Benefits And Obstacles Of E-Accounting Systems Adoption In Ghana’s SMEs

MA619 Accounting Research Literature Review

Discussion

Accounting can be considered as a means of recording, categorising and at the same time summarizing in a proper way and in suitable perspectives of money, business transactions along with events that are, partially financial in character, and help in analysing the results. In essence, the current section of review of literature highlights accounting as a specific information system that enumerates, processes and at the same time aptly communicates pecuniary information regarding a business unit. This segment also throws light on the fact that advancement in IT-information technology have radically enhanced accounting systems and at the same time transformed useful life. Essentially, computers together with other digital technologies are said to have enhanced office productivity helped the speedy exchange of requisite documents, proper collaboration with diverse partners along with compilation as well as data analysis. In actual fact, this study also presents evidence from prior works scholars regarding the way information technology provided different kinds of economic actors and novel effective tools for recognizing and undertaking economic as well as business opportunities.

As suggested by Trigo et al., (2016), accounting information system (AIS) is a complete set of interconnected subsystems that operate together to acquire, process and at the same time store up, transform and give out information for the purpose of planning, decision making as well as exercising control. AIS is regarded as a tool that was integrated in the field of Information as well as Technology System. This system can be considered to be very crucial for business enterprises. Essentially, this is the accountable in creating dependable pecuniary information requisite for the purpose of decision making (Susanto, 2017). Basically, there are different designs of this AIS system and specific factors need to be taken into consideration that in turn influences the manner in which information is collected and at the same time reported. Particularly, this depends on anticipated users of this specific information and diverse kinds of decisions that they are expected to arrive at.

The general model for particularly Accounting Information System (AIS) can be regarded as a general model since it is applicable to different systems of information, irrespective of architecture of technology (Schaltegger & Burritt, 2017). The components primarily comprises of end users, diverse sources of data, processing of data, management of data, generation of requisite information as well as feedback.

Figure 1: General Model for the purpose of Accounting

(Source: Rahman, 2016)

The first operational phase in the area of AIS is the collection of data. The objective is to make certain that the data entering are valid, complete as well as free from material mistakes. As such this stage helps in promoting relevance along with efficiency. In addition to this, the system needs to capture pertinent data and acquires the same once. However, data sources can essentially be taken from two different sources namely, internal or else external. Myers et al. (2017) suggests that after successful collection of the data it gets stored in the database and need to be processed for generation of information. In essence, activities which pertain to processing of data necessarily differs from simple to complex and includes algorithms, statistical procedures, forecasting of sales, and summarizing processes utilized in accounting. Particularly, the information acquired can then be forwarded to different external end users plus the internal end users (Millo et al., 2016). Thereafter, feedbacks are delivered back to business enterprise so that individuals can understand things that need to be retained and things that need to be improved.  

General Model for the Accounting Information System

Maskell et al. (2016) suggest that one of the primary objectives of AIS is to pass the principle of cost principle or else cost benefit association. As such, financial information is not in itself free and firms essentially spend millions each and every year for the purpose of gathering and organizing financial information and assembling the same into financial assertions. Libby (2017) states that under this specific principle, the cost of delivering financial information in pecuniary statements need not outweigh overall advantage of the information to different users.

Another important objective of AIS is to shield assets of the firm for making certain that data are dependable and can minimize wastes along with likelihood of fraud and theft. In essence this is also referred to as control principle (Maskell et al., 2016). Also, another objective is to stay in harmony with both organization as well as human factors of business entity. Fundamentally, this can be indicated as compatibility principle. Finally, it is also the objective of AIS to accommodate rate of growth in the transaction volume and changes in organization (Millo et al., 2016). Particularly, this is known as flexibility principle.

Information technology can be considered to be a potential tool that can play an important part in the attainment of success of a business enterprise. The entire world has identified the fact that advent of internet computing can be extremely dominant and at the same time foremost in the upcoming future (Maskell et al., 2016). Use of technology in different areas of business namely trading, filming, publishing among many others have delivered the opportunity for business concerns to present their products/services to their customers across the world. Nonetheless, development as well as growth of IT along with internet remain staggering, and in that large fraction are untouched in the area of accounting, particularly management accounting. Therefore, numerous accounting studies have integrated Information Technology as an important part of the learning programme of accounting for introducing IT to future professional accountants.

Success in the process of execution of accounting information systems (AIS) also referred to as enterprise resource planning (ERP) systems is critical to business concerns (Libby, 2017). It can be hereby mentioned that high rate of failure of AIS/ERP systems of implementation calls for the need to study significant factors that influence systems of execution. However, the intricate processes of implementation of AIS along with many other factors exert influence on the successful execution of the systems. The current study is significant from the perspectives of decision making and managerial accounting, since the systems of ERP/AIS is not merely systems that create data from daily operations/reporting but also is a crucial tool for delivering information necessary for decision making as well as exercises of control.

As per Appelbaum, Kogan, Vasarhelyi, and Yan (2017) the implementation of the information technology has a huge impact on the profit of the organisations. It may not be said that the IT implementation will improve the profits of the organisation. It may also reduce the income, since the application is a costly process. There exists an risk of adopting a technology that is inappropriate and can lead to lot more expenses and wastage of resources. However if the accountants examines the functionality and feasibility of the systems then the risk can be avoided.

Objectives of Accounting Information System

 There is rapid change in the technology that makes it difficult to track. It is challenge to the company to adapt the change. The new technology that is being adapted at present may get obsolete within months or even weeks. Therefore, the companies are needed to select the technology that is easily upgradable to meet the requirements o the future. The accountant’s skills and knowledge are needed to be repositioned for supporting the implementation of the information technology in the accounting system. The staffs are needed to be well trained and use the systems efficiently. However at presently the the new systems of accounting are easy to use and user friendly.

 The influence that the information technology gives to the companies when it comes to accounting information system is competitive advantage, the information technology allows the companies to make innovations in the productions, increase the productivity and reduce the employee overhead. The new trend in the accounting system also reduces the accounting costs. The economic efficiencies   can easily be realised by migration of high cist function into online environment.

 The process of observing the advancement in the technology is by the equipments that are used in the information processing. The various devices of the computers create a competitive advantage compared to the organisations who does not have the equipments. According to the present research, it can be observed that more that 98% of the business entities have adopted information technology in the process of accounting and operations.

The system of AIS or else ERP delivers potential advantages for supporting business decisions. Laudon and Laudon (2016) suggest that it is imperative to develop a positive association between successes of implementation of AIS with the consequent realization of decision support advantages from AIS otherwise ERP systems. As mentioned by Ismail and King (2014), AIS or ERP are said to store vital information along with knowledge utilized for presenting a decision that can drive overall performance of a business concern. In itself, they not only deliver transactional information, adopters of ERP also perceive considerable levels of decision-making features in their ERP systems. Also, systems of decision support are utilized for analysing outcomes of decision making. It also has an important impact on the process-oriented factors of decision-making. Intrinsically, the real time decision support system presents an important improvement with regard to process-associated features. Collier (2015) mentions that ERP concentrates on assimilation of business procedures, thus, successful implementation of AIS can direct the way towards augmentation of confidence in decisions.

In each and every phase, accounting information is said to be useful and effective to different types of management of firms whether be it managers, sub-officers of diverse educational institutes, capable workers, creditors, debtors and government institutes. In essence, each one of the users of data on accounting handles its association with the business enterprises based on accounting reports. As such, an economic action can necessarily be undertaken appropriately in case if the decision, execution along with the control of the implementation is founded on operative, appropriate and full information. Cleary (2017) suggests that in this context, on one hand, there is need for an accounting management for delivering requisite information together with accounting services that can fittingly serve the requirements of managers.

Implementation of Technology in Accounting Information System

As rightly indicated by Collier (2015), information system in business is an intricate system that can be properly divided into three different sub-systems. This includes executive sub-systems, sub-system of management as well as information sub-system. Ismail & King (2014) indicates towards the fact that the information sub-system acts as a connection between both executive as well as management sub-systems. Basically, its task is to the deliver timely information to sub systems of both executive as well as management for assisting in the process of decision making.

As correctly indicated by Millo et al. (2016), information sub system as per role and activity of accounting are mainly divided into both accounting as well as non-accounting sub systems of information. Myers et al. (2017) mention that strategic management requires diverse along with concise information in the way of decision-making. Essentially, the decisions presented by strategic management are mainly future oriented and thus the decisions carry greater risk in association to final results. Principally, tactical management level calls for detailed information in comparison to strategic management and this is also for shorter time period.

Operational management level normally has the need of analytical data for developing information on a daily basis. However, for the purpose of undertaking business operations, management of firms is reliant on information system of accounting (Libby, 2017). There are number of financial assertions containing diverse information that are important to managers at different levels.

Schaltegger and Burritt (2017) suggest that in a bid to adequately react to requests of management of firms, AIS need to be organized as an active along with creative system. However, pro-active solutions delivered by AIS can help the managers to assess, direct and at the same time augment information requests. Fundamentally, it is in this way, overall strength of AIS can be enhanced; process of adoption of business as well as important financial decision can be made possible. For instance, supply function accepts information particularly from pecuniary, analytical together with management accounting and provides information to particularly the AIS that is processed by the system and made available to different interest parties (Maskell et al., 2016). In case if there is higher degree of communication along with connection, the business enterprise can be able to adequately encounter challenges and accomplish desired aims.

 The function of the financial statements is to give various information to the various decision makers and the stakeholders, related to the financial position, performance and changes in the company’s financial position. The financial statements also provide various information related to the capability of the management to operate with the resources that the owners have entrusted to them. In order to inform the decision makers of the company with a content that is understandable, the financial statements are intended for (Simkin, Worrell & Savage, 2018).  The making of the income statement, balance sheet, cash flow statement are the various primary However at present the new trends in accounting system has made the process more easy and time saving. The accounting information system pays an very important role in the decision making. The technology is growing at a rapid rate and offering innovative ways to develop new trends and solutions to all the problems related to accounting and its representation in the financial statements. This would as a result, increase the profitability and the efficiency of the companies. However, it can be pointed out that that the companies must invest in educating its staffs and it management for implementation of the new trends of accounting system. This would enable the decision making process to become more simple and systematic. The companies must also adapt the various laws are guidelines that will facilitate application of the business software.

Influence of Successful implementation of Information technology in the area of accounting

As said by Collier (2015), the main objective of the process of accounting is to record, classify and summarize the financial transactions in a manner that is significant and in monetary terms, and interpreting the result thereof. The result is then used by the various stakeholders who make potential investments in the company and hereby influencing the decision making of the companies and its management  As suggested by Teittinen, and Granlund  (2017) the  accounting is an information system for measurment, process and communication of the information that is suitable for in making thye various potential economic decision. As Contributed by Brown-Liburd, Issa and Lombardi (2015) that accounting information system is very vital because it provides qualitative information the management functions of planning, controlling and evaluating. Langfield-Smith et al. (2017)in his study has classified the Accounting information into two parts, the first part information that influences decision-making that is for the controlling the entity; information that facilitate  and the second part deals with the process of decision making that is mostly used for coordinating within the organisation. However, Cowton (2018) argues that argues that integration of accounting information system may lead to various confusion and conflict.

The Success in the application of the accounting information systems (AIS) is crucial for the various business entities. In case of high rate of failure of the AIS/ERP systems implementation, there can a huge loss. Therefore, in order to avoid such situations, it is t is essential to study the various vital factors that impact systems implementation, and the links to measure the company`s outcomes. Additionally, irrespective of the size of the company, executives who are senior must pay attention the management control and accounting (MAC) practices. The various studies have been conducted to observe the importance from the making of decision and perspectives of managerial accounting, as the systems of AIS/ERP are not simply systems that produce the data from regular reporting and operations; they are essential mechanisms for providing information for control and decision making.

The information technologies developments have changed the business environments significantly along with the management processes of the organisations. The business environment at present has become more competitive and dynamic, for the reason of fast developments of recent times (Patel, 2015). In such an environment that is competitive, it has become very essential for the managers to make decisions that is logical, consistent and strategic and develop models and instruments that give financial information. As per this aspect, the vitality of accounting information has risen. The primary motive of an accounting is to give information for making of decisions (Muda, 2017). Provided information need to be fast, useful and appropriate for the entity. It means the given information needs to conform to environment of the business. On the other hand, it could be stated that accounting system is a vital organizational system when it d conforms and fits to environment of exact enity.

Conclusion

As per the analysis of the various literatures, it can be understood that the system of  accounting information affects the process of decision making for the firms in many ways. Firstly, the accounting knowledge and methods of the industries and businesses has increased the relevance of the financial reports and data and its reliability. Secondly, the flow of transactions are better understood by the along with the related activities of control for ensuring reliability and validity of information. According report it can be concluded that the decision making process has been influenced to a great extend through the new trends of the system of accounting information and the implication of the various software and technologies. This has resulted in the requirement for analyses, identification and verification of possible alternatives for solving unconformity issues of accounting system in the environment of business. The managers of the organizations now can easily recognize possible correction directions; estimate the application possibilities of the various innovative decisions.

References

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