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COMPARATIVE IMPACT AND ANALYSIS OF COMPUTERIZED ACCOUNTING SYSTEM AND MANUAL ACCOUNTING SYSTEM OF QUOTED MICROFINANCE BANKS (MFBS) IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Accounting records kept on the manual system can be lost or damaged easily, such as by coffee spills. On the other hand, records kept by a computer are likely to be safer because many systems are backed up often. If pages are lost in a paper pad, firms have to recreate the transactions by conducting research and writing them in again. In a computerized system, firms simply restore the latest backup and add a few transactions that were not saved. In this area, accounting software is obviously superior to manual systems.

Data processed through software is organized and easy to find. That’s not the case with manual systems, where you may have to review several pages to find what you need. Accounting programs organize the information in one place, classified by type. If an organization wants to find certain data about a vendor, it can go to the accounts payable section of the software, usually by clicking a link or tab, and conduct a search for the vendor. If you conduct the same process on a manual system, it may have to go through several pages and take more time to locate the vendor.

In spite of the benefit of computer to the banking industry and businesses in general, some problems are still left unsolved and new ones have been credited by the use of computer itself being a problem such as the use of computer to keep accounting records. Another problem is the displacement of labour hands in the accounting department and its union implication and the problem of low turnover (volume of operation) and profitability in banks. Against this background this study is set to undertake a comparative analysis of computerized and manual accounting systems of quoted microfinance banks in Nigeria.

1.2 Statement of problem

The major challenge in the manual accounting system is that processing of customer information takes a very longer period of time. Customers waste precious time in joining long queues at the bank for their banking activities. There is also huge labour cost, in terms of salaries and its related cost. Errors of commission and omission are very prone in the bank. The manual banking system makes banking transactions very dull, cumbersome, and unpleasant; manual maintenance of accounts is quite tedious and consumes a lot of time. These are the problems associated with manual accounting system. Though it has certain benefits too, ledgers can be reviewed easily and the accountant can incorporate simple changes if needed. It convenient to reconcile individual accounts as each ledger contains information in an organized manner. The other benefit is that the accountant can physically handle any ledger and make notes against customers account if there are any issues needing correction or clarification.

According to McBride (2000), computerized packages can quickly generate all types of reports needed by management for instance budget analysis and variance analysis. Data processing and analysis are faster and more accurate which meets the managers need for accurate and timely information for decision making. Frank and Sangester (1999) consented to the speed with which accounting is done and further added that a computerized accounting system can retrieve balance sheets, income statement or other accounting reports at any moment. He consented that computerized accounting system allow managers to easily identify and solve problems instantly. Nevertheless, there is a problem associated with application of computerized accounting system in an organization; this is in respect of displacement of labour hands in the accounting department and its union implication and the problem of low turnover (volume of operation) and profitability in banks. Divergent views had been put forward in respect of the merits and demerits associated with the application of manual and computerized accounting systems in regards towards their respective contribution in an organizational efficiency in daily operations. This form the milieu upon which the study is set out to perform a comparative analysis of manual and computerized accounting systems of quoted microfinance banks in Nigeria.

1.3. Objectives of the study

The main purpose of this study is to carry out a comparative analysis of computerized accounting and manual accounting system of quoted microfinance banks (MFBs) in Nigeria. The specific objectives are:

i. To determine the effect of manual accounting system and computerized accounting system on the

net profit margin of quoted microfinance banks (MFBs) in Nigeria. ii. To ascertain the effect of manual accounting system and computerized accounting system on

return on asset (ROA) of quoted microfinance banks (MFBs) in Nigeria.

iii. To verify the effect of manual accounting system and computerized accounting system on return

on equity of quoted microfinance banks (MFBs) in Nigeria.

1.4. Hypotheses of the study

The following hypotheses are stated in their null forms and tested at 5% level of significance.

Ho₁: Manual accounting system and computerized accounting system do not have significant effect on net profit margin of quoted microfinance banks in Nigeria.

Ho₂: Manual accounting system and computerized accounting system has no significant effect on return on asset (ROA) of microfinance banks in Nigeria.

Ho₃: Manual accounting system and computerized accounting system do not have significant effect on return on equity of quoted microfinance banks in Nigeria.

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