THE IMPACT OF COMPUTERIZED ACCOUNTING ON FINANCIAL REPORTING
IN MANUFACTURING FIRMS IN UGANDA
A CASE STUDY OF UGANDA BREWERIES LIMITED
BY
BYENKYA DENIS MARK
REG: NO. 07/U/4799/EXT
SUPERVISED BY: MR. KINTU ISMAlL
A RESEARCH REPORT SUBMITTED TO THE SCHOOL OF DISTANCE AND
LIFE LONG LEARNING IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF THE BACHELOR OF COMMERCEOF MAKERERE
UNIVERSITY
JULY 2011
DECLARATION
I, Byenkya Denis Mark, declare that the following research report is my original work and to
the best of my knowledge has never been submitted to any university for any academic purpose.
Signed……………………………..
Date:…………………………….
Byenkya Denis Mark
i
APPROVAL
This work entitled “the impact of computerized accounting on financial reporting in
manufacturing firms in Uganda” has been compiled under my supervision and I approve it fit for
examination.
Signed:________________________
Date:_________________
Mr. Kintu Ismail
ii
DEDICATION
This book is dedicated to my dear family especially the late Dad John Byenkya, Mum Mrs.
Margaret Kiwanuka, my brothers David, John and sisters Mary and Cissy and all my friends who
tirelessly encouraged me throughout my course never to give up on any battle. I am sure they
will celebrate with me for my success.
iii
ACKNOWLEDGEMENT
This work would not have been completed without the efforts of my Supervisor, fellow students
and friends. Am grateful for their help.
I would like to thank my Supervisor – Mr. Kintu Ismail for his tireless efforts and professional
advice for inspiring me compile this piece of work.
I am grateful to my family especially mum, sis and bro for financial and moral support my God
bless them abundantly.
Also special regards to all the lecturers of Makerere University Kampala who taught me for the
knowledge I acquired which has made me a better person.
Finally am very grateful to the Almighty God, for His love, kindness, endless support and
protection throughout my life. I will praise you for ever Amen
iv
ACCA
LIST OF ABBREVIATIONS
-Associated of the Chartered Association of Certified Accountants
IFRS
- International Financial Reporting Standards
v
TABLE OF CONTENTS
DECLARATION ............................................................................................................................. i
APPROVAL ................................................................................................................................... ii
DEDICATION ............................................................................................................................... iii
ACKNOWLEDGEMENT ............................................................................................................. iv
LIST OF ABBREVIATIONS ......................................................................................................... v
TABLE OF CONTENTS ............................................................................................................... vi
LIST OF TABLES .......................................................................................................................... x
ABSTRACT ................................................................................................................................... xi
CHAPTER ONE ......................................................................................................................... - 1 10. Introduction ......................................................................................................................... - 1 1.1 Background to the Study ..................................................................................................... - 1 1.2 Problem Of Statement ......................................................................................................... - 3 1.3 Purpose of the Study............................................................................................................ - 3 1.4 Objectives of the Study. ...................................................................................................... - 3 1.5 Research Questions. ............................................................................................................ - 4 1.6 Subject Scope ...................................................................................................................... - 4 1.7 Time Scope .......................................................................................................................... - 4 1.8 Geographical Scope ............................................................................................................. - 4 1.9 Significance of the study ..................................................................................................... - 4 CHAPTER TWO ........................................................................................................................ - 5 LITERATURE REVIEW ........................................................................................................... - 5 vi
2.0 INTRODUCTION ................................................................................................................ - 5 2.1 COMPUTERIZED ACCOUNTING SYSTEMS ................................................................. - 5 2.1.1Overview on computerized accounting .............................................................................. - 5 2.1.2 Computerized accounting .................................................................................................. - 5 2.1.3 Benefits of computerized account system.......................................................................... - 6 2.2 QUALITY OF GOOD FINANCIAL REPORTING .......................................................... - 7 2.2.1 The qualities of financial reports ..................................................................................... - 8 2.3 RELATIONSHIP BETWEEN COMPUTERIZED ACCOUNTING AND FINANCIAL
REPORTING ............................................................................................................................ - 10 2.3.1 Computerized accounting on financial reporting is linked to benefits applying computer
system while generating financial reports................................................................................. - 10 2.4 CONCLUSION ................................................................................................................. - 11 CHAPTER THREE .................................................................................................................. - 13 RESEARCH METHODOLOGY.............................................................................................. - 13 3.1 INTRODUCTION ............................................................................................................. - 13 3.2 RESEARCH DESIGN ...................................................................................................... - 13 3.3 POPULATION OF THE STUDY ..................................................................................... - 13 3.3.1
Population size ........................................................................................................... - 13 -
3.3.2
Sampling size and composition .................................................................................. - 14 -
3.3.2
Sampling design ......................................................................................................... - 14 -
3.4 SOURCES OF DATA COLLECTION ............................................................................. - 14 3.4.1
Primary data ............................................................................................................... - 14 vii
3.4.2
Secondary data ........................................................................................................... - 14 -
3.5 DATA COLLECTION TOOLS ........................................................................................ - 15 3.5.1
Questionnaires ............................................................................................................ - 15 -
3.5.2
Interviews ................................................................................................................... - 15 -
3.6 DATA PRESENTATION AND ANALYSIS ................................................................... - 15 3.7 DATA ANALYSIS ........................................................................................................... - 15 3.8 LIMITATIONS OF THE STUDY .................................................................................... - 15 3.8.1
Limited source of information.................................................................................... - 15 -
3.8.2
Scarcity of time .......................................................................................................... - 16 -
CHAPTER FOUR ..................................................................................................................... - 17 PRESENTATION, ANALYSIS AND INTERPRETATION OF THE STUDY FINDINGS . - 17 4.1 Introduction ....................................................................................................................... - 17 4.2 Characteristics of Respondents ........................................................................................ - 17 4.2.1
Age and Gender .......................................................................................................... - 17 -
4.2.2
Marital status .............................................................................................................. - 18 -
4.2.3
Level 1 of Education .................................................................................................. - 18 -
4.2.4
Duration the employees have been in the firm .......................................................... - 19 -
4.3 The benefits of computerized accounting systems to the firm .......................................... - 20 4.3.1
Computerization of the accounting function .............................................................. - 20 -
4.3.2 Computerized accounting packages used in the firm ...................................................... - 20 4.3.3
Benefits of the computerized accounting systems to the firm ................................... - 21 -
4.4 The qualities of financial reports ....................................................................................... - 23 viii
4.5 The relationship of computerized accounting systems on financial reporting ................. - 25 4.5.1
Computerized accounting and financial reporting ..................................................... - 25 -
4.5.2 The relationship between computerized accounting systems and financial reporting. .... - 25 CHAPTER FIVE ...................................................................................................................... - 27 5.0 DISCUSSIONS, SUMMARY, CONCLUSION AND RECOMMENDATIONS ............. - 27 5.1 INTRODUCTION .............................................................................................................. - 27 5.2 DISCUSSIONS OF THE FINDINGS ................................................................................ - 27 5.2.1.1 Quick financial reports .................................................................................................. - 27 5.2.1.2 Improvement in business performance ......................................................................... - 28 5.2.1.3 Understandability .......................................................................................................... - 28 5.3 SUMMARY OF THE FINDINGS ..................................................................................... - 28 5.3.1 Characteristics of the respondents ................................................................................... - 28 5.3.2 Computerized accounting and its benefits ....................................................................... - 28 5.4 FINANCIAL REPORTING AND ITS QUALITIES ......................................................... - 30 5.5 RELATIONSHIP between COMPUTERIZED ACCOUNTING SYSTEM AND
FINANCIAL REPORTING...................................................................................................... - 30 5.6 CONCLUSION ................................................................................................................... - 31 5.7 RECOMMENDATIONS .................................................................................................... - 31 REFERENCE:........................................................................................................................... - 34 APPENDIX 1: RESEARCH QUESTIONNAIRE.................................................................... - 36 -
ix
LIST OF TABLES
Table 1: Sample size and composition..................................................................................... - 14 Table 2: Shows respondents’ Age and Gender ........................................................................ - 17 Table 3: Shows the Marital status of the respondents.............................................................. - 18 Table 4: Shows duration the employees have worked in the firm ............................................ - 19 Table 5:Shows responses on whether the accounting functions of the firm are computerized - 20 Table 6: Computerized accounting packages used in the firm ................................................ - 21 Table 7: Benefits of the computerized accounting systems to the firm .................................... - 21 Table 8:Responses on assessing the benefits of computerized accounting system to the firm
expressed in numerical term. .................................................................................................... - 22 Table 9: Responses on examination of qualities of financial reports generated by the firm .... - 24 Table 10: Responses on the relationship of computerized accounting on financial reporting - 25 Table 11: Correlations............................................................................................................... - 26 -
x
ABSTRACT
This study was conducted to assess the impact of computerized accounting on financial reporting
in Uganda Breweries Limited.
The study was set to address the objectives of assessing the benefits of computerized accounting
in Uganda Breweries Limited, examining the qualities of financial reports produced by Uganda
Breweries and the relationship of computerized accounting and financial reporting in
manufacturing firms.
The researcher used a descriptive and analytical research design to establish a relationship
between two variables and to exhaust all areas in the research.
A sample size of 30 employees from various department was used and sampled on a nonrandom purposive method. Questionnaires and interviews were used to collect data which was
processed by tabulation, and also narrations inform of description was accounted for for easy
understanding of the findings.
While assessing the benefits of computerized accounting system, the findings indicated that
67.7% respondents were in agreement that computerized accounting systems minimizes errors
and allows easy posting of transactions on ledger, 24.44% disagree with the view.
On examining the qualities of financial reports generated by firm, 87.5% of the respondents
accepted that financial reports produced are reliable and 12.5% respondent disagreed.
The researcher found out that Uganda Breweries runs a fully computerized accounting system in
financial reporting thus benefiting from the system. The firm is able maintain the financial report
qualities of timeliness, reliability, accuracy because of computerized accounting system.
xi
The research recommended that there is need to consult with system analyst to match the
company’s information needs with available software.
Training staff, proper authorization and use of appropriate accounting software will save time,
and fewer mistakes in the company.
xii
xiii
CHAPTER ONE
10.
Introduction
This study was about assessing the impact of computerized accounting on financial reporting in
manufacturing firm in Uganda. The chapter presented the background of the study, statement of
problem, objectives of the study, research questions, and the significance of the study.
1.1
Background to the Study
Financial reporting information that is useful to present or potential investors, creditor and other
users in assessing the amount timing and uncertainties of prospective net cash inflow to the
related enterprise or organization (William 1998)
Financial reports can be described as a comprehensive summary of a firm’s financial data over a
period of time, such as a month, three month, a year or even the life of the business (Everand
1998)
There are different types of financial reporting which includes the statement of financial position
which indicates the financial position of the firm.
The statement of affairs of business of a particular moment of time, statement of comprehensive
income which explains what happened to a business as a result of operations.
Financial reports should be perceived to true and fair and this depends on the existence of proper
internal control/systems.
Manufacturing firms have been in operations for decades in Uganda. Majority of them have been
successful is the operation (Indira 2008). The success of these firms in the eyes of the potential
stake holders is seen in the financial performance. The financial performance of the firms is
visible in the financial reports prepared by the firms.
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Manufacturing firms every where in the world can improve on their state of reporting financial
affairs by employing use of computer systems referred to as computerized accounting system
which ease processing of accounting data.
Computerized accounting system is the application of the computer based software used to input
process, store out put accounting information (Millichamp 1995).
The application is to support advancing technologies that enable firms to use computer
programmes to perform tasks that were previously done manually.
The need for computerization of accounting system is due to increase in the number of
transactions as a result of the policy of continuous expansion of the business.
It is noted that business accounting records can not be accurately maintained when the firm
expands and when the system is not computerized it is the computer based system that the firm
can use to post numerous transaction to the right ledgers and prepare proper financial statements.
It is from this need that Uganda breweries industry considers it very important to computerize its
systems and different functions as it considers two mandatory rules that govern its operations,
technology must benefit your business and if technology does not benefit your business then you
don’t need it. For this reason, the accounting section which the firms considers very important is
highly computerized for the purpose of improving on record keeping, proper maintenance of
different loss of cash or loss of accounting records.
Computerized accounting system in commercial organization that will help to integrate, simplify
and streamline all the business processes and transaction cost effectively and easily (Indira 2008)
Business organization should adopt a suitable accounting package in order to derive benefits
from it (Mike et al 2006) for instance for a small business, personal finance organizer like
-2-
quicken, Microsoft money and quick books are usually good enough to handle accounts of a
small businesses.
It’s however noted that the way accounting data is entered, processed and stored has
considerably changed. It is no longer necessary to have huge roomful of ledgers and record, there
is accuracy and efficiency in keeping records, low case of omission and loss of accounting
records. These changes in financial reporting might be due to several factors.
Therefore the researcher focuses on investigating the impact of computerized accounting in
manufacturing firms.
1.2
Problem Of Statement
Manufacturing firms have changed the way they present their financial reports with
developments in new innovations of accounting softwares. A report from survey on
manufacturing firms in East Africa indicate a way of financial statements have tremendously
improved (Indire 2008)
However lack good financial reporting will not ensure efficiency and effectives in record
keeping hence miss leading reports or accounts. This has prompted the researcher to investigate
into the phenomenon.
1.3
Purpose of the Study.
The purpose of the study was to assess the impact of computerized accounting on financial
reporting in manufacturing firms in Uganda.
1.4
Objectives of the Study.
(i)
To assess the impact of computerized accounting to manufacturing firms in Uganda.
(ii)
To examine the qualities of financial reports produced by the manufacturing firms in
Uganda.
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(iii)
To establish the relationship of computerized accounting and financial reporting in
manufacturing firms in Uganda.
1.5
Research Questions.
(i)
What is the impact of computerized accounting to manufacturing firms in Uganda?
(ii)
What are the qualities of financial reports produced by the manufacturing firms in
Uganda?
(iii)
What is the relationship between computerized and financial reporting in manufacturing
firms in Uganda?
1.6
Subject Scope
The scope of the study was confined on impact of computerized accounting on financial
reporting in a manufacturing firm in Uganda.
1.7
Time Scope
The study covered the period of (2006-2010)
1.8
Geographical Scope
The researcher carried out in Uganda breweries located in Luzira, Kampala.
1.9
Significance of the study
The study is expected to make the following contribution.
The study help management of different organizations in determining what best accounting
soft wares to adopt in order to improve on performance of the firms.
The management will be able to understand the significance of preparing quality and reliable
financial reporting.
The research will help me be awarded bachelors degree in commerce
-4-
CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
This section of literature review focused on subject matter of computerized accounting in
relation to financial reporting in a manufacturing firm. The literature was presented in order of
the stipulated objectives of the study.
2.1 COMPUTERIZED ACCOUNTING SYSTEMS
2.1.1 Overview on computerized accounting
An accurate accounting record is a virtual part of any organization apart from helping it to keep
its float financially and legally.
Its requirement of small groups to manage with simple book keeping procedures but bigger
groups juggling with large sums of money and complex financial transactions may find their
workload used by using a computerized system (Marivic, 2009).
2.1.2 Computerized accounting
Computerized accounting involves the use of computers to handle large volume of data with
speed, efficiency and accuracy aimed at overcoming the fundamental however, does not mean
change in principle, the principle of accounting remains the limitations of manual accounting and
hence producing quality and reliable work same with day books ledgers double entry only that
the accounting processing is done by computer packages (ACCA, 2007).
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A computerized accounting system is a delivery system of accounting information for purpose
such as providing reliable accounting information to users (Nash and Hearly, 2003).
Computerization of system can certainly help in minimizing some errors when preparing
accounting records (Mike et al, 2006).
Other view adds that computerized systems are advantageous in consolidating information
channels meaning that files which had previously been duplicated by several departments are
now consolidated into a single file (Mc Rae, 1998).
A computerized accounting system is a system that uses computers to input, process, store and
output accounting information in form of financial reports.
It records all transactions that routinely deal with the events that affect the financial position and
performance of the entity.
2.1.3 Benefits of computerized account system
Different scholars have expressed views on computerized accounting packages as below:
A computerized package can quickly generate all types of records needed by management. Data
processing and analysis are faster and more accurate which meets the manager’s needs for
accurate and timely information for decision making (Mc Bride, 2000).
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The benefits of computer accounting include among others improving reporting to users, better
record keeping and minimized errors. With the system automatically generating reports, a lot of
time will be saved in the long run and unnecessary cost. Few staff will also be needed to operate
the system (Vanbriefing, 2005).
In support of above view, computerized accounting is used to maintain journals, ledgers and
prepare financial statements (Meigs and Meigs, 1998).
Easy posting transaction to ledger and principles of double entry to do accounting function using
computerized accounting system. It can be largely automated by use of systems (Cook, 2001).
2.2 QUALITY OF GOOD FINANCIAL REPORTING
Financial reporting refers to preparation of financial statements by the business necessary in
making decision by management (Kakuru, 2003).
Good financial reporting is all about presenting useful information to users so that proper
decision can be made and data presented. Financial reporting should provide information about
entity’s economic resources, claims against those resources, owner’s equity and changes in the
resources and claims (Frankwood, 1999).
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Financial reporting should provide information that is useful to present or potential investors,
creditors and other users in making national investment, credit and similar decision making
(Larson et al, 1995).
2.2.1 The qualities of financial reports
Quality information
Quality information depends on the intended users of the information and should be evaluated
with respect to the users. Accounting qualities include relevance and reliability, neutrality,
comparability, consistency and understandability/timeliness.
Reliability: Information is said to be reliable if it is from material errors and bias and represents
faithfully that is purport to represent emphasized (Frankwood, 1999).
Reliable information is verifiable faithfully representative.
Neutrality: The demand of accounting information should not be selected to benefit one class
and neglect the other. Reliable information is verifiable neutral.
Comparability: Is another characteristic of quality information; user must be able to compare
financial statements of enterprises over time in order to identify trends in financial position
(Frankwood, 1999).
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The relationship between two or more pieces of information that enables users to identify and
explain the difference between financial data (Nacubo, 2000).
Timeliness: Financial information to benefit user must be presented at the right time otherwise it
loses relevance (Frankwood, 1999).
Understandability: Information can be put to use easily by the users and formatted in a way that
is understandable (Wood, 1997).
The users are assumed to have reasonable knowledge of business and willing to study and
understand the information (Thatcher, 2005).
Relevance: Financial information is relevant if investor can use it to make investment decisions
and the information should enable investors to estimate the risk of an investment (Turner, 2000).
Preparation of financial statements
Statement of financial position
It provides information about an entity’s assets and liabilities, the entity’s resource structure
(major classes and amounts of assets) and its financial structure (major classes and amounts of
liabilities) and ownership interests (Neil, 1996).
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Statement of comprehensive income
It records sales and purchases as well as expenses incurred during the financial reporting.
Statement of cash flow
A cash flow statement (together with its related notes) reflects an entity’s in flows and outflows
during a period information helps user to assess factor such liquidity, risk relationship between
profits and cash flow.
2.3 RELATIONSHIP BETWEEN COMPUTERIZED ACCOUNTING AND FINANCIAL
REPORTING
2.3.1 Computerized accounting on financial reporting is linked to benefits applying
computer system while generating financial reports.
Computerized accounting systems have been credited for their quick processing speed and large
storage capacity. Using computerized accounting system ensures up-to-date account balances
are available any time for management to make quick decisions (Lancouch, 2003).
Quality of financial reports is assured with computerized accounting system as compared to
manual systems. The method of inputting and processing data is sophisticated thus accuracy of
data is improved. This means that financial reports will bear minimum errors.
- 10 -
Computerized system will foster accessibility and faster transformation of information stored in
computers, hence financial reports can easily be accessed through online system without delay
and timely decision making (Kwarijuka, 1998).
The use of computer based systems in manufacturing firms will enable employees from various
function areas and branches to generate timely financial reports which enable managers to
monitor business operations and important finance decisions (Wailes, 1999).
A computerized accounting system is a delivery system of accounting information as providing
reliable accounting information to users. So records of expenditure and incomes and assets,
liabilities, revenue expenses must be documented and transferred to general ledger of firm’s
financial details to be analyzed for future financial decisions.
2.4 CONCLUSION
Computerized accounting is faster and efficient in processing information. As the properties of
information continue to change, the accounting system should become flexible enough to meet
the need of users. Automated generation of accounting document like invoices, cheques and
statement of accounting with the larger reduction in the cost of hardware and software and
availability of user-friendly accounting software package with relative cheap maintenance. In
order to promote quality of financial reporting, there is need of feedback regarding the way in
which user determines quality (Mangiameli et al, 1999).
- 11 -
Financial reports need provide feedback in order to prepare good reports enable constantly
updating the system.
- 12 -
CHAPTER THREE
RESEARCH METHODOLOGY
3.1
INTRODUCTION
This Chapter presents the research designs, techniques, method of data collection, study
population, sampling and procedures of data collection, data presentation and analysis and the
limitations.
3.2
RESEARCH DESIGN
The researcher used a descriptive and analytical research design in establishing a relationship
between financial reporting and computerized accounting in manufacturing firms. Both methods
were applied in order to exhaust all the areas in research. The study is based on a single case
study to enable a broad cross section of researchers in order to facilitate the great understanding
of the phenomenon and apply a series of statistical tests to help in the presentation of the data to
the researcher.
3.3
POPULATION OF THE STUDY
The study population consisted of mainly employees who use the computerized accounting
software.
3.3.1 Population size
The study population was about 30 members mainly employees who use computerized
accounting software and these include sales department team, accounting team and procurement
team.
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3.3.2 Sampling size and composition
Table 1: Sample size and composition
Respondent
Population size
Sample
Top level management
5
3
Financial Controller
10
5
Finance Manager
15
10
Source: Researcher computation
3.3.2 Sampling design
The study was carried out using purposive sampling. It is the sampling method used to carry out
research for data for a specific purpose and this was applied by selecting top level and lower
level management.
3.4
SOURCES OF DATA COLLECTION
The researcher used both primary and secondary sources of data.
3.4.1 Primary data
This was obtained from the respondents who included the above mentioned levels of
management representatives.
3.4.2 Secondary data
This was obtained from periodical reports and company profile, book reviews and other
publications and surfacing internet on specific websites.
- 14 -
3.5
DATA COLLECTION TOOLS
The researcher used questionnaires, and interviews to obtain up-to-date information.
3.5.1 Questionnaires
The researcher set questions and devices to respondents to fill and the researcher used responses
to make conclusion.
3.5.2 Interviews
These involved face-to-face interactions with the respondents where the interviewer asked
questions that respondents answered.
3.6
DATA PRESENTATION AND ANALYSIS
The researcher analyzed and made complete interpretation of results. The data was collected
together, compared and this enabled the researcher to develop new ideas of other sources. The
data presented in a report was documented and was in form of tables, graphs and SSPS. The
questionnaire was edited to remove inconsistence.
3.7
DATA ANALYSIS
After the collection of raw data, it was presented using frequency tables in raw figures and
percentages of the results were then to be calculated using tools like SPSS and Spearman’s
Correlation were used to analyze data.
3.8
LIMITATIONS OF THE STUDY
3.8.1 Limited source of information
The research in this area was few therefore was limitation of information on the study/research
topic, however the researcher used internet to get information.
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3.8.2 Scarcity of time
The limitation of time factor to complete the research, however the researcher tried to budget
time properly to see that the report was finished in time.
The researcher was limited by finance
To facilitate conduct of research in terms of printing and looking for information, however the
researcher tried to solicit for funds to enable a successful compilation of the research report or
work.
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CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF THE STUDY
FINDINGS
4.1
Introduction
This Chapter is about presentation, analysis and interpretation of the study findings.
This presentation, analysis and interpretation were done using computational percentage tables,
graphs and also narrations in form of description was accounted for easy understanding of the
findings.
4.2
Characteristics of Respondents
The respondent’s bio-data was looked at in terms of gender, age, marital status and level of
education.
4.2.1 Age and Gender
The gender and age of the respondents were revealed as shown below:
Table 2: Shows respondents’ Age and Gender
Gender
Age
Total
Percentage
18-25yrs
26-35yrs
Above 36yrs
Male
7
10
4
21
70
Female
3
5
1
9
30
Total
10
15
5
30
100
Source: Primary data
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From the table above, 70% of the respondents were males while 30% of them were females.
This implies that the data obtained was gender biased because the human resources Uganda
Breweries Ltd is more of males than females. Most of the respondents were aged between 26-35
years which is a very active and productive age bracket.
4.2.2 Marital status
The marital status of the respondents obtained from the study was shown as below:
Table 3: Shows the Marital status of the respondents
Marital status
No. of respondents
Percentage (%)
Single
10
67
Married
20
33
Total
30
100
Source: Primary data
The findings indicated that 33% of the respondents are married and only 67% are single which
implies that the data was obtained mainly from responsible and credible respondents hence its
reliability.
4.2.3 Level 1 of Education
The response about the education level of the respondents was presented in the table below:
Table 3: Shows level of education of respondents
Education level
No. of respondents
Percentage (%)
Certificate
5
17
Diploma
7
23
Degree
15
50
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Masters
3
10
Total
30
100
Source: Primary data
The findings in the table above show that 50% of the respondents are degree holders, 23% are
diploma holders, 10% have masters qualification and only 17% have certificate qualification.
This implies that data for the study was obtained from learned respondents who have easily got
adopted to use computer based systems hence the reliability of the data.
4.2.4
Duration the employees have been in the firm
The respondents were asked for how long they have been working in the firm. However, the
responses to the question were tabulated as indicated below:
Table 4: Shows duration the employees have worked in the firm
Duration
No. of respondents
Percentage (%)
Less than 2 years
2
6
3-4 years
8
27
Above 5 years
20
67
Total
30
100
Source: Primary data
The findings in the table above show that 67% of employees have worked in the firm for over 5
years which therefore an indication of low labour turnover, 27% have worked for the period
between 3-4 years and only 6% have been in the firm for a period less than 2 years. This implies
that the data was obtained from respondents who had gotten experience on the use of the
computerized systems and were also more familiar with the variables under study that is
computerized accounting and financial reporting.
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4.3
The benefits of computerized accounting systems to the firm
In assessing the benefits of computerized accounting, the researcher considered whether the
firm’s accounting function was computerized, then the computerized packages used and their
benefits to the firm.
4.3.1 Computerization of the accounting function
When the respondents were asked whether the firm’s accounting functions are computerized, the
responses obtained were tabled as below:
Table 5: Shows responses on whether the accounting functions of the firm are
computerized
Response
Frequency
Percentage (%)
No
11
36.7
Yes
19
63.3
Total
30
100
Source: Primary data
From the table above, majority of the respondents (63.3%) responded that the firm’s accounting
functions are fully computerized while only 36.7% said that the system is not computerized.
This implies that the firm’s accounting functions are computerized and efficiency in preparing
and handling accounting records.
4.3.2
Computerized accounting packages used in the firm
When asked on what computerized accounting packages the firm uses the responses obtained
were shown as below:
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Table 6: Computerized accounting packages used in the firm
Response
Frequency
Percentage (%)
Quick Books
4
13.3
Sage
26
86.7
Tally
0
0
Others
0
0
Total
30
100
Source: Primary data
The above table shows that Sage (86.7%) is the mostly used computerized accounting package in
the firm while Quick Books (13.3%) and no other packages are used in the firm.
4.3.3 Benefits of the computerized accounting systems to the firm
When the researcher asked the respondents on whether computerization of accounting function
benefits the firm. The following were responses tabled below:
Table 7: Benefits of the computerized accounting systems to the firm
Responses
No. of responses
Percentage (%)
Yes
20
66.7
Not sure
4
13.3
No
6
20
Total
30
100
Source: Primary data
The above presentation (66.7%) of the respondents pronounced that computerized accounting
benefits the firm while 20% of them did say it has no benefits and only 13.3% were not sure of
- 21 -
the benefits to the firm. This therefore implies that the employees of the firm are aware of the
benefits that the system offers to the firm.
After enquiring whether computerized accounting benefits the firm, the researcher focused on
assessing the benefits in form of statement that presented the elements of the system on financial
reporting and findings were summarized.
Table 8:
Responses on assessing the benefits of computerized accounting system to the
firm expressed in numerical term.
Benefits
Responses
Total
A
N
D
Quick financial/reports
20
5
5
Improvement in business
15
3
Accuracy and efficiency
25
Simplified posting
Percentage (%)
A
N
D
30
60.5
14.5
25
12
30
80
7.5
12.5
0
5
30
70
5
25
25
3
2
30
75
5
20
Minimized errors
18
0
12
30
90
0
10
Easy auditing
19
6
5
30
63.3
20
16.7
Total responses
122
13
44
180
Responses percentage
67.7
7.22
24.44
100
Source: Primary data
The above shows the following:

60.5% of the respondents agreed that financial statements are quickly generated while
25% disagreed with the statement and only 14.5% had neutral idea on the statement.

80% of the respondents agreed that computerized accounting system improves business
performance, 12.5% disagreed with the statement while only 7.5% were neutral.
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
70% agreed that accurate and efficient records are kept with computerized systems, while
25% disagreed with the statement and 5% were of a neutral view.

75% of the respondents agreed that posting transaction to ledgers are simplified with
computerized accounting while 20% disagreed and only 5% were neutral.

Findings also showed that 90% of the respondents agreed on the minimization of the
arithmetic errors and 10% disagreed and no one had a neutral view.

63.3% of the respondents agreed that auditing of financial statement is eased when
accounting system is computerized, 20% had neutral view and 16.7% disagreed with the
statement.
However, the overall findings indicate that 67.7% responses were in agreement with the
statements while 7.22% disagreed with the statement and 24.44% have mixed views on the
notion.
These findings imply that the computerized accounting bears a lot of benefits in
minimization of errors and easy posting transaction on ledger and easing auditing of the
statement.
The researcher established that Uganda Breweries Ltd considers two mandatory rules that govern
its operations, technology must benefit the business.
4.4
The qualities of financial reports
The Researcher was interested in examining the financial reports generated by the firm in order
to find out whether they meet the basic qualities.
The qualities were examined in terms of reliability, relevance, understanding and timeliness.
The findings are below:
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Table 9: Responses on examination of qualities of financial reports generated by the firm
Qualities
Responses
Percentages (%)
Yes
No
Total
Yes
No
Reliability
25
5
30
87.5
12.5
Timeliness
20
10
30
80
20
Relevance
22
8
30
70
30
Comparability
27
3
30
95
5
Understandability
30
0
30
100
0
Source: Primary data
From the above presentation, it was found out that 87.5% of the respondents accepted that that
the financial reports produced are very reliable while only 12.5% said that the reports are not
reliable.
80% of them also sided with the timeless of the reports. 20% did not say that the financial
reports produced are not timely to the user.
Also 70% of the responses agreed that the financial reports are of relevance while 30% did not
side.
95% pronounced that financial reports can easily be compared with previous reports while 5%
did not side.
100% of the respondents said that the financial reports produced are easily understood.
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4.5
The relationship of computerized accounting systems on financial reporting
4.5.1 Computerized accounting and financial reporting
When the researcher asked whether computerized accounting has relationship on financial
reporting of the firm, the following responses were obtained:
Table 10: Responses on the relationship of computerized accounting on financial reporting
Responses
No. of respondents
Percentage (%)
Yes
22
73.3
Not sure
2
6.7
No
6
20
Total
30
100
Source: Primary data
The above table shows that 73.3% of the respondents responded Yes while 20% said No and
only 6.7% were not sure therefore it implies that the relationship of computerized accounting on
financial reporting in the firm.
4.5.2 The relationship between computerized accounting systems and financial reporting.
To establish the relationship of computerized accounting on financial reporting in manufacturing
firms under this objective the researcher used Person correlation coefficient to establish the
relationship between the variables. (Computerized accounting and financial reporting)
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Ho: computerized accounting systems have an effect on financial reporting
Ha: computerized accounting systems have no effect on financial reporting
Table 11: Correlations
Spearman's rho Computerized
accounting
Correlation
Computerized
Financial
accounting
reporting
1.000
Coefficient
Sig. (2-tailed)
.
.035
N
Financial reporting
.669*
Correlation
30
30
.669*
1.000
Coefficient
Sig. (2-tailed)
N
.035 .
30
30
*. Correlation is significant at the 0.05 level (2-tailed).
From the above findings, it shows that there is a strong relationship between financial reporting
and computerized accounting. At Pearson correlation coefficient r =0.669
The results as depicted from the table above (r2=0.669, P=0.35) suggest a positive effect on
financial reporting on the management of Uganda breweries limited other factor taken care of
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CHAPTER FIVE
5.0 DISCUSSIONS, SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 INTRODUCTION
This Chapter looks at discussions and summary of the findings based on the objectives,
conclusions and recommendations of the study and suggested areas of further research.
5.2 DISCUSSIONS OF THE FINDINGS
The researcher in his study based the discussions on the objectives of the study.
5.2.1 The benefits of computerized accounting to the firm
The researcher when assessing the benefits of computerized accounting on financial reporting
found out the following:
5.2.1.1 Quick financial reports
The researcher found out that through computerized accounting financial reports can be
generated very quickly.
The quickness in generation of reports is due to the fact that through computerized accounting,
data processing and analysis are faster and more accurate. With such advantage, managers can
instantly access different information which leads to easy and quick decision making.
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5.2.1.2 Improvement in business performance
The researcher observed that computerized accounting system results into improvement in
business performance.
That computerized system is a highly integrated application that
transforms the business processes with its performance enhancing features.
Accounting
functions, inventory control and statutory reporting can easily be done hence resulting in access
to business information for good decision making (Indira, 2008).
5.2.1.3 Understandability
The researcher found that financial reports generated are very understandable to user. Financial
information may be put easily by the user, financial reports need to be easily understood by the
users as report acts as a way of communication between firm and stakeholders (Wood, 1996).
5.3 SUMMARY OF THE FINDINGS
5.3.1 Characteristics of the respondents
The researcher revealed issues on computerized accounting and financial reporting. They survey
basically covered employees in Uganda Breweries Limited a manufacturing firm in Uganda to
assess how computerized accounting has impacted on financial reporting in the firm. The
response rate was amazing that is all the selected respondents returned their questionnaires.
5.3.2 Computerized accounting and its benefits
The research revealed that Uganda Breweries’ accounting systems are computerized and the
most used accounting package is Sage as 86.7% of the respondents revealed so. The package has
all functions of data entry, double entry system and report generation. Sage Software is used in
the accounting section to handle the accounting function. Other accounting packages used are
Quick Books which the firm uses in procurement and sales sections. The study also revealed
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that the firm greatly benefits from computerization of accounting system as shown by 63.3% of
the respondents.
The illustrated benefits are summarized as below:

Financial reports can quickly be prepared when required.

There is a bearable improvement in business performance.

Accuracy and efficiency in record keeping.

Posting transactions in the ledgers are simplified.

Arithmetic errors are also easily minimized.

Auditing of financial statement is simplified as all records of transactions are recorded
safely.
Other benefits include handling automated book-keeping, bank reconciliation, payroll, VAT
returns or large amounts of data.
The study revealed the following shortfalls of using computerized accounting packages (Sage)
by the firm:

The software (Sage) is very expensive to acquire and also difficult to maintain.

Human errors greatly affect the functionality of the system.

It’s costly in case of breakdown or repair.
Comparing the benefits and the shortcomings as revealed by the study, it is fair to assert that
computerized accounting systems have been of great benefit to the firm notwithstanding the
- 29 -
short comings as indicated in many weaknesses as a result of human errors. If addressed, the
firm can benefit more from use of computerized accounting system.
5.4 FINANCIAL REPORTING AND ITS QUALITIES
The basic qualities of financial reports found out from the study include the following relevance,
reliability, comparability and understandability. Others included completeness, accuracy and
efficiency.
The researcher also observed that companies must first recognize the users of financial
information such as customers. To a customer, a quality financial report is one that helps one to
make better decisions. Financial reports must be comprehensive, complete, easy to understand
and accurate.
Firms or companies need to have continuous improvement in the quality of their financial
reporting.
5.5 RELATIONSHIP BETWEEN COMPUTERIZED ACCOUNTING SYSTEM AND
FINANCIAL REPORTING
Using the above finding, it implies that there is a strong relationship between computerized
accounting system and financial reporting.
Therefore computerized accounting has a strong relationship of (r2=0.669, P=0.35) this suggests
a positive effect on financial reporting.
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5.6 CONCLUSION
From the findings, it is evident that computerized accounting system contributes a lot towards
financial reporting in manufacturing firms and other organizations that prepare financial reports.
The study reveals that firms are able to maintain financial reports with qualities of timeliness,
liability, relevancy and understandability, accuracy and efficiency because of computerized
accounting system.
The researcher sides with findings of the study and concludes that
computerized accounting has greatly led to improved financial reporting because of the
advantages it offers to preparation of financial reports.
5.7 RECOMMENDATIONS
Basing on the findings of the study, the researcher made the following recommendations for the
firm and similar organizations in improving on their financial reporting.
The firm should recruit a professional to handle computerized accounting systems. This is
because any wrong entry of data will certainly generate inaccurate and unreliable results. Staff
must therefore be adequately trained to enable them efficiently operate the system.
The firm should select packages or software that are user friendly and should consider
customization of the systems to fit specific needs. Other than adopting off-shelf packages with
customized packages, training costs will be reduced.
The systems should suit business
environment adapt to changes.
There should be routine system maintenance programmes put in place so that the system can be
rid of shortfalls such as viruses and fraud among others that may affect the system operations.
This should be done so that the system can operate to the expectation of management.
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This firm should ensure that deadlines within which a report should be ready. This will enable
the accountant to work within the set schedules.
The firm should set aside budgets for research and development specifically for its computerized
projects. These will improve and update the computerized accounting system.
Data manager of the firm should ensure that all financial information capture and backed up,
computerized systems security is sometimes prone to threats such as virus attacks.
It is
important that the data is backed up so that in case of a system breakdown, the data would have
been secured.
Internal control system also needs to be put in place so that in case errors occur, they can be
traced and corrected.
The researcher also recommends that the firm should run the computerized accounting systems
alongside the manual system where some data can be captured manually. This is important
because should the computerized system breakdown, important source information can still
remain available. One other fact is that the computerized system very much relies on human
effort which justifies the simultaneous run with the manual system.
Areas of further study
There is need for more to be undertaken to establish the role of management in promoting the
quality of financial reporting.
There is need to explore whether computerized accounting can be run alongside the manual
system. Therefore there is need to investigate if the two systems can be used concurrently.
More research on business process re-engineering and how essential can be used in computerized
accounting to achieve better goals in firms.
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There is need for more research on how accounting records can be maintained in providing in
depth exposure to accounts and quality of financial reports
- 33 -
REFERENCE:
Carol L. Cook (2002); How computers have simplified Accounting, http://www.Yala.edu
Denis, G.E. (1996) “An Assessment of Accounting Information Security” The CPA Journal
New York (Vol.67), pp.28-34.
Elliot Berry and Robbin Javis (1997); Accounting Business Context 3rd Edition, Thomson
Business Press London United Kingdom.
Frank W. and Alans (1999); Business Accounting: Sixth Edition (International Student Edition
Pitman Publishing).
George J. Nacubo and Gerald W. Mc Kean (2000), Business Data Processing 2nd Edition
Houghton Mifflin Company, Printed in United States of America.
Kakuru (2003); Financial Decisions and Business; Business Publishers, Kampala.
Lancouch, A.A. (2003), “The Perceived Threats to the security of computerized Accounting
Information Systems” The Journal of American Academy of Business Cambridge USA, Vol.3
No.1.
Larson et al (1998) Fundamental Accounting Principal; Eleventh Edition (Statement of Cash
flow edition).
Marivic A. (2009), “Evaluating the security of computerized information systems: An Empirical
study on Egyptian Banking Industry” Ph.D Thesis, Aberdeen University, U.K.
Mihir and Bijan (2002), Financial Accounting, 3rd Edition, Heinemann Publishers.
Redman F. Thomas (2006), Building Trust in Financial Reporting.
- 34 -
Robert F. Meigs, Mary A. Meigs et al (1998), Financial Reporting, 9th Edition, Irwin McGraw
Hill Publishers New York United States of America.
Thatcher (2005) Financial Reporting; http://www.navesink.com
Turner E. Lynn 2000; Characteristics of High Quality Financial Reporting. www.sac.gov/news.
Vanbriefing (2005), Introduction to Accounting; http://www.navesink.com
Wood, F and Sangster, A (1997) Business Accounting 2, 8th Edition, Prentice Hall London.
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APPENDIX 1: RESEARCH QUESTIONNAIRE
Dear Respondent,
The Researcher is a student of Makerere University pursuing Bachelor’s of Commerce External.
This questionnaire is designed for academic purposes only. This information will be treated very
confidential and will be an aid in obtaining data necessary for my research topic “The impact of
computerized accounting on financial reporting.” This will contribute to the partial
fulfillment of the requirement for the award of Bachelor’s of Commerce of Makerere University.
Instruction: Tick the right option in box or fill in the blank spaces.
A) Bio-data
Name (optional)……………………………………………………..
Gender: Male
Female
Age: 18-25 yrs
26-35 yrs
Marital status: Single
35 and above
Married
Educational level
Certificate
Degree
Diploma
Masters
For how long have you worked in the firm?
Less than 2 years
3-4 years
above 5 years
- 36 -
B) To assess the impact of computerized accounting systems in firms.
Is the firm’s accounting system computerized?
Yes
No
What computerized accounting packages are used in this firm?
1. Sage
2. Quick books
3. Tally
4. Others (specify)……………………………………………………………………………
In your view, do you think computerization of the accounting system has benefits to the firm?
Yes
Not sure
No
If yes, please tick any one option for the statements below:
A-Agree, N-Neutral
D-Disagree
Statements
A
Financial reports are quickly generated
There is improvement in business performance due to
computerization of the accounting system
There is accuracy and efficiency in account record keeping
through computerization
Accounting functions like posting transaction to the ledger and
- 37 -
N
D
double entry are simplified.
Arithmetic errors are easily minimized through application of
computerized accounting systems.
Auditing of the financial statement is eased with use of
computerized accounting systems.
Other benefits:…………………………………………………………………………………
…………………………………………………………………………………………………….
…………………………………………………………………………………………………….
C) To examine the qualities of financial reports produced by the firm.
In this section, the respondent is required to tick any one option for each statement below.
The financial reports produced are very reliable that is free from material errors and bias and
represents that real status of the firm.
Yes
No
Financial reports can influence the decision of the stakeholders regarding issues in the
organization.
Yes
No
The financial reports are easily compared with previous period’s reports.
Yes
No
The reports are always generated at the right time when needed by the stakeholders.
Yes
No
- 38 -
The reports are always understood well by the stakeholders.
Yes
No
The investors greatly rely on the financial reports to make their investment decisions.
Yes
No
Other
qualities:………………………………………………………………………………………..
……………………………………………………………………………………………………
……………………………………………………………………………………………………
D) The relationship of computerized accounting systems and financial reporting.
Do you think computerized accounting has an impact on financial reporting?
Yes
Not sure
No
In this section, the respondent is required to tick any one option for each statement below:
SA-Strongly agree
A-agree
N-neutral
D-Disagree SD-
Strongly disagree
Statements
SA
Financial reports are timely generated for decision making
purposes by the users.
The financial reports can be prepared at regular intervals with
much ease as a result of computerization of the accounting
- 39 -
A
N
D
SD
systems.
Arithmetic errors in the financial reports have greatly reduced
due to computerized accounting systems.
Keeping of records and maintenance of accounting data have
become easy and simple to perform.
The stakeholders can greatly rely on the reports generated
because of accuracy and quality of the financial reports.
There is a guaranteed quick speed of processing financial
statements.
Others (please specify):………………………………………………………………………
…………………………………………………………………………………………………….
…………………………………………………………………………………………………….
Thanks for your cooperation. God bless you.
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