to prepare the statement of comprehensive income and the statement of financial position.

Manual Accounting Versus Computerized Accounting

Manual accounting implies that the whole accounting cycle is performed manually on a periodic basis where by trial balances are calculated, journal transactions are entered and financial reports are prepared. Computerized accounting implies that the only thing that accountants do is recording transactions into the computer which processes the other steps of accounting cycle automatically or by a request (Weber, 2011).

Background to Computerized Accounting Systems in Tanzania

The introduction of Computerized Accounting Systems (CAS) in Tanzanian public institutions dates back to 1992 when the government took measures to computerize various aspects of its financial management functions and moving from a manual accounting system toward a computerized system. Ever since, performance in the financial sector has improved significantly (World Bank, 2002).

Some aspects of accounting practices which have been computerized include; accounts payable, accounts receivable, general ledger, cash management, purchase order and payroll. The main computerized accounting system used by public institutions in

Tanzania is EPICOR (formerly PLATINUM). After the implementation of the system, all accounting staff received training on how to use the system (World Bank, 2002).

Statement of the Problem

In the past decade, the government has taken various measures to improve efficiency in accounting practices. Among the measures taken by the government to improve efficiency in accounting practice in public institutions was the introduction of computerized accounting systems such as; Tally, Pastel and Epicor. The introduction of computerized accounting systems aimed to improve speed, accuracy and reliability.

However, despite of the many benefits of using computerized accounting systems, in many public institutions, incidences of accounting malpractice, delays in preparation of financial reports, financial misreporting and fraud have been reported (CAG, 2012). This casts a shadow of doubt on whether the introduction of computerized accounting systems have helped to improve efficiency in accounting practices.

Although many studies have been conducted on the impact of CAS in accounting practices in public institutions, little studies have been conducted on the impact of computerized accounting systems on payroll accounting in urban water and sewerage authorities. As a result, there is a knowledge gap that needs to be addressed. It is the objective of this study to fill that gap.

Objectives of the Study

Main Objectives

The study aimed to assess the impact of computerized accounting systems (CAS) on performance of payroll accounting by focusing on selected urban water and sewerage authorities as a case study.

Specific Objectives

a) To assess extent of adoption of CAS in payroll accounting in UWASAs

b) To assess performance of payroll accounting after adoption of CAS

c) To identify the effect of adoption of CAS in payroll accounting

d) To identify challenges facing adoption of CAS in payroll accounting

Research Questions

The study was guided by the following research questions

a) To what extent have UWASAs adopted CAS on payroll accounting?

b) What is the level of performance of payroll accounting after adoption of CAS?

c) What are the positive impacts of adoption of CAS on performance of payroll accounting?

d) What are the challenges facing adoption of CAS on performance of payroll accounting?

Significance of the Study

The findings of this study will contribute to the existing body of knowledge on the impact of CAS on performance of payroll accounting in UWASAs in Tanzania and help stakeholders in the accounting professional to become aware of the extent of adoption of CAS on performance of payroll accounting as well as the positive and negative impacts of adoption of CAS on performance of payroll accounting in Urban Water Supply and Sewerage Authorities

Also, findings of this study serve as a stimulant and stepping stone for future researchers and academicians by suggesting areas where further studies need to be conducted on the same or similar topics. Also, successful completion of the study will enable the researcher to partially fulfill the requirements for the award of a Masters

degree in Business Administration (MBA Finance) offered by the Open University of Tanzania.

Limitations of the Study

Due to shortage of time to conduct a fully and intensive study, the researcher had to limit the scope of the study so as to finish the study within time specified by academic calendar of the university, also the issue of limited funding emerged as one of limitation during the study.

1.7 Definition of Terms Accounting

As many professional accountants and auditors state - accounting is a language of business which is accepted in all developed and developing countries, but what exactly is accounting? Well, accounting has been defined by many authors in various ways. According to Weber (2011), accounting is the way business owners manage their company’s financial information.

Sacco (2008) defines accounting as a process through which financial information is recorded, organized, summarized, analyzed, interpreted, and communicated. This implies that accounting is concerned with the design of an organization’s record keeping system, the preparation of financial documents, analysis and interpretation of financial documents.

Computerized Accounting

Computerized accounting is defined by Wilson (2010) as a total suit of components that together comprises all inputs, storage, transactions, processing, collecting and reporting of financial transaction data. Before the introduction of information

technology into accounting, accounting protocols were performed manually. Today accountants use computer software to perform these duties.

Computerized accounting system refers to the method or scheme by which financial information on business transactions are recorded, organized, summarized, analyzed, interpreted and communicated to stake holders through the use of the computer and computer-based systems such as the internet and accounting software. This facilitates the automation of accounting tasks (Bretcht and Martin, 2006).

Meigs and Kay (1998) defined a Computerized Accounting System (CAS) as a system that uses computers to input, process, store and output accounting information the inform of financial reports. The author also adds that accounting system records all transactions that routinely deal with events that affect the financial position and performance of an entity.

Marivic (2009) described a computerized accounting system as a method or scheme by which financial information on business transactions are recorded, organized, summarized, analysed, interpreted and communicated to stakeholders through the use of computers and computer based systems such as accounting packages. He emphasized that it’s a mechanized process of facilitating financial information inflows.

Payroll Accounting

Payroll Accounting refers to that aspect of accounting needed to determine the accurate records of salaries and wages paid to workers. Naturally, business organizations are required by law to keep accurate payroll records. Apart from being needed to compute the accurate amount of employee's salaries and wages, payroll accounting is needed to establish the various expenses related to salaries and wages (Okoye, 2010)

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IMPACT OF COMPUTERISED ACCOUNTING SYSTEM ON PERFORMANCE OF PAYROLL ACCOUNTING (A CASE OF URBAN WATER SUPPLY AND SEWERAGE AUTHORITIES)



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