1.1 Introduction
Accounting information system is defined as a computer based system that increases the control and enhances the cooperation in the companies. Accounting information aids in profit making, budgeting and cost control. In a company, it is the duty of the management accountant to see that his company keeps good records and prepare proper financial regulations. Management accountants also need to keep up with the latest development in the use of computers and in the computer system design. Accountants provide many special reports for management, decision making. This function requires the gathering of both historical and projected data.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.
1.2 Background of Study
Accounting plays a vital role in the success or failure of contemporary business institutions. Systems are responsible for recording, analyzing, monitoring and evaluating the financial condition of business institutions, preparing documents necessary for tax purposes, providing information support to many other organizational functions, (Amidu, John & Joshua. 2011). In the context of small and medium scale enterprises (SMEs), accounting information is important as it can help the firms to manage their short-term problems in critical areas like costing, expenditure and cash flow, by providing information which will be used to support monitoring and control (Mitchell, Reid & Smith, 2000; Son, Marriot, & Marriot, 2006).
Small and Medium Scale Enterprises are the reasons behind any growing economy. Some of the roles of small and medium scale enterprises include generating employment opportunities, rural development, youth empowerment, immense contribution to national income and growth, spread and development of adaptable technology and regional balanced growth channel. These enterprises are faced with diversity of challenges in Nigeria due to numerous domestic and global economic problems and policy inconsistencies. The result is a high mortality rate of the firms (Dasanayaka, Kankanamge & Sardana, 2011). Some of the challenges are internal to the enterprise and they include inadequate working capital, high competition from larger companies, difficulties in sourcing raw materials, low capacity utilization, poor of management strategies, and poor educational background of operators, huge financial problems and reluctance in embracing technology (Tafamel & Idolor, 2008; Osamwonyi and Tafamel, 2010).
Small companies are often established from family business. Mostly, in family business, are managed by family members. However, the workforce can be from non-family members. Therefore, the business environment is different according to the style of management as well as the culture that the family inherited from generations to generations (Peter and Buhalis 2004). SMEs have an important role to play in the development of Nigerian economy. The extent of contribution these business units can make towards the growth and development of Nigeria depend on how successful they are in their operations. The fact that is underlying the success of a business enterprise is the establishment and application of controls by the owners or management in addition to the systematic record keeping of business transactions, which, at the end of the period, keeps the owner well-informed about the performance of the business (Mbroh, John & Attom, 2011).
The study conducted by Ismail (2009) is the financial management of enterprises. Accounting information is information provided by the accountants and accounting systems. This information is usually presented in financial statements such as the income statement and the statement of financial position. It also includes any financial ratios extracted from these financial statements. Accounting systems are responsible for analyzing and monitoring the financial situation of firms, preparation of documents that are necessary for tax purposes, providing information to support many other organizational functions such as production, marketing, human resource management, and strategic planning. Without such a system it will be very difficult for SMEs to determine performance, identify customer and supplier account balances and forecast future performance of the organization. The primary purpose of an accounting information system (AIS) is the collection and recording of data and information regarding events that have an economic impact upon organizations and the maintenance, processing and communication of such information to internal and external stakeholders for proper decision making (Stefanou, 2006).
The growth of computer technology in 1950’s had initiated increasing development in information storing and processing (Rashid, Hossain, & Patrick, 2001). This system has contributed to increases in business productions and transactions as firms are in better positioned to achieve their objectives. Thus, this enhances business activities. More businesses and transactions implied that there will be more accounting data needed to be recorded and updated. Prior traditional accounting method of manually inputting and recording daily transactions has become inefficient and time wasting. Errors such as wrong data entry, inefficient tasks performance and massive utilization of paper product created many problems to business activities and organization’s performance. These inadequacies have led to the emergence of accounting information system. A system that is able to gather, analyze and produce reports more efficiently (Saira et al., 2010).
Aremu & Adeyemi (2011) argued that except for statutory demands, Small and medium scale enterprises hardly give serious thoughts to the process of sound accounting, while also noting that the inadequacy and ineffectiveness of accounting processes have been responsible for untimely collapse of most of them. The circumstances highlighted above have persisted due to poor generation and use of accounting information in Nigeria. The absence of accounting information system in most small and medium enterprises in Nigeria tends to compound their challenges.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to examine the Accounting Information System and the Growth of Small and Medium Scale Enterprises.
1.3 Statement of Problems
Investigation revealed that small and medium scale enterprises are known to be the wheel behind the moving train of the Nigerian economy, and as it is also known that every large business start small. Its worthy of note that in spite of the importance and the indispensable nature of SMEs in Nigeria, a lot of SMEs have not given much attention to accounting information and book keeping in relation to their business transactions, despite its importance in the success of SMEs. This could be as a result of lack of sound knowledge in book keeping practices by owners or respective managers.
Difficulty exists in ascertaining the level of non-recognition of the necessity of accounting information to continued existence and growth of SMEs. Low educational background of owners and employment of unskilled accounting staff had affected the production of unreliable accounting or financial statement which in turn affect managerial decision making.
It has also been found out that most SMEs fail to keep proper books of account and also fail to observe basic accounting procedures. As a result, they are not able to portray the exact financial position of the enterprise. This tends to impede the ability of the enterprise to obtain the most needed loans from financial institutions and other sources for expansion and diversification. The financial statements, such as the profit and loss accounts, statement of financial position and the cash flow statement of SMEs cannot easily be prepared. Under such circumstances, annual profits cannot readily be determined. SMEs in Nigeria are however, often encountered with accounting and financial management challenges. Poor record keeping, inefficient use of accounting information to support their managerial decision making and the low quality and reliability of financial data are part of the main problems of financial management concerns of SMEs in Nigeria.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Accounting Information System and the Growth of Small and Medium Scale Enterprises. In achieving this aim, the following specific objectives were laid out as follows:
- To determine the effect of accounting information system on sales growth;
- To determine the effect of accounting information system on asset growth; and
- To suggest the possible recommendations that enhances the employment of information provided by accounting system.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- What are the effects of Accounting Information System (AIS) on sales growth?
- What are the effects of AIS on asset growth?
- What are the effects sales volumes on profitability?
- What are the effects of expenses on profitability?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
- H01: Accounting Information System (AIS) has significant effect on sales growth
- H02: Accounting Information System (AIS) has significant effect on asset growth
1.7 Significance of 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. The research work will 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.
To the employees and consumers, it will help them to assess the ability of the business to produce goods and render services on continuous basis and pay salaries. The research will be of benefit to the government in terms of tax collection and the regulation of business activities.
Lastly, the study will contribute to the body of the existing literatures on the topic, hence it will be of used to the prospective researchers.
1.8 Scope of Study
The scope of the research is focused on the Accounting Information System and the Growth of Small and Medium Scale Enterprises. The population of the study consist of SMEs in Lagos metropolis, Lagos State registered with Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN).
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Operationalization of Variables
The main objective is to examine the Accounting Information System and the Growth of Small and Medium Scale Enterprises in Lagos Metropolis. The dependent variable is the growth of small and medium scale enterprise, which is measured by two variables namely Sales growth, Assets growth.
The independent variable is Accounting information system captured by Ethical values (EV), Effective accounting systems (EAS), Human resources (HR) and Investment in technology (IT).
Y*= f (Y1, Y2)
Y*= The Growth of Small and medium scale enterprises
Where:
Y1= Sales Growth
Y2= Asset Growth
X= Accounting information system
X= f (X1, X2, X3,X4)
Where:
X1=Ethical values
X2=Effective accounting systems
X3=Human resources
X4=Investment in technology
It can also be stated that the growth of small and medium scale enterprises is a function of accounting information system.
Y*= f (X1, X2, X3, X4)
Converting this functional relationship into a regression model, it becomes:
Y*= α0 + α1X1 + α2X2 + α1X3+ α2X4 + µ
Where:
α0= Constant term of the regression model
α1-4 = Coefficients of parameter estimates of Accounting information system.
µ= Stochastic variable.
1.11 Definition of Operational 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 enhances the cooperation in the companies.
Small scale businesses:
This refers to a generally privately own business that employs a small number of workers and does not have a high volume of sales.
Medium scale enterprises:
This refers to the typically result from the slow and steady growth that results from a successful small business
Sales Growth:
This is the amount by which the average sales volume of a company’s products or services has grown, typically from year to year.
Assets Growth:
This is a corporate events associated with asset expansion.
Ethical Values:
The set of established principles governing virtuous behavior
Effective Accounting Systems:
An effective accounting system is a type of system that is accurate, useful and timely. Its purpose is to provide information for external entities, such as tax agencies and investors, and for internal purposes, such as evaluating efficiency and profitability.
