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METHODIST UNIVERSITY COLLEGE GHANA

THE IMPACT OF COMPUTERISED ACCOUNTING INFORMATION


ON THE DEVELOPMENT OF SMALL AND MEDIUM SCALE
ENTERPRISES IN GHANA
(A STUDY OF SELECTED SME's IN ACCRA METROPOLIS)

BY

OSUMANU-SULEMAN, AMIDU KORIWIE


MAWUNU, KAFUI BENEDICTA
ANUM MABEL, AYERKI DEDE
JOSEPH, ADJEI TETE

MAY, 2015

THE IMPACT OF COMPUTERISED ACCOUNTING INFORMATION


ON THE DEVELOPMENT OF SMALL AND MEDIUM SCALE
ENTERPRISES IN GHANA
(A STUDY OF SELECTED SME's IN ACCRA METROPOLIS)

BY

OSUMANU-SULEMAN, AMIDU KORIWIE


MAWUNU, KAFUI BENEDICTA
ANUM MABEL, AYERKI DEDE
JOSEPH, ADJEI TETE

A PROJECT WORK SUBMITTED TO THE DEPARTMENT OF


ACCOUNTING

FACULTY

OF

BUSINESS

ADMINISTRATION,

METHODIST UNIVERSITY COLLEGE GHANA FOR FULFILMENT OF


REQUIREMENT FOR THE AWARD OF BACHELOR OF BUSINESS
ADMINISTRATION (BBA) DEGREE IN ACCOUNTING

MAY 2015
ii

DECLARATION

We hereby declare that this submission is our own work towards BBA degree
and that, to the best of our knowledge, it contains no material previously
published by another person nor material which has been accepted for award
of any other degree of the University, except where due acknowledgement has
been made in the text.

We bear sole responsibility for any shortcomings.


............................................................

......................................

OSUMANU-SULEMAN AMIDU KORIWIE


(BBAA/ET/123001)

DATE

..................................................
MABEL ANNUM AYERKI DEDE
(BBAA/ET/ 121479)

...........................................
DATE

...................................................
MAWUNU KAFUI BENEDICTA
(BBAA/ET/121614)

.............................................
DATE

.................................................
JOSEPH ADJEI TETE
(BBAA/ET/113866)

.........................................
DATE

iii

CERTIFICATION

I hereby certify that the preparation and presentation of this long essay were
supervised in accordance with the guidelines on supervision of long essay laid
down by the Methodist University College Ghana.

...............................................

...........................................

WILLIAM OFFEI-MENSAH
(SUPERVISOR)

DATE

iv

DEDICATION

We dedicate this piece of work to our colleague of blessed memory PHILIP


ACQUAYE who met his untimely death in the first semester of level 300,
R.I.P

ACKNOWLEDGEMENT

We would like to thank our advisor, Mr. William Offei-Mensah, in assisting us


to finish the long essay. He has given us support as well as valuable comments
throughout the consultation period so that we can manage to handle one of the
hardest subjects in our university life. In addition, we would also acknowledge
our school-mates for their help in the data collection process. They have
devoted their precious time for the interviews voluntarily and their
wholehearted support contributes to the success of this long Essay.
We wish to express our deep appreciation to our lecturers of Faculty of
Business Administration who groomed and prepared us adequately, both
academically and professionally, to face the challenges of this study. They
deserve our sincere gratitude. May we also take this singular opportunity to
register our high depth of indebtedness to Mr.Sumaila H.Suleman of the
Sissala west GES for his support. We also thank Mr Richard B, Jacob
Ladimine and Onowa Simon Owizy for their assistance in data analysis and
Abigail Chiriwuo for the assistance in typing the manuscript and correcting all
typographical and grammatical errors. Allah (God) richly blesses them all.
Lastly, we also express gratitude to our colleagues most especially Emmanuel
Glago, Ceecee M.Soumahoro, Dogbey Felix, A. Eric, Alex Dapaah Joshua
Oppong, Frances (aka calculus), Agorkpa Bentile, Mahmud Amadu, Jerry
Dombo and all those who asked not to be mention and not forgotten the
various SMEs owners who gave us variable information to our questionnaire
and also full acknowledgement goes to the various authors and researchers
from whose works we derived useful information and ideas which were of so
much help to the successful completion of this long essay.

vi

Table of Contents

DECLARATION....................................................................iii
CERTIFICATION..................................................................iv
DEDICATION.......................................................................v
ACKNOWLEDGEMENT..........................................................vi
TABLE OF CONTENTS..........................................................vii
LIST OF TABLES AND FIGURES.................................................x
LIST OF ABBREVATIONS AND ACRONYMS..................................xi
ABSTRACT........................................................................xii

CHAPTER ONE.................................................................................... 1
INTRODUCTION.................................................................................. 1
1.0 Background to the Study......................................................................1
1.2

Statement of the Problem................................................................4

1.3

Objectives of the Study...................................................................6

1.4

Research Questions.......................................................................6

1.5

Research Hypotheses.....................................................................7

1.6

Significance of the Study................................................................7

1.7

Scope of the Study........................................................................8

1.8

Definitions of Terms......................................................................9

1.9 Organization of the Study...................................................................10

CHAPTER TWO.................................................................................. 11
LITERATURE REVIEW........................................................................11
2.1

Introduction............................................................................... 11

2.2

The concept of Computerised accounting information...........................13

2.3

The Concept/Definition of Small and Medium Scale Enterprises..............19

2.4

Peculiar Small Business Challenge and Failure in Ghana.......................25

2.5

Empirical Review......................................................................32

2.5.1
The Role of Computerised accounting information on the Improvement
of the Performance of Small and Medium Enterprises in Ghana.....................34
2.5.2 The Role of Computerised accounting information in Expansion of SMEs.38

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2.6

Creating Computerised accounting information...................................40

2.7

Importance of Small Business to the Ghanaian Economy.......................42

2.8

Summary of the Chapter.................................................................45

CHAPTER THREE............................................................................... 46
RESEARCH METHODOLOGY..............................................................46
3.0 Introduction................................................................................... 46
3.1 Research Design..............................................................................46
3.2 Sample Selection and Design..............................................................46
3.3 Research Instrument.........................................................................47
3.4 Validity and Reliability......................................................................48
3.5

Specification of Variables Used.......................................................49

3.5.1 Independent Variable...................................................................50


3.5.2

Dependent Variable...............................................................50

3.5.3

Control Variables..................................................................51

3.6

Specification of Models for Data Analysis.........................................51

3.7

Decision Rule for Testing Of Formulated Hypotheses...........................54

3.8

Method of Data Analysis...............................................................54

3.9

Data Collection Procedure.............................................................55

3.10

Limitation of the Study Design.......................................................55

CHAPTER FOUR................................................................................ 57
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF RESULTS..........57
4.0

Introduction............................................................................... 57

4.1

Data Presentation........................................................................57

4.3

Descriptive Statistical...................................................................61

4.4

Data Validity Test........................................................................62

4.5

Regression Results......................................................................63

4.6

Test of Research Hypotheses..........................................................71

4.7 Discussion of Result.........................................................................73

CHAPTER FIVE.................................................................................. 76
SUMMARY, CONCLUSION AND RECOMMENDATIONS..........................76
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5.0 Introduction................................................................................... 76
5.1

Summary of Findings...................................................................76

5.2

Conclusion................................................................................ 77

5.3

Recommendation........................................................................78

5.4

Suggestion for Future Research Direction..........................................79

REFERENCES...................................................................................81

APPENDIX I: SUMMARY OF RAW DATA AND EXTRACTED FROM


ADMINISTRED QUESTIONNAIRE........................................................88

APPENDIX II: LIST OF SOME SELECTED SMEs UNDERSTUDY..............89

APPENDIX III: Sample Questionnaire.....................................................90

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LIST OF TABLES AND FIGURES

Table 4.1 Distribution of Administered Questionnaire

............................58

Table 4.2 Age Distribution of Respondents

............................. ....59

Table 4.3 Educational Qualification of Respondents

..........................

Table 4.4 Business existence

....60

................................................................. 60

Figure : 4.5 Employees Distribution table

...... 61

Table 4.6 Descriptive Statistics

.............................................62

Table 4.7 Model Summary for Model 1

.........................................65

Table 4.8 Regression Coefficient for Model 1

...............................66

Table 4.9 Model Summary for Adjusted Model 1

...............................67

Table 4.10 Regression Coefficient for Adjusted Model 1


Table 4.11 Model Summary for Model 2

..................................................69

Table 4.12 Regression Coefficient for Model 2

.....................................70

Table 4.13 Model Summary for Adjusted Model 2


Table4.14 Regression Coefficient for Adjusted Model 2

....................68

...................71
..................72

LIST OF ABBREVATIONS AND ACRONYMS

AICPA ........................America Institute of Certified Public Accountants


ANOVA ......................Analysis of Variance
BDS .............................Business Development Service
BECE ..........................Basic Certificate of Education
CAS ..........................Computerised Accounting System
FAA ..........................Frequency of account audit
FPA............................Frequency of preparation of accounts
GDP............................Gross Domestic Product
GEDC .........................Ghana Enterprise Development Commission
GRATIS.......................Ghana Appropriate Technology Industrial Services
GSS ............................Ghana Statistical services
HND.............................. Higher National Diploma
IFC .................................International Finance Corporation
ITTUs............................Intermediate Technology Transfer Units
LA ................................Number of ledger account
MOTI.............................Ministry of Trade and Industry
NBSSI............................National Board for Small scale Industry
RC..................................Rate of consultation
SB...................................Number of subsidiary books
SD...................................Number of source documents
SME.................................Small and Medium Enterprises
SPSS....................................Statistical Package for Social Science
UNIDO..............................United

nation's

Organisation

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Industrial

Development

ABSTRACT

The dynamic role of small and medium scale enterprises (SMEs) in developing
countries have been highly emphasised. These enterprises have been identified
as the means through which the rapid industrialisation and other
developmental goals of these countries can be realised. This study was
embarked on to

empirically investigate the impact of computerised

accounting information to the development of small and medium scale


enterprises. The multiple linear regression was employed to determine
the usefulness of computerised accounting information by showing the
kind and strength of relationship that exist between the
measures of accounting information (such

various

as rate of consultation of

account, number of source documents, number of subsidiary books,


number of ledger accounts, frequency of preparation of account and
frequency of account audit) and SME development measured in terms
of annual profit and number of branches. The population of the study was
made up of the total SMEs in Accra metropolis registered with the ministry of
Trade and Industry while a sample size of 40 selected SMEs in Accra was
utilized for the study. The findings of the study showed that computerised
accounting information has a significantly positive relationship with
performance and number of branches
information

and as such accounting

is useful to the development of SMEs. Based on the

findings of the study it was recommended that SME owners should


ensure that

they maintain an accurate and

up to

date accounting

information system, capable of providing information that would boost


their performance when utilized. Also they should endeavour to consult
their

accounting

diversification

information

when

embarking

on

expansion

or

programmes. Furth more the findings will assist policy

makers, development agencies and business organisations to ascertain the


appropriate strategy to improve the SMEs.

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CHAPTER ONE
INTRODUCTION
1.0 Background to the Study
The overriding importance of small and medium enterprises to the Ghanaian
economy has made it imperative for researchers to direct much attention and
effort towards the identification of possible ways through which a sound Small
and Medium Enterprise (SME) sub-sector will be established in Ghana, as
well the communication of such feasible solution to stakeholders and policy
makers.

The dynamic role of small and medium enterprises (SMEs) in developing


countries as engines through which the growth objectives of developing
countries can be achieved has long been recognised. It is estimated that SMEs
employ 22% of the adult population in developing countries (Daniels, 1994;
Daniels & Ngwira, 1992; Daniels & Fisseha, 1992; Fisseha, 1992; Fisseha &
McPherson, 1991; Gallagher & Robson, 1995). The sector employs about
15.5% and 14.09% of the labour force in Ghana and Malawi respectively
(Parker et al, 1994), has experienced higher employment growth than micro
and large scale enterprises (5% in Ghana and 11% in Malawi). In Ghana, the
sectors output as a percentage of GDP accounted for 6% of GDP1 in 1998,
the importance of these Small and Medium Enterprise (SME) in the Ghanaian
economy flows from the vital role they play in the development of a nation's
economy.

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Abdulrasheed et al. (2012) considers Small and Medium Enterprise (SME) as


the engine of growth in many economies. He argued that their importance can
be viewed from the perspective of employment generation, contribution to
export earnings and Gross Domestic Product (GDP).

Every business has numerous processes; some simple, others complex and
cumbersome. But as the business grows, acquires new customers, enters new
markets and keeps pace with constant changes in information technology,
companies need to maintain highly accurate and up-to-date accounting,
inventory and statutory records. This is where a Computerised Accounting
System helps simplify, integrate, and streamline all the business processes,
cost effectively and easily and helps presents the true picture of all the
business undertakings to users of financial reports. With the decrease in the
price of computers and accounting programs, this method of keeping books is
becoming popular (Raymond and Bergeron, 1992). Osotimehin et al. (2012)
sees Small and Medium Enterprise (SME) as a veritable tool for the
achievement of national macro-economic objective in terms of employment
generation at low investment cost, creation of industrial interlinks by
consuming products of large firm and providing products used by large firms.
Survey Report on Small and Medium Enterprises 1990, conducted by National
Board for Small Scale Industries (NBSSI) and Ghana statistical services (GSS)
outlined the following as roles played by SME;
a)
b)
c)
d)

Improvement of per capital income,


increased value addition to raw materials supply
improved export earnings and
Step up of capacity utilization in key industries.

Furthermore, considering the current social economic environment of Ghana,


which is filled with tension and fear of no and/or insufficient source of
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income, emanating from the high level of unemployment in the country.


(Kpelai, 2009, Osisioma 2010). It becomes enticing and somewhat expedient
to explore the SME sub-sector since it is considered as an effective means of
reducing the level of unemployment in the country. (Abdulrasheed et al.,
2012; Osotimehin et al., 2012; Kpelai 2009, Okoh & Uzoka. 2012). On the
basis of the foregoing argument, the various democratic regimes in Ghana
came up with different strategies and policies aimed at reducing the alarming
rate of unemployment in the country through the SME. Governments almost
all over the world had formulated policies aimed at facilitating and
empowering the growth, development and performance of the SME's to grow
through soft loans, managerial training and other fiscal incentives through
support from international agencies and organisations like World Bank and
United Nations Industrial Development organisation (UNIDO).
Unfortunately, research has shown that most of such small businesses do not
stand the test of time not to talk of growing into corporations. The mortality
rate of small and medium scale enterprises in Africa is high (Kpelai, 2009).
Put differently a greater number of small business who enter business every
year fail rather than succeed (Chioma, 1979). This trend has a negative
implication on the economy by inhibiting the success of SME, thereby
preventing the attainment of their potential benefit. Keplai (2009) believes that
inadequate training in managerial skills resulting to inability to make and/or
effectively use computerized accounting information is a major factor
inhibiting the progress of SME.

Okoh and Uzoka (2012), posits that

management of small enterprises is constrained by lack of accounting


knowledge by stakeholders. This constitutes a big problem because accounting
is considered the language of business and covers the basic economic events
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of a business. Based on the foregoing discussion, it is imperative to determine


whether or not the effective utilization of computerised accounting
information by mangers/owners of SME could help improve the performance
of SME ( i.e., whether computerized accounting information utilization has an
influence on the performance of small and medium enterprises [SME] in
Ghana).

1.2

Statement of the Problem

After the independence of Ghana till date, a good number of small and
medium scale enterprises have been established in Ghana. This is stimulated
by the governments effort towards improving the various indices of good
living of the Ghanaian populace.

Unfortunately, majority of these firms have been unable to stand the test of
time while the growth of some others have been stunted (Kpelai 2009),
implying that most small and medium scale enterprises (SME) established in
Ghana do not survive or grow to expected height.

The advancements in information technology have eventually led to the


introduction of Computerised Accounting Systems in corporate reporting to
help produce relevant and faithful representative financial reports for both
management and external users for decision making (Greuning, 2006). The
many advantages from the use of these systems have led many to conclude
that Computerised Accounting Systems in Corporate Reporting is the engine
of growth in business organisations (Frenzel, 2006).

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It is worth noting that, notwithstanding the introduction of these Computerised


Accounting Systems and despite the enormous benefits from the use of these
systems, the problem is that some companies still make use of the Manual
Accounting Systems which are often characterised by keeping a large number
of books and are usually associated with errors in recording large volumes of
transactions. Reasons for the use of the manual accounting system may be
attributed to factors such as inadequate supply of expertise knowledge about
the Computerised Accounting Systems; high cost of installation and
maintenance; resistance to change; risks of being hacked; power failure;
viruses and losing information.

Chioma (1979) believe that a greater number of small business owners who
enter the business every year fail to succeed. These failures have been
associated with a number of factors which include; lack of access to fund, lack
of entrepreneurship skills, poor credit rating, poor management practice such
as poor record keeping, inability to make or inappropriate use or inadequate
use of computerised accounting information among others (Kpelai, 2009;
Okoh & Uzoka, 2012, Abdulrasheed et al., 2012). According to Wichmam
(1983) and World Bank (1978)

cited in Naruanard (2003), poor record

keeping and inefficient use of computerised accounting information are the


major causes of business failure.

However, an examination of the extent to which computerised accounting


information affect the performance of small business would help reveal
whether utilization of computerised accounting information improves the
performance of such small businesses, with the increased in complexity of
transactions and the emergence of new technologies, how are the SME's
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positioning themselves to take advantage of Information Technology to


improve their corporate reporting?

1.3

Objectives of the Study

The major objective of the study is to investigate the impact of computerised


accounting information to the development of small and medium scale
enterprises. The specific objectives are:
1. To determine the relationship between the accounting

information

and the performance of SME development in Ghana


2. To examine the relationship between computerized accounting
information and expansion and diversification programs of SME's in
Ghana.
3. To make appropriate recommendation for solving or at least
eliminating the indentified challenges of SME's using computerise
accounting information for development of the SME's in Ghana.

1.4

Research Questions

In an attempt to achieve the above research objectives, the following research


questions have been developed for examination
1. Is there any significant relationship between computerised accounting
information and the performance of small and medium enterprises?
2. Is there any significant relationship between computerised accounting
information and expansion/diversification of small and medium scale
enterprise?

1.5

Research Hypotheses

The researcher has formulated the following hypothesis for the study in a null
form.
xviii

Ho1:

There is no significant relationship between computerised accounting


information and the performance of SME.

Ho2:

There is no significant relationship between computerised accounting


information and expansion/diversification of SME.

1.6

Significance of the Study

Over the years, there has been public outcry for fresh graduates who will
develop their entrepreneurial skills and embark on legal economic ventures
that will enable them earn some income and even employ others rather than
roam the streets in search of jobs.
i.

One of such venture is the establishment of small and medium scale


businesses which is purported to be in their capacity. However, the
success of such small business (keeping other factors constant) will
depend on the proper use of computerised accounting information. This
is based on the fact that computerised accounting information covers the
basic economic events of a business and consequently captures relevant
data relating to performance of a business in terms of sustainability and

ii.

growth.
The study will be particularly useful to fresh graduates who intend to go
into business by facilitating the sustainability and growth of small and
medium business which will in turn provide gainful and continuing

iii.

employment to such graduates.


The study will also aid government in developing policies and strategies
that will create an enabling environment for the sustainability, growth
and development of small and medium scale businesses by considering
the relevance of computerized accounting information to businesses
when formulating policies that affect small businesses.

xix

iv.

Small and medium business owners may also be given some insight on
the possibility of breaking out of stagnation in business by paying due
attention to computerized accounting information in their business

v.

decision making process.


Finally, the study intends to contribute towards reduction of

unemployment rate in the country via the establishment of a vibrant small


and medium industry sub-sector.

1.7

Scope of the Study

The study covers all aspects of accounting involved in the production of useful
information for all stakeholders in a business. It covers financial accounting
cost and managerial accounting which are used in producing computerised
accounting information. Also the study is limited to small and medium
businesses in Accra metropolis for periods between 2000 to 2014. The study
lasted for a period of three months. The selection mix of the SME's provided a
comparative point of assessing the impact of computerised Accounting
Information on the development of SME's in Ghana.

1.8

Definitions of Terms

Small Medium Enterprises: All over the globe there has being a lot of
definitions as to what exactly is meant by small and medium enterprises, most
often, the commonly used criterion is the number of employees of the
enterprise. In most developing economy including Ghana, small and medium
enterprises tend to have few employees who tend also to be mostly relatives of
the owner hence there is often lack of separation between ownership and
control. As a result, an operational definition is important for the study.

xx

The most commonly used principle which has been identified from the various
definitions is the number of employees of the enterprise. As contained in its
Industrial Statistics, the Ghana Statistical Service (GSS) considers firms with
less than 10 employees as Small Scale Enterprises (Kayanula and Quartey,
2000) and it is this definition that has been adopted and used in the course of
the study.

The employee principle which has been considered in this study is also in line
with the definition of Small-Scale Enterprises adopted by the NBSSI.
Business Development: In the content of these write up, business
development refers to the sustenance and growth of a business with a positive
multiplier effect on the economy at large.
Computerised accounting information: This relate to information gotten via
the use of financial, costing and managerial accounting techniques to process
economic data (events) of a business and produce useful information that can
be used by stakeholders of a business such as; (Managers, employees owners,
government etc) for making business, financial and investment decisions.
Accounting Analysis: It is a process of evaluating the extent to which a firm
accounting reflects economic reality (Wild et al 2007).
Accounting Ratio Analysis: This entails the analysis of mathematical relation
between two or more accounting variables or quantities (Jennings 1993).

1.9 Organization of the Study


Chapter 1: This chapter will talk about introduction of this study, which will
also include brief introduction of the topic, research background, rationale
behind choosing the topic, problem statement, aim and objectives, justification
xxi

and limitations of this research. Chapter 2: The second chapter is the literature
review of this study. It will be about the works of various authors and scholars
who have highlighted and discussed about the theories of the topic from
different dimension. Chapter 3: This third chapter will discuss the research
method that will be used in this research paper. Research method allows the
researcher to plan and design the whole research in a proper way and shows
the right direction to achieve an outcome. So the chapter explains the reasons
behind the use of selected research method and the advantages by using the
specified research approach. Chapter 4: This chapter will analyze the data to
provide a fruitful meaning of the research finding. Chapter 5: This chapter will
discuss research recommendations, limitations, and further research on this
topic and also describe how managers can get benefit or managerial
implications of this paper.

CHAPTER TWO
LITERATURE REVIEW
2.1

Introduction

To date, accounting information systems (AIS) research has not matured to


the point of having a framework to describe its research areas nor the major
constructs under investigation. As a result, it is difficult to identify areas for
future research and relationships between research streams.

xxii

In an effort to propel the study on the part of determining whether or not


computerised accounting information is useful to the development of small
and medium business, a critical review of a good number of related works on
the subject area are carried out. Computerised Accounting Systems (CAS),
however, is widely used in many corporate bodies including SMEs. For
example, in Australia, the Yellow Pages (1997) reported that 76% of the small
businesses surveyed had at least one computer and 75% of these used
accounting software. Burgess (1997) in a review of IT adoption by Australian
small businesses concluded that the main software application package used
was accounting (Burgess 1997 and Wenzler 1996). In general, an information
system is used to represent real world phenomena with a set of symbols that
are themselves captured and implemented within a computerised environment
(McCarthy 1979). Therefore, an accounting information system is one that
translates representations of economic activities into a format that is valuable
to accountants and to their customers -- i.e., business decision makers -- who
need information about economic activities.

Accountants are being pressured to re-define their contribution to


organizations and to expand the scope of their activities beyond financial
statement preparation and analysis (Elliott 1994, Brecht and Martin 1996).
According to ISAB Framework for preparation and presentation of financial
statement, the objective of financial statements is to provide information about
the financial position, financial performance and changes in financial position
of a company that is useful to a wide range of users in making economic
decisions. These financial statements are usually directed towards the common
information needs of these users and as a result, it serves as their major source
of financial information. Users of these financial statements include
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shareholders, prospective investors, employees, customers and government.


The act of communicating financial information to these users is known as
Financial Reporting. By these problems under study is linked with existing
theories and the works of scholars relating to similar issue so as to smoothen
the part on which the study will be propelled.

Specifically, this chapter is prepared to carefully conceptualise computerised


accounting information in 2.2, define and describe small and medium
enterprises in 2.3, identify the peculiar small business challenge and failure in
Ghana in 2.4, carry out an empirical review of relevant related literatures in
2.5, identify the role of computerised accounting information in improving the
performances of SMEs in 2.5.1, identity the role of computerised accounting
information in expansion of SMEs in 2.5.2, outline the process for creating
computerised accounting information in 2.6, pin pointed the importance of
small businesses to Ghanaian economy in 2.7 and finally a summary of the
chapter would be carried out to outline the major issues addressed by the
chapter.

2.2

The concept of Computerised accounting information

Information generally refers to processed data or the finished product of a


series of processes, inherent in the processing of raw data, which is capable of
inducing some action on the part of the recipient. An accounting information
system is one that captures, stores, manipulates, and presents data about an
organizations value-adding activities to aid decision makers in planning,
monitoring, and controlling the organization i."

This definition certainly

includes financial accounting systems, which have the primary purpose of

xxiv

generating financial statements in accordance with Generally Accepted


Accounting Principles. However, this definition recognizes that businesses
must perform a wide range of value-adding activities (such as production,
distribution, sales, etc.) to be successful, and that the types of information
needed to manage such activities will be extensive. Therefore, the scope of
corporate systems that are included under the AIS umbrella is much broader
than the general ledger system and the programs that prepare journal entries to
feed it. Rather, AIS is a system that aids in processing transactions and in
tracking the data that result from such transactions. These systems also must
provide performance measurements (financial and non-financial) and help
enforce management control objectives. They include transaction processing
systems (such as billing systems for sales processes), inter-organizational
systems that share data with upstream and downstream partners (such as webbased order systems and electronic data interchange cash receipt processing),
and support systems that enable economic exchanges (such as order
processing,

customer

market

analysis,

and

inventory

control

systems).Computerised accounting information therefore could be viewed as


information derived from the processing of economic events or financial
transactions of a business entity in such a manner that the recipient of such
information can derive utility from the consumption of such information.
Glautier et al. (2011), attest to this by asserting that the relevance and
usefulness of computerised accounting information entails beyond purely
operational consideration to an evaluation of the degree to which the needs of
the users of computerised accounting information are satisfied.

According to Frank W. (2012) accounting information system (AIS) is the


total suite of components that, together, comprise all the inputs, storage, and
xxv

transaction processing, collecting and reporting of financial transaction data. It


is, in effect, the infrastructure that supports the production and delivery of
accounting information. The objective of an accounting information system is
to collect and store data about accounting transactions so as to generate
meaningful output for decision making.

Accounting Software on the other hand is a class of computer programs that


perform accounting operations. Accounting Software is an application
software that records and processes accounting transactions within functional
modules such as accounts payable, accounts receivable, payroll, and trial
balance. Thus, these software packages allow the whole accounting system to
be run on a computer hence the name Computerised Accounting System.
(Daniel Bricklin, 1985)

The processing of these economic events is capture in the definition of


accounting by the America Institute of Certified Public Accountants [AICPA],
(1961). The institute defined accounting as the art of recording, classifying
and summarising in a significant manner and in terms of money, transactions
and events which are in part or at least of financial character and interpreting
the results thereof. This process describes the series of activities and
procedures

carried out to produce useful computerised

accounting

information. Such information could be derived from financial, costing and


management accounting techniques used to capture and process economic and
financial data of a business.

Financial accounting technique creates computerised accounting information


(for both internal and external users) via the preparation, analysis and
xxvi

interpretation of financial statements such as the income statement(Statement


of Financial performance/Comprehensive Income), cash flow statement,
balance sheet(statement of financial position),Value Added statement,
Explanatory

Notes

Accompanying

Financial

statements,

Historical

Summary/comparative financial Statements and so on. Meighs et al. (2001)


defines financial computerised accounting information as information
describing the financial resource, obligation and economic activities of an
entity. Such information are usually revealed in the financial position, which
describe an entitys financial resources and obligation at a point in time, and
results of operation which describe an entity financial or economic activities
during the year. Lately, Vitez (2010) reviewed that paper ledgers, manual
spreadsheets and hand-written financial statements have all been translated
into computer systems that can quickly present individual transactions into
financial reports. Computerised Accounting Systems follow the same logic of
journal, ledgers, reports and statements in a manual system. Computerised
systems simply consolidate posting functions and other basic tasks into a
"behind the scenes" System. Companies can also generate reports and
financial statements easier, allowing for better performance management
reviews. Computerised Accounting System is therefore a computer based
system which combines accounting principles and concepts as well as the
concept of information system to record, process, analyse and produce
financial information to its users for making economic decisions. (Gelinas et
al, 2005)
Figure 2.1 a computerised Accounting Information system model
STORAGE

INPUT

PROCESSI
NG
xxvii
USERS

OUTPUT

Feedback

Feedback

(Gelinas et al, 2005)


Raymond and Bergeron (1992) researched into the increasing rate of adoption
of Computerised accounting information among SMEs and concluded that, the
advent of powerful, low cost microcomputers, together with user-friendly
accounting software and the benefits associated with the use of AIS, has
allowed a greater number of SMEs to implement IT in recent years. Therefore,
AIS adoption among corporate bodies in general is as a result of combination
of different factors as well as the benefits associated with such. Cost
accounting techniques on the other hand are used to produce useful
information for internal management to aid the control of various costs
incurable in the course of running a business. Glautier et al. (2011) opined that
cost management is a key success factor requiring information for product and
service monitoring as well as cost control.
Management accounting uses both financial and costing techniques and/or
information in providing solutions to business problems when faced with
alternative course of actions (Adeniyin, 2011). Meighs et al. (2001) argued
that management accounting involves the development and interpretation of
computerised accounting information intended specifically to aid management
in running the business. The owner/manager uses this information in setting an
entitys overall goal, evaluating performance of departments and individuals,
deciding whether to introduce a new line of product and in making virtually all
types of management decisions.

However, to increase the effectiveness and efficiency with which useful


computerised accounting information is provided to users, a suitable
xxviii

computerised accounting information system (AIS) must be put in place.


Meighs et al. (2001) defined an accounting system of one consisting of
personnel, procedures, devices and records used by an entity to; develop
computerised accounting information and to communicate these information
to decision makers.

A computerised accounting information system provides all forms of


computerised accounting information needed by users. It captures information
on the profitability, liquidity and health position of a business. (Diamand et al.,
2000; Okoli, 2012). Worthy of note also is the automation of accounting
system that has helped in improving the speed and accuracy with which
accounting reports are prepared.

To wrap it up, nearly everyone uses

computerised accounting information in reality. It is simply the means by


which we measure and communicate economic events (Meighs et al., 2001). It
links decision makers with economic activities and the result of their
decisions. Computerized Accounting Information Systems are important to
businesses in various ways. The use of computers is time-saving for
businesses and all financial information for the business is well organized
(Baren, 2010).

Exhibit 2.2 an Integrated Computerised accounting Information system

Sales order
Processing

Invoicing

Inventory
Control
Purchase
Order
xxixProcessing

Sales
Ledger

Purchase
Ledger

Payroll
GENERAL
LEDGER

Frank W. & Sangster A (2012)

Exhibit 2.2 includes a payroll module .Business with a large number of


employees would find this particularly useful as a payroll systems require a
good deal of regular processing and again a reasonable knowledge of payroll
is required in order to set up the system in the first place.

2.3
The Concept/Definition of Small and Medium Scale
Enterprises
There is no single, uniformly acceptable, definition of a small firm (Storey,
1994).
Firms differ in their levels of capitalisation, sales and employment. Hence,
definitions which employ measures of size (number of employees, turnover,
profitability, net worth, etc.) when applied to one sector could lead to all firms
being classified as small, while the same size definition when applied to a
different sector could lead to a different result. The first attempt to overcome
this definition problem was by the Bolton Committee (1971) when they
formulated an economic and a statistical definition.
Under the economic definition, a firm is regarded as small if it meets the
following three criteria:

xxx

i.
ii.

it has a relatively small share of their market place;


it is managed by owners or part owners in a personalised way, and not

iii.
iv.

through the
medium of a formalised management structure;
It is independent, in the sense of not forming part of a large enterprise.

The Committee also devised a statistical definition to be used in three main


areas:
i.

Quantifying the size of the small firm sector and its contribution to

ii.

GDP, employment, exports etc.


comparing the extent to which the small firm sectors economic

iii.

contribution has
Changed over time;
applying the statistical definition in a cross country comparison of the
small firms economic contribution.

Thus, the Bolton Committee employed different definitions of the small firm
to different sectors. Alternatively, Wynarczyk et al (1993) identified the
characteristics of the small firm other than size. They argued that there are
three ways of differentiating between small and large firms. The small firm
has to deal with:
i.
ii.
iii.

uncertainty associated with being a price taker;


limited customer and product base;
uncertainty associated with greater diversity of objectives as compared
with large Firms.

As Storey (1994) stated, there are three key distinguishing features between
large and small firms. Firstly, the greater external uncertainty of the
environment in which the small firm operates and the greater internal
consistency of its motivations and actions. Secondly, they have a different role
in innovation; small firms are able to produce something marginally different,
in terms of product or service; this differs from the standardised product or
service provided by large firms. A third area of distinction between small and
xxxi

large firms is the greater likelihood of evolution and change in the smaller
firm; small firms which become large undergo a number of stage changes. It
was against this background that the European Commission (EC) coined the
term `Small and Medium Enterprises (SME). The SME sector is made up of
three components:
i.
ii.
iii.

firms with 0 to 9 employees - micro enterprises


10 to 99 employees - small enterprises
100 to 499 employees - medium enterprises.

Thus, the SME sector is comprised of enterprises (except agric, hunting,


forestry and fishing) which employ less than 500 workers. In effect, the EC
definitions are based solely on employment rather than a multiplicity of
criteria. Secondly, the use of 100 employees as the small firms upper limit is
more appropriate given the increase in productivity over the last two decades
(Storey, 1994:13). Finally, the EC definition did not assume the SME group is
homogenous, that is, the definition makes a distinction between micro, small,
and medium sized enterprises
.
However, the EC definition is too all-embracing for a number of countries.
Researchers would have to use definitions for small firms which are more
appropriate to their particular `target group (an operational definition). It must
be emphasized that debates on definitions turn out to be sterile unless size is a
factor which influences performance. For instance, the relationship between
size and performance matters when assessing the impact of a credit
programme on a targeted group.(also refer to Storey, 1994).

According to World Bank since 1976 - Firms with fixed assets (excluding
land) less than US$ 250,000 in value are Small Scale Enterprises. Grindle et al
(1989:9-10) - Small scale enterprises are firms with less than or equal to 25
xxxii

permanent members and with fixed assets (excluding land) worth up to US$
50,000. USAID in the 1990s - Firms with less than 50 employees and at least
half the output is sold (also refer to Mead, 1994).
UNIDOs Definition for Developing Countries:
i.
ii.
iii.
iv.

Large - firms with 100+ workers


Medium - firms with 20 - 99 workers
Small - 5 - 19 workers
Micro - < 5 workers

UNIDOs Definition for Industrialised Countries:


i.
ii.
iii.

Large - firms with 500+ workers


Medium - firms with 100 - 499 workers
Small - 99 workers

From the various definitions above, it can be said that there is no unique
definition for a small and medium scale enterprise thus, an operational
definition is required. A point of caution is that the process of valuing fixed
assets in it poses a problem. Secondly, the continuous depreciation in the
exchange rate often makes such definitions out-dated. Steel and Webster
(1990), Osei et al (1993) in defining Small Scale Enterprises in Ghana used an
employment cut off point of 30 employees to indicate Small Scale Enterprises.
The latter however disaggregated small scale enterprises into 3 categories:
i.
ii.
iii.

micro -employing less than 6 people;


very small, those employing 6-9 people;
Small -between 10 and 29 employees.

The choice of small and medium scale enterprises within the industrial sector
is based on the following propositions:
(a) Small and Medium Scale Enterprises

Mobilise funds which otherwise would have been idle;


Have been recognised as a seed-bed for indigenous entrepreneurship;

xxxiii

SMEs are labour intensive, employing more labour per unit of capital

than large enterprises


SMEs Promote indigenous technological know-how;
Are able to compete (but behind protective barriers);
Use mainly local resources thus have less foreign exchange

requirements;
Cater for the needs of the poor and;
Adapt easily to customer requirements (flexible specialisation).

These enterprises have been recognised as the engines through which the
growth objectives of developing countries can be achieved. They are potential
sources of employment and income in many developing countries. It is
estimated that SMEs employ 22% of the adult population in developing
countries (Daniels, 1994; Daniels & Ngwira, 1992; Daniels & Fisseha, 1992;
Fisseha, 1992; Fisseha & McPherson, 1991; Gallagher & Robson, 1995)

Every company applies accounting because it is generally accepted that


companies have to reveal certain financial and management information to
economic users and of course because accounting is an indispensable tool in
business decision-making process. Accounting is an important part of every
company thus; businesses are required to keep proper books of accounts
(Section 123 of the Companies Code (1963), Act 179). Accounting can be
divided into two basic categories: those which apply manual accounting and
those which prefer computerized accounting systems (Weber, 2010).

Furthermore, Kpelai (2009) defined small business as group of businesses


whose scale of operations are less than average for the industry, where
managers are, at least, co-owners and provide substantial part of the start-up

xxxiv

capital. He further outlined the characteristics of small businesses, which


include the following;
i.

One individual/family often holds ownership and management

ii.

hence decisions are subjective


Small businesses require small capital base in general. However,
they have difficulty in attracting funds for expansion as a result of
which majority of them

rely heavily on personal sources

(Ogunleye 2000:28)
iii.

Most small business operate labour intensive production

iv.

The manager/proprietor hardly can separate his private funds and


these contradict the accounting entity principle which could
contribute to inefficiency and non-performance of many small
businesses.

v.

The rate of small business mortality is high.

vi.

Small and medium business could take the form of sole


proprietorship, partnership or a private limited liability company.

Traditional small businesses which have little growth potentials include:


barbing shops, shoe repair shop, small farm holders using traditional
implements, bricks/block making, animal husbandry, poultry and so on. They
are mostly operated and manage by the owner and take the form of sale
proprietorship. High growth businesses on the other hand are categories of
small businesses with high growth potentials. They employ advance
technology in their production process in order to remain competitive in the
market and they are run by teams of management expert. Their rate of growth
makes them cross easily to medium and large scale business in a short period
of time. Kpelai (2009) outline examples of such businesses to include;
xxxv

computer and information technology related enterprises, fast food industries,


telecommunication accessories industries etc. Just like small business, the
capital based, number of employees, level of sophistication of technology,
legal form etc are criteria's used to define medium scale businesses.

Finally most medium scale business in Ghana take the form of private
companies and engage in businesses within the manufacturing, trading and
even the support the trade sector such as transportation, telecommunication
etc.

2.4

Peculiar Small Business Challenge and Failure in Ghana

Despite the wide-ranging economic reforms instituted in the region, SMEs


face a variety of constraints owing to the difficulty of absorbing large fixed
costs, the absence of economies of scale and scope in key factors of
production, and the higher unit costs of providing services to smaller firms
(Schmitz, 1982; Liedholm & Mead, 1987; Liedholm, 1990; Steel & Webster,
1990).
Below is a set of constraints identified with the sector.
i.

Input Constraints: SMEs face a variety of constraints in factor


markets (also see Levy, 1993). However, factor availability and cost
were the most common constraints. The specific problems differed by
country, but many of them were related, varying according to whether
the business perceived that their access, availability or cost was the
most important problem and whether they were based primarily on
imported or domestic inputs (World Bank, 1993; Parker et al, 1995).
SMEs in Ghana and Malawi emphasised the high cost of obtaining

xxxvi

local raw materials; this may stem from their poor cash flows (Parker
et al, 1995). Aryeetey et al (1994) found that 5% of their sample cited
the input constraint as a problem.
ii.

Finance: Access to finance remained a dominant constraint to small


scale enterprises in Ghana. Credit constraints pertaining to working
capital and raw materials were cited by respondents (between 24% and
52% in Parker et al, 1995). Aryeetey et al(1994) reported that 38% of
the SMEs surveyed mention credit as a constraint , in the case of
Malawi, it accounted for 17.5% of the total sample(Daniels & Ngwira,
1993:30-31). This stems from the fact that SMEs have limited access
to capital markets, locally and internationally, in part because of the
perception of higher risk, informational barriers, and the higher costs
of intermediation for smaller firms. As a result, SMEs often cannot
obtain long-term finance in the form of debt and equity.

iii.

Labour Market: This seems a less important constraint to SMEs


considering the widespread unemployment or underemployment in
these countries. SMEs generally use simple technology which does not
require highly skilled workers. However where skilled workers are
required, an insufficient supply of skilled workers can limit the
specialisation opportunities, raise costs, and reduce flexibility in
managing operations. Aryeetey et al (1994) found that 7% of their
respondents indicated that they had problems finding skilled labour,
and 2% had similar problems with unskilled labour.

iv.

Equipment & Technology: SMEs have difficulties in gaining access


to appropriate technologies and information on available techniques.
This limits innovation and SME competitiveness. Besides, other
constraints on capital, and labour, as well as uncertainty surrounding
xxxvii

new technologies, restrict incentives to innovation. 18% of the sampled


firms in Aryeetey et al (1994) mentioned old equipment as one of the
four most significant constraints to expansion (18.2% in Parker et al,
1995).
v.

Domestic Demand: 5% of Ghanaian proprietors indicated they had


marketing constraints (Aryeetey et al, 1994; Daniels & Ngwira, 1993).
The business environment varied markedly among SMEs in Ghana,
reflecting different demand constraints after adjustment. There were
varying levels of uncertainty caused by macroeconomic instability and
different levels of government commitment to private sector
development. Recent economic policies have led to a decline in the
role of the state in productive activity but a renewed private investment
has created new opportunities for SMEs. Nonetheless, limited access to
public contracts and subcontracts, arising from cumbersome bidding
procedures and/or lack of information, inhibit SME participation in
these markets. Also, inefficient distribution channels often dominated
by larger firms pose important limitations to market access for SMEs.
As noted in the case of Ghana, demand constraints limited the growth
of SMEs (Parker et al, 1995).

vi.

International Markets: Previously insulated from international


competition, many SMEs are now faced with greater external
competition and the need to expand market share. However, this
problem was mostly identified in medium-sized enterprises in Ghana
(12.5% in Aryeetey et al, 1994:13), less than 1% of the total sample
complained there were too many imported substitutes coming into the
country. Daniels & Ngwira (1993). However, Riedel et al (1988)
reported that Tailors in Techiman (Ghana) who used to make several
xxxviii

pairs of trousers in a month went without any orders with the coming
into effect of trade liberalisation. Limited international marketing
experience, poor quality control and product standardisation and little
access to international partners, impede expansion into international
markets. It is reported that only 1.7% of firms export their output
(Aryeetey et al, 1994).
vii.

Regulatory Constraints: Although wide ranging structural reforms


have improved, prospects for enterprise development remain to be
addressed at the firm-level.

viii.

Legal: High start-up costs for firms, including licensing and


registration requirements can impose excessive and unnecessary
burdens on SMEs. The high cost of settling legal claims and excessive
delays in court proceedings adversely affect SME operations. In
Malawi, prohibitive laws like The Business Licensing Act, The
Electricity Act, The Control of Goods Act, and The Export Incentives
Act, have severely constrained SME development (Makoza &
Makoko, 1998). 5.3% of proprietors in Malawi mentioned this as a
constraint (Daniels & Ngwira, 1993). In the case of Ghana, the
cumbersome procedure for registering and commencing business were
key issues often cited. However, Aryeetey et al (1994) found that this
accounted for less than 1% of their sample. Meanwhile, the absence of
antitrust legislation favours larger firms, while the lack of protection

ix.

for property rights limits SME access to foreign technologies.


Managerial Constraints (Lack of Entrepreneurial & Business
Management Skills): Lack of managerial know-how places significant
constraints on SME development. Even though SMEs tend to attract
motivated managers, they can hardly compete with larger firms. The
xxxix

scarcity of management talent, prevalent in most countries in the


region, has a magnified impact on SMEs. The lack of support services
or their relatively higher unit cost can hamper SME efforts to improve
their management because consulting firms often are not equipped
with appropriate cost effective management solutions for SMEs.
Furthermore, absence of information and/or time to take advantage of
existing services results in weak demand for them. Despite the
numerous institutions providing training and advisory services, there is
still a skills gap among the SME sector as a whole. According to
Daniels & Ngwira (1993), about 88% of Malawian SMEs desired
training in various skills but as of 1992, less than 6% have actually
received it. In Ghana, a lot has actually been achieved in this regard,
though there is still room for improvement.
x.

Institutional Constraints: The lack of cohesiveness and the wide


range of SME interests limit their capacity to defend their collective
interests and their effective participation in civil society.

xi.

Associations and collective action: Associations providing a voice for


the interests of SMEs in the policy-making process have had a limited
role compared to those of larger firms. Many of the entrepreneurs
associations have yet to complete the transition of their goals from
protectionism to competitiveness (World Bank, 1993). Additionally,
the potential economies of collaborative arrangements in production
and sales among SMEs have not been adequately explored.

The dependence of the SME sector in Ghana on large-scale enterprises as


purchasers of output, either for sale, as final goods or to be used as
intermediate inputs, is very limited. Only 13% of firms produce any item for
xl

or component for larger firms. Interdependence among SMEs is very minimal.


As reported in Osei et al (1993), only 17.6% of firms with growing output and
8.4% of those whose output stagnated have other SSEs as customers.

Lately Moris (2007) posit that small businesses have some inherent
disadvantageous characteristics that will require that they be provided with
public support. The basic challenges faced by small business include:
a) Poor record keeping and inefficient use of computerised accounting
information (Berryman 1982; Walton 2000; World Bank 1978). Also,
Byron and Firedlob (1984) posited that SMEs owners/managers lack
the technique for using financial statements or simply are unaware that
they can use them to support their financial and other business
decisions.
b) Inadequate managerial ability resulting from huge knowledge gaps.
Most promoters of small and medium businesses do not know how to
make and use computerised accounting information (Abdurasheed et
al., 2012)
c)

Weak financial capacity to undertake research and development or


costly support service such as business development service (BDS).
These could make such business vulnerable to stunted growth and
eventual failure.

d)

Poor credit rating by financial institutions induced by poor financial


strength, poor record keeping or the absence of adequate accounting
system that could produce computerised accounting information
needed by these institution for granting loans.

e)

Inability of some small business to hire and pay qualified accountants

xli

f)

Poor financial control which makes room for fraudulent activities that
affect the survival of small businesses.

g)

Lack of business connection resulting from inability of the


entrepreneur to foster good relationship with customers and creditors.

To add to the foregoing, empirical studies has revealed that a paramount


inhibiting factor affecting the development of small business is their failure to
explore the information resource embedded in an effective, efficient and
standardize computerised accounting information system (Okoli, 2012). Ismail
and King (2007) opined that SMEs in sub-Saharan Africa have not developed
their AIS system to optimal level whereby they can enjoy the full benefit of it.
Naruanord (2003) posited that although most SMEs, prepare account for
statutory purpose, many fail to use these reports. He argued that SMEs
owners/managers either lack the technique for using financial statement or
simply are unaware that they can use them to support their financial and other
business operations.

He further argued that, poorly prepared computerised accounting information


render most SMEs unable to evaluate their own financial situation, or to
demonstrate viability and/or to facilitate loan financing. This situation causes
improper financial decisions and ends up with low performance and high
failure rate. World Bank (1978) cited in Nuranard (2003) stated that poor or
inadequate record keeping 0f computerised accounting information make it
difficult for financial institutions to evaluate potential risk and returns of
SMEs, thus making them unwilling to lend to SMEs.

xlii

2.5

Empirical Review

The consideration of small and medium enterprises as a means for inducing


economic growth and alleviating the high rate of poverty in the country by
providing gainful employment to the Ghanaian populace has drawn the
attention of a number of researchers to the sub-sector.

Oko and Uzoka (2012) carried out a study on the role of computerised
accounting information in the survival of small scale business in WarriNigeria, which employed the use of chi-square statistical technique to analyze
the data. The findings of their work showed that the success of small scale
business enterprises depends greatly, but not solely, on computerised
accounting information. Okoli (2012), worked on the use of Computerised
accounting information of an Aid to management decision making, using the
analysis of variance model (ANOVA) to analyze collected data. Her findings
showed that a good accounting system result in higher profit margin over the
years, thus concluding that weak accounting system should be eradicated.

Also, Abdurasheed et al. (2012) carried out a study on accounting principles of


small enterprises in Ilorin metropolis of Kwara State in Nigeria. The least
square linear regression model was employed in the study to test formulated
hypothesis, which was run on statistical package for social science (SPSS).
The findings of the study showed that accounting records has great influence
on the effective operation of small businesses and thus recommended for the
use of good accounting practice by small businesses. In relation to this, is the
work of Nurannard (2012) on the use of financial information in financial

xliii

decision of SMEs in Thailand His studies revealed that SME performance is


influence by
i.
ii.
iii.
iv.
v.

demand for products


management
experience in a particular industry
capital invested
Record-keeping etc.

Other works on the research variable include; that Osilimehin et al; (2012), on
the challenges and prospects of Micro and small scale enterprises in Nigeria
which revealed that financial constraint and lack of management skill hamper
the efficient performance of micro and small scale enterprises in Nigeria.
Shanker, (2012) carried out a study on the advantages of computerised
accounting information to small business. His study revealed that
computerised accounting information is beneficial to small business in several
ways such as; provision of reliable data on business operation, facilitating
business decision making, and aiding control of business activities.

Micholls and Homes (2013) carried out a study on an analysis of the use of
computerised accounting information by Australian small business, by
conducting a survey on small businesses within the country. The study
revealed that most small business within the industry do not prepare and make
use of computerised accounting information prepared in accordance to
standard accounting practice.
Worthy of note also is the work of Gibson and Wallschutzky (2013) which
carried out a study on the use of computerised accounting information in
decision making in small firms, using structured small business owners for a
twelve months period, found that few of the participating firms identified
access to computerised accounting information as important when making
xliv

strategic decisions. The study also revealed that some small firm
owners/managers use some business information for routine control decision.

However, the resulting gap from the above analysis is that the extent to which
the utilization of computerised accounting information influence the
development (in

terms of improved profitability) of SME has not been

empirically assessed, thus inducing the researcher to empirically examine the


usefulness of computerised accounting information to the development of
small and medium scale enterprises.

2.5.1
The Role of Computerised accounting information on the
Improvement of the Performance of Small and Medium Enterprises
in Ghana
A careful review of related literature on the problem under study shows
extensive emphasis on the relevance of computerised accounting information
to the activities of small business and consequently, its survival and
development. It is particularly useful to small business activities such as;
inventory control, resource allocation, monitoring and control, evaluation of
performance etc.The use of computers is time-saving for businesses and all
financial information for the business is well organized (Baren, 2010).

A Computerised Accounting System enables businesses to stay organized.


When information is entered into the system, it makes finding the information
easy. Employees can look up any financial information whenever it is needed.
There is less room for errors as only one accounting entry is needed for each
transaction rather than two (or three) for a manual system. The accounting

xlv

records are automatically updated and so account balances (e.g. customer


accounts) will always be up-to-date.

Storing information is vital to a business. After information is entered into the


system, the information is stored indefinitely. Companies perform backups on
the system regularly to avoid losing any information. The introduction of
Computerised Accounting Systems provides the ability to see the real-time
state of the companys financial position.

Computerised Accounting Systems allow companies to distribute financial


information easily. Financial statements are printed directly from the system
and are distributed internally and externally to those needing the information.
Reports can be produced which will help management monitor and control the
business, for example the aged debtors analysis will show which customer
accounts are overdue, trial balance, trading and profit and loss account and
balance sheet. In effect, Computerised Accounting information enable
financial statements to be prepared and presented to meet the relevance and
faithful representation criteria of financial statements.

Glatier et al. (2011) argued that computerised accounting information could


help a businesss manage short-term problems in areas such as costing,
expenditure and cash flow by providing information to support monitoring and
control. Okoh and Uzoka (2012) posited that management of personnel, use of
computerised accounting information and financing options are areas that
must be taken seriously for effective management and survival of small
businesses.

xlvi

Abdurasheed et al. (2012) also argued that small business owners and
managers must be able to read between the lines of their financial statement,
implying the need for adequate and comprehensive analysis and interpretation
of accounts. He further opined that good accounting practices allows for
creation of useful computerised accounting information that could help
improve the effective operation of small and medium enterprises.

Narunard (2003) posits that the relevance of computerised accounting


information to small business performance lies in its use to assess the
profitability of alternative course of action, measure performance and evaluate
the position of the enterprise in terms of profitability, liquidity, solvency and
leverage. Computerised accounting information can be used to improve SME
performance by facilitating proper financial decisions. For instance, different
capital structures cause different degrees of financial risk; difference financial
plans affect SMEs performance differently. Thus proper accounting is a key to
small business success (Wichman, 1983). Oko and Uzoka (2012) argued that
without proper knowledge of accounting one will find it difficult to provide
adequate administrative management that will ensure the survival of small
businesses.

He outlined the role of computerised accounting information on the


improvement of the performance of small scale firms under the following
heads;
i.

As a tool for control: Book-keeping aspect of accounting helps


guard against petty dishonesty and incompetence commonly
displayed by employees of small scale enterprises. Business
enterprises normally have assets like; cash, stock of goods,
xlvii

furniture, buildings, machinery etc thus making it imperative for a


proper accounting system to be installed to ensure that each and
every item is accounted for with a view to reducing opportunities
for theft and mis-appropriation and to ensure economic expense as
the employees knowing that every item has been recorded and will
be accounted for will be careful in handling all business properties.
ii.

Assistance in credit dealings; most of todays businesses are


conducted on credit basis. A trader, more often than not finds
himself with two alternatives either to extend credit facilities to his
customers or not to. As a result the firm need to keep track of its
debtors. This necessitates the use of accounting technique such as
the debtors ledger to keep track of such customers that owe the
firm. This improves the firm by increasing sales and reducing
incidence of financial losses from credit dealings.

iii.

Assisting in taxation matters; The government charges taxes of


various types e.g. Gift tax, Value Added Tax, Income tax ,Capital
gains tax, custom duty, excise duty etc to be able to calculate and
pay the correct amount of tax due, an entrepreneur must know his
exact sales figure hence the need for accurate accounts. Absence of
proper accounts can easily lead to over taxation a situation which
can be very unpleasant.

Iv.

Assistance in determination of profit; the ultimate objective of all


business

undertakings is to make profit. It would be difficult to

ascertain whether a business is making profit or loss without the


help of complete up-to-date accounts. Also small business owner
who depend on their business as a source of livelihood might end
xlviii

up eating into their capital if they dont know the profitability of


their businesses.

2.5.2 The Role of Computerised accounting information in


Expansion of SMEs
Empirical studies shows that computerised accounting information facilitate
the expansion of SME in diverse ways. Glautier et al. (2011) opined that
computerised accounting information allows for efficient and effective
allocation of resources of small businesses which could lead to improved
performance in the form of expansion in profit level.

Diamond et al. (2007) is of the view that computerised accounting information


is vital to the expansion of small businesses as well as the expansion and
diversification programmes of SMEs. It reveals availability of fund and future
or forecasted profit of an investment to be embarked on, which guides
expansion decisions of SMEs.

Okwoli (2012) specifically narrowed the role of computerised accounting


information in expansion of SMEs to decision making. She opined that
computerised accounting information is a veritable tool for making effective
small business decisions that would allow for growth and expansion of such
small business. Such decisions are usually based on budgets and adequate
planning, which make use of accounting data like available funds, cost of
investment, forecasted profits etc. Ademola et al. (2013) specifically outline
the role of computerised accounting information in expansion of SME to
include;

xlix

i.

Sourcing of loans: Computerised accounting information reveals


the performance and financial position of an enterprise and thus
reveals the enterprise ability to pay back a collected loan. This
makes banks and other financial institutions to request for financial

ii.

statement which they study before granting a loan.


Efficient and effective allocation of resources: Computerised
accounting information allows for efficient and effective allocation
of resources as it shows the result of each venture embarked on,
thus influences investment and divestment decisions via-a-vis the
profitability of such venture.

iii.

Influences willingness to Invest: Computerised accounting


information relates profitability of SMEs to their growth capacity and
consequently influences expansion in areas that have proven
profitable bearing in mind the capacity in the computerised
accounting information system of such enterprises.

iv. Planning Internal Expansion: Computerised accounting information of


SMEs such as sales record shows product with higher demands, thus
inducing expansion in that direction. Customer order also guide
manufacturing in terms of quantity or planning production schedule
v.

Starting a new business: This is another aspect in which computerised


accounting information plays a significant role in expansion of small
businesses. It provide information such as start-up cost, starting
capacity of the SME, needed working capital, forecasted profits of the
SME etc which are all important factors to be considered when
establishing an SME.

vi. Production of information for small business decision making and


performance Assessment: Computerised accounting information of
l

SMEs such as sales record, operating cost, profitability etc provides


information needed for the assessment of the performance of SMEs,
thus influencing decisions such as; whether to continue a particular
business, increase capacity or whether to close a particular business
and move to other business that might be more lucrative.

2.6

Creating Computerised accounting information

The creation of computerised accounting information involves a series of


process. This process has been captured in the concept of accounting cycle.
Mergs et al. (2001) defined an accounting cycle as the sequence of accounting
procedures used to record, classify and summarise computerised accounting
information in financial reports at regular intervals. It involves the
accumulation of the effect of business transactions via accounting records, the
classification of such records with the use of ledgers and journals and the
summarisation of data captured on these transactions with the use of financial
statements such as the income statement (e.g. profit and loss account), cash
flow statement, balance sheet etc. According to Meigs et al. (2001) accounting
cycle generally consist of eight specific steps viz;
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.

Journalize (record) transactions


Post each journal entry to the appropriate ledger account
Prepare a trial balance
Make end-of-period adjustments
Prepare adjusted trial balance
Prepare financial statements
Journalizing and posting closing entries
Prepare an after-closing trial balance.

However, the creation of computerised accounting information does not stop


at the preparation of financial statements. Such statement needs further
processing via analysis and interpretation that will aid the provision of

li

computerised accounting information in a form that its users would derive


maximum utility from its consumption. Such analysis and interpretation has to
be linked to the operation of a business in a manner that could reveal effects
on the operations of a business in terms of evaluation of performance, thus
increasing the utility content of such information. In view of these, the
creation of computerised accounting information involves the following
processes or stage;
i.

The identification of economic and financial events from source


via the instrumentation of source documents such as invoices,
receipts, debit notes, credit notes, vouchers cheques etc.

ii.

The capturing of such events as they occur via the use of subsidiary
books such as the sales day book; purchase day book, cash receipt book,
cheque payment book, petty cash book, general journal, nominal ledger,
debtors ledger, creditors ledger etc.

iii.

Preparation of ledger accounts such as expense account, asset


account, liability account etc which is the ultimate destination of all
entries recorded in the subsidiary books. It shows the result of
transactions and classifies economic transactions as well.

iv.

Preparation of trial balance to test arithmetical accuracy of entries in


the ledgers.

v.

The preparation of end of year accounts and statement to show the


result of business operations at the end of an accounting period.

vi.

The analysis and interpretation of such end of year statements to


ascertain the position of a business in terms of profitability, liquidity,
solvency, leverage, etc via the use of accounting ratio. These give more
information on growth and survival prospects of a business.

lii

vii. The presentation of such information in a form that would be easily


understandable by users
viii. The communication of such information to users such as owners,
managers employees and any other stakeholder that has an interest in the
business.

2.7

Importance of Small Business to the Ghanaian Economy

A thorough review of empirical works on Micro small and medium enterprises


will show that so much emphasis has been placed on the importance of SMEs
to economic development of a nation. It is interesting to note that small scale
enterprises make better use of scarce resources than large scale enterprises.
Research in Ghana and many other countries have shown that capital
productivity is often higher in SMEs than is the case with LSEs (Steel, 1977;
Child 1971). The reason for this is not difficult to see, SMEs are labour
intensive with very small amount of capital invested. Thus, they tend to
witness high capital productivity which is an economically sound investment.
Thus, it has been argued that promoting the SME sector in developing
countries will create more employment opportunities, lead to a more equitable
distribution of income and will ensure increased productivity with better
technology (Steel & Webster, 1991). Due to their flexible nature, SMEs are
able to withstand adverse economic conditions. They are more labour
intensive than larger firms and therefore, have lower capital costs associated
with job creation (Anheier & Seibel, 1987; Liedholm & Mead, 1987; Schmitz,
1995). SSEs perform useful roles in ensuring income stability, growth and
employment. Since SMEs are labour intensive, they are more likely to succeed
in smaller urban centres and rural areas, where they can contribute to the more

liii

even distribution of economic activity in a region and can help to slow the
flow of migration to large cities. Because of their regional dispersion and their
labour intensity, the argument goes; small scale production units can promote
a more equitable distribution of income than large firms. They also improve
the efficiency of domestic markets and make productive use of scarce
resources, thus, facilitating long term economic growth.

Naruanard (2003) argued that SMEs play important role in a nations economy
by virtue of the fact that they comprise majority of businesses in the nation
and contribute substantially to employment. He added that SMEs generate
employment, add improve labour skills and have linkages with large
enterprises. Osotimehin et al. (2012) opined that SMEs are catalyst in the
socio-economic development of any country. They are veritable vehicle for the
achievement of national macro-economic objective in terms of employment
generation at low investment cost. He further argued that SMEs contribute
substantially to GDP, export earnings, per capital income and output. It also
encourage the development of indigenous entrepreneurship, enhance regional
economic balance through industrial dispersal and generally promote effective
resource utilization that are considered to be critical in the area of engineering
economic development (Tolentino, 1996; Oboh, 2004; Odeh, 2005).

The importance of the small scale enterprise sector in the economic


development and growth of low income countries has been widely recognised
and need not be overemphasised. This sector has the potential for the future
growth of both employment and incomes as well as in alleviating urban and
rural poverty. In order for the sector to flourish, the playing field has to be

liv

levelled in terms of policies and strategies that are required to assist the sector
attain its full potential.
To wrap it up, Aborode 2005 cited in Okoh & Uzoka (2012) posited that the
importance of small scale enterprises can be seen in the vital role, which they
play in the development of the economy which includes;
1) Source of employment; over 70% of employed people in Africa are in
production in small businesses
2) Utilization of local raw materials, the raw materials used in production
in small businesses are obtained easily within the country. Money is
not spent on the importation of raw materials into the country thereby
reducing the amount of foreign exchange paid to foreigners
3)

They provide an effective means of stimulating indigenous


entrepreneurship

4)

Through their wide dispersal, they provides an effective means of


mitigating rural/urban migration and resource utilization

5)

By producing intermediate products for use in large-scale enterprises,


they contribute to the strengthening of industrial inter-linkages

6)

They also maintain a competitive advantage over larger enterprises


by serving dispersal local markets and produce various goods with
low scale economies for niche markets.

2.8

Summary of the Chapter

The review of relevant literatures on the variables of the study viz;


computerised accounting information and small business development reveals
some striking issues relating to the aforementioned variables. The review
shows that, although small and medium scale enterprises constitute a major
avenue for the development of a nation's economy, it has been faced with
lv

many setbacks that limit its ability to survive, grow and consequently impact
on the economy of a country. This is evidenced in the fact that several small
business established over time have failed to survive (kpelei 2009).

However majority of research attempt to show the link between these


phenomenon and accounting has centred on the accounting practice of such
firms. A particularly effort has not been made to reveal how accounting
impacts on small businesses vis-a-vis their development and this constitute a
gap on which knowledge has to be created. Also, to uncover the extent to
which accounting could help reduce the rate of small business failure and
influence their performance positively. The reviewed literature shows that
computerised accounting information plays some vital role in improving the
performance of small and medium businesses.

CHAPTER THREE
RESEARCH METHODOLOGY

3.0 Introduction
This chapter would present the method that was employed in the study. This
dealt with the research design, target population of study, sample selection and
design, data types, sources and method of data collection, validity and
reliability of data instrument, specification of variables employed, and
specification of model for data analysis, method of data analysis and limitation
of the study design.

lvi

3.1 Research Design


The survey design was employed for the study and this comprised both
analytical and descriptive types. The survey was considered appropriate
because it is ideal when there is the need to determine the objective, opinions,
impressions and values of a target group. This method enables the making of
generalizations about a population based on responses drawn from the
population. It is also suitable for large sample size (Frankel & Wallen 2003).

3.2 Sample Selection and Design


A sample is a limited number of elements selected from a population which is
a good representation of the target population(Akpa 2011).However, the nonrandom sampling technique was used to select a convenient sample of
forty(40) SME's comprising twenty(20) small business and twenty(20)
medium businesses. This sample size was selected base on accessibility and
availability of a working accounting system. The use of a large sample size of
selected 40 SMEs was induced by the need to reduce possibility of biased that
may result from the use of non-random sampling technique (see Appendix I
for list of selected SMEs)

3.3 Research Instrument


The main instrument for the data collection for the study was a structured
questionnaire. According to Frankel & Wallen (2003), a questionnaire is a
formalized set of questions for obtaining information from respondents. The
overriding objective is to translate the researchers information needs into a set
of specific questions that respondents are willing and able to answer. While
lvii

this may seem straightforward, questions may yield very different and
unanticipated responses. A questionnaire is the main means of collecting
quantitative primary data. A questionnaire enables quantitative data to be
collected in a standardized way so that the data are internally consistent and
coherent for analysis. The questionnaire is considered to be appropriate in
view of the level of intellectual capacity of the respondents who can provide
more answers. The questionnaire affords not only wider geographical
coverage than any other technique, but also reaches individuals who are
normally difficult to contact. A questionnaire is more adequate in situations in
which the respondents have the opportunity to check his or her information.

There are some weaknesses associated with the use of a questionnaire. The
format of questionnaire design makes it difficult for the researcher to examine
complex issues and opinions. Even where open-ended questions are used, the
depth of answers that the respondent can provide tend to be more-limited than
with almost any other method of research. This makes it difficult for a
researcher to gather information that is rich in depth and detail. Again, the
researcher hopes the questions asked mean the same to all the respondents as
they do to the researcher. This is a problem that can - to some extent - be
avoided by conducting a Pilot Study prior to conducting the real survey. The
questionnaire was developed based on the research questions and in sections.
Section A was based on personal data (Bio data) of respondents and section B
was base on questions that will enable the researcher to collect data on the
variables needed to complete the research. The questionnaire consisted of both
open and closed-ended questions. The closed-ended questions enabled more
flexibility in filling in. The open-ended on the other hand allowed opinions
lviii

and recommendations and for triangulation. Respondents were asked to select


options provided that best describe their responses. This was done to elicit the
appropriate responses from the respondents.

3.4 Validity and Reliability


There was the need to ensure reliability and validity of the data collection
instrument. To ensure that the research instrument must measure what is it
supposed to measure, the questionnaire was designed to reflect the research
questions the researcher intended to find answers to. There was the need to
ensure that the research instrument produce consistent result. As a result, the
questionnaire was tested on five (5) SME's randomly selected from Accra
metropolis. The pre-testing enabled the researcher to check the wording and
sequence of questions, the length of the questionnaire, clarity of instruments,
and effectiveness of the cover letter. This enabled the researcher to correct any
inconsistencies (unreliability) and inaccuracies in the instrument that was used
in the actual survey. Furthermore, very simple language was used in wording
the questions to facilitate easy understanding by respondents. This ensured
that the instrument elicit responses to measure variables that it is intended to
measure. To further enhance on the validity of the instrument, the items on the
questionnaire were formulated based on the research objectives.

In addition, the questionnaire was critically assessed by colleagues BBA


students and my supervisor. Their comments and suggestions helped in no
small way to correct the inconsistencies in the instrument. The reliability was
to make sure of reliability co-efficient and to achieve that the results was
censured by subjecting the field data to thorough editing to remove

lix

contradictions, errors and inconsistencies before analysing. All these were


employed for the consistency and of the instrument in the study; hence its
reliability and validity.

3.5

Specification of Variables Used

The study investigates the relationship that exist between CAI and the
development of SMEs, in terms of improved performance of SMEs, so as to
find out if CAI is useful to the development of SMEs. The variables for this
study are categorized into three viz: Independent variable, Dependent variable
and the control variables.

3.5.1 Independent Variable


The independent variable of the study is computerised accounting
information represented as (AI) and is measured in terms of rate of
consultation of computerised accounting information, number of source
documents in use, number of subsidiary books in use number of ledger
accounts in use, frequency of preparation of accounts and frequency of
audit of accounts. To quantify the rate of consultation of accounts,
frequency of preparation of account and frequency of account audit, the
questionnaire is structured in a way that respondents could show such
frequencies on; daily, weekly, monthly, quarterly, semi-annually, annually
and other basis which does not fall into this category. A daily frequency is
given a rank of 365, a weekly frequency is given a rank of 52, a monthly
frequency is given a rank of 12, a quarterly frequency is given a rank of 4,
a semi- annual frequency is given a rank of 2, and an annual frequency is
given a rank of 1. This ranking is based on the reasoning that there are 365
lx

days in a year, 52 weeks in a year, 12 months in a year, 4 quarters in a year,


2 semi-annual periods in a year and 1 annual period in a year. The
conversion of frequencies to annual basis was influenced by the fact that
the dependent variables (profit figures) were collected on annual basis.

3.5.2

Dependent Variable

The study has two dependent variables measuring SME development which
are; annual profit figures represented as (PF) and number of branches
represented as (NOB).

3.5.3 Control Variables


In order to establish the relationship between CAI and SME performance, it is
necessary to control for other factors that can affect SME performance. The
control variables are variables other than the independent variable that are
capable of affecting the dependent variable.

The control variable of these study are demand for the enterprises product
represented as (DE) and access to capital or capital investment represented as
(CI).

The demand for an enterprise product could influence profit and

consequently influence performance. Capital is a control variable since it is


needed for expansion of branch network. Performance and expansion of
branches are measures of SME development which are influence by demand
for product and capital investment; as such they represent factors other than
the independent variable that can influence the dependent variable. Demand

lxi

for enterprise product is measured by annual sales while capital investment is


measured by total current investment of the firm.

3.6

Specification of Models for Data Analysis

According to Quinlan (2011), data analysis can be classified into basically


four stages of procedures namely descriptive of the data, interpretation &
conclusions and theorisation of findings. Babbie (1993) defined a model as an
abstraction of reality. It represents a summary of what happens in a real world
(Alabar 2011). The model used for this study is expressed in implicit terms as
follows; small business development is measured in terms of profitability and
branch network, thus necessitating the development of two models to show the
relationship between the independent variable and the two dependent
variables.

Model 1: Small and medium enterprise development measured in terms of


profitability. For this model SME development is measured in terms of
profitability and is represented as (PF).Computerised accounting information
(independent variable) is measured in terms of rate of consultation of
computerised accounting information, expressed as (Rc), number of source
documents expressed as (Sd), number of subsidiary books expressed as (Sb),
number of ledger accounts expressed as (La), frequency of preparation of
accounts expressed as (Fpa), frequency of account audit expressed as (Faa).
Computerised accounting information as the independent variable is expressed
as (AI).
Thus computerised accounting information (AI) = Rc+ Sd+Sb+La+Fpa+Faa
Where:

lxii

i.
ii.
iii.
iv.
v.
vi.

Rate of consultation = (Rc)


number of source document = (Sd)
number of subsidiary books = (Sb)
number of ledger accounts = (La)
frequency of preparation of accounts = (Fpa)
frequency of account audit = (Faa)

However SME development (PF) is dependent on computerised accounting


information (AI) thus PF is a function of AI.
This is expressed mathematically as PF = f (AI) ---------------- (1)
Since;

AI = Rc + Sd+ Sb + La + Fpa + Faa


PF = f (Rc + Sd + Sb + La + Fpa + Faa) -------------------------(2)

Introducing the control variable and error term


PF = f (AI + DE + CI + ei) -------------------------------------------------------- (3)
PF= + 1AI + 2DE + 3CI + ei ----------------------------------------------- (4)
Where PF = SME development
B1, B2, B3 =the coefficients
= the intercept
AI = Computerised accounting information
DE = demand for enterprise product
CI = capital investment
ei = error factor
To be more direct on the research objective however this model will be
restated without the control variables as shown below;
PF = + B1Rc + B2Sd + B3Sb + B4La + B5Fpa + B6Faa + ei -----------------(5)

Model 2: Small and Medium Enterprise (SME) development measured in


terms of number of branches. For this model SME development is measured in
terms of number of branches represented as (NOB) Thus NOB = SME
lxiii

development. Also Small and Medium Enterprise development, measured in


terms of number of branches (NOB) is influenced by computerised accounting
information (AI).Thus NOB = f (AI) ---------------------------------- (6)

Introducing the control variables

NOB = f (AI + DE + CI + ei) ---------------

(7)
Therefore NOB = +B1AI+ B2DE + B3CI + ei ----------------------------------(8)
Where NOB =number of branches
= intercept
B1, B2, B3 = the coefficients
AI=computerised accounting information
DE = demand for enterprises product
CI = capital investment
ei = error factor
This model is also stated without the control variables as follows;
NOB= +B1Rc+B2Sd+B3Sb+B4La+B5Fpa+B6Faa+ei. ----------------------(9)

3.7

Decision Rule for Testing Of Formulated Hypotheses

The decision rule for accepting or rejecting the formulated hypotheses is as


follows:
a. Reject the null hypotheses if the computed t-statistic is greater than the
critical value from t-table at n-k-I degrees of freedom (where n is the
number of observation, K is the number of predictors and 1 is a
constant), if otherwise accept it.

lxiv

b. Accept the alternative hypotheses if the computed T-statistic is greater


than the critical value from t-table at n-k-I degrees of freedom. If
otherwise reject the alternative hypotheses. (see Akpa, 2011; Doane &
Seward, 2007; Bowerman & OConnell, 2003)

3.8

Method of Data Analysis

The method adopted for data analysis was guided primarily by the nature of
the research problem, the objectives and hypothesis formulated in chapter one.
Simple frequency tables and percentages were used to summarize
demographic data of respondents and other primary data gotten from the field.
Also, the researcher strives to find out the nature of relationship that exists
between the variable under study by employing the use of multiple linear
regressions to assess the nature and level of relationship since the model is a
multivariate one. More so, to be able to interpret the relationship between
variables of the study and find answers to the research questions posed in
chapter one, t-test for significance would be used to test the formulated
hypothesis.

3.9

Data Collection Procedure

A letter of introduction was collected from the Methodist University CollegeGhana, Accra which was presented to the various SME's respectively to allow
access to the various premises. The researcher met the various heads of the
SME's and organised a meeting to brief them about the project work and its
importance and appealed to them to co-operate with the researcher when the
need arise and the appropriate officer was appointed to help with the

lxv

questionnaire. Sample questions for the SME's were given to them to answer
and collect after one week. The researcher used two weeks to gather the data.

3.10

Limitation of the Study Design

The major limitation of the study design emanates from the unavailability of
readily available and accurate number of Small and Medium Enterprises in
Accra Metropolis and the metropolis its own share of demarcations. This
limits the possibility of making generalizations on all SME's in Accra
Metropolis. To manoeuvre this hurdle however, the researcher has confined
the study to only selected SMEs in Accra metropolis that are registered with
NBSSI, RGD and MOTI. Also, the use of non-random sampling technique
(convenience sample) reduces the objectivity of the design. To offset this, the
researcher used a large sample size of 40 selected SMEs in the sample. The
last limitation of the study design lies in the method of data analysis. The
underlying assumptions of multiple regressions such as the existence of
linearity might not always be met. Also there is the possibility outliers being
present in the formulated model. However, to overcome these, the researcher
carefully formulated the model to include all predictive factors including
control variables and error factor to caution the effect of any unmet underlying
assumption. Also outliers are directly discarded from the model.

lxvi

CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF RESULTS
4.0

Introduction

To statistically determine the extent to which computerised accounting


information is relevant to the development of small and medium businesses,
this chapter has been developed to present data collected on the major
variables of the study (i.e. computerised accounting information (AI) and
small business development measured by annual profits and number of
branches), analyze such data using the method of analysis chosen in chapter 3.
The analysis also entails testing for validity of collected data, testing of
formulated hypothesis and a discussion of findings from the result of analysis.

4.1
Data Presentation
This section presents data collected from both primary and secondary sources
as show in the table below.
Table 1:

Distribution of Administered questionnaire

Questionnaire
Administered
Returned

Copies
40
40
lxvii

Percentage (%)
100
100

Not returned
Retuned but unusable
Returned and usable
Source: Field Survey, 2015

0
2
38

0
5
95

The above table shows copies of questionnaire administered to selected SMEs


in Accra Metropolis. The information shows that a total of 40 questionnaires
were administered to 40 selected SMEs across the town. All the copies
administered were returned but two copies were unusable because vital
information needed for the analysis was not disclosed. The remaining 38 were
considered valid and usable. This constitutes 95% of the total questionnaires
administered while the two unusable copies constitute 5% of the total
questionnaire administered.

Table 2; Age Distribution of Respondents.

Frequency
Valid

Percent

Valid Percent

Cumulative Percent

20-30

20.0

20.0

20.0

31-40

18

45.0

45.0

65.0

41-50

15.0

15.0

80.0

51- Up

20.0

20.0

100.0

40

100.0

100.0

Total

Source: Field Survey 2015

The age distribution of respondents is as follow: 20% out of the 40


respondents are within the age bracket of 20 to 30 years, 45% were within the
age bracket of 31 to 40 years, 15% were within the age bracket of 41 to 50
years while the remaining 20% were within the age bracket of 51 years and
above.
lxviii

Table 3; Level of Educational


Educational qualification
BECE
SSCE
Diploma/Certificates
HND/Degree
2nd Degree
PhD/Professional
Total
Source: Field Survey, 2015

Frequency
15
10
5
5
3
2
40

Percentage (%)
37
25
12
13
8
5
100

On the educational background of respondents in Table 3, 37% of respondents


had BECE, 25% had SSCE, 12% had Diploma/certificate, 13% had an
HND/Degree, 8% had 2nd Degree and the remaining 5% had a
PhD/professional qualification. This is refreshing, it indicates that all the
respondents have had some knowledge in school and should be in the position
to contribute effectively to the study
Table 4 Business existence
Frequency
Valid

Percent

Valid Percent

Cumulative Percent

1-5

12

30.0

30.0

30.0

6-10

22.5

22.5

52.5

11-15

10.0

10.0

62.5

16-20

15.0

15.0

77.5

21-ABOVE

22.5

22.5

100.0

40

100.0

100.0

Total

Source: Field survey 2015


The table shows that 23% of the SMEs were in business for about 21 years
and above,30% are between 1 to 5 years in the business,22% have spend 6 to
10 years in the business and another 15% had spend about 16 to 20 years in
the business with the remaining 10% spending 11 to 15 years in the business.
lxix

Figure : 4.5 Employees Distribution table

Source :Field survey 2015.

From the graph representation above it shows the distribution of employment


geheration by the SMEs in the Metropolis compreses of 8 SMEs employes
between 1 to 10 employees whiles 18 of such SMEs also employess between
11 to 50 people as against another 6 and 8 SMEs companies employing 51 to
200 and 201 and above respectively.

More so, a summary of data on the independent, control and dependent


variables of the study captured in the questionnaire administered is
summarized in tabular form and shown appendix iii. The data on the variables
shown in the appendix represent annual values and frequencies i.e. frequencies
reflected on daily, weekly, monthly, quarterly and semi-annual basis are
converted to their correspondent annual frequencies as explained in chapter
three. For instance, if the rate of consultation of computerised accounting
lxx

information for a given SME is on weekly basis the annual frequency will be
52 since there are 52 weeks in a year.

4.3

Descriptive Statistical

The descriptive statistic which is prepared to make raw data from the field
more comprehensible and ease the analysis of collected data is show in table
4.4 below.
Table 6. Descriptive statistic for all variables
Variable

Minimum

Maximum

Mean statistic

Deviation

Range

AI
Rc
Sd
Sb
LA
Fra
Faa
DE
CI
PF
NOB

38
38
38
38
38
38
38
38
38
38
38

statistic
10
2
2
2
2
1
1
450
2000
345
1

statistic
95
52
6
6
7
12
12
7010
150,000
6831
5

28.21
12.00
3.29
3.97
3.13
3.50
3.29
2747.84
30900.00
2167.82
2.55

statistic
23.051
16.089
1.228
1.127
1.256
2.911
3.127
2132.804
31406.200
1884.835
1.083

statistic
85
50
4
4
5
11
11
6560
148000
6.486
4

Source: student field survey 2015 using SPSS version 16


(Please note that the items AI, DE, CI are code in GHs000)

Table 6 above presents the descriptive statistic for all the variables. N
represents the total number of paired observations which is 38, reflecting the
total number of questionnaire used. The computerised accounting information
(AI) has a mean of 28.21 with a high standard deviation of 23.031. this means
that the rate of utilisation of computerised accounting information by the
sampled SMEs is 28 times within a year on average and the fluctuation around
this mean is 23.1, indicating that the rate of utilisation among the SMEs is not
uniform as shown in the high standard deviation. The two control variables,
demand for enterprise product (DE) and capital investment (CI), showed a
mean at 2,747,800 and 30,900, while their standard deviations were 2,132,800
lxxi

and 31,406,700. This means that on average the annual demand for their
products is 2,747,800 with a fluctuation of 2,132,800. This also reflects the
absence of a uniform demand for the products of sampled SMEs. Also the
average capital investment of the sample SMEs stand at 30,900,000 with a
very wide fluctuation of 31,406,200. This is not out of place considering the
wide difference between capital base of small businesses and that of medium
businesses. The two dependent variables of the study (annual profit and
number of braches) had a mean of 2,167,820 and 2.55 while the standard
deviation stood at 1,884,839 and 1.083. This also means that the average
annual profits for sampled SME stood at 2,167,820 with a wide fluctuation
around the mean of 1884,835 while the average number of business for SMEs
is approximately 3 with a very low fluctuation of 1.083.

4.4

Data Validity Test

In attempt to validate the data used for these analysis and ascertain the
robustness of the results, the following checks were carried out; (I) check for
multicollinearity

(ii) checks for Heteroscedasticity and non-linear

relationships.
(I)

check for multicollinearity.

To check to the presence of multicollinearity the strength of the correlation


and variance inflation factor would be employed. The variance inflation factor
for

all

variables

in

the

are;4.544,4.157,3.984,2.904,4.682,6.321,7.309,5.098,3.455

models
(source

SPSS

computations shown in table 4.6 and 4.8 ). They all fall below 10, indicating
the absence of multicollinearity and consequently validating the collected data.
(ii)

Check for Heteroscedasticity and non-linear relationship.

lxxii

Heteroscedasticity arises from the presence of outliers, however this is


usually present in most Cross sectional data involving small, medium and
large firms (Tsegba 2010).Following the suggestion of Gujarati and Sangeetha
(2007). Questionnaire with outliers were eliminated as reflected in the two
questionnaires which were considered unusable and discarded.

4.5

Regression Results

To achieve the major and specific objectives of this study multiple regression
were computed for the two models using Statistical Package for Social
Sciences (SPSS) version 16. Also, to find results that are specifically linked to
the two specific objectives of the study the above models were adjusted by
excluding the control variables and then computing the regression for the new
models. Regression results for the models are shown in the sub-sections
below.

Table 4.7; Model Summary for Models 1

PF = + B1AI +B2DE +

B3 CI + ei
Table 4.7: Summary of Regression Results
Change statistics
R-

Std.

Square

change

Error of

change

Mode

R-

Adjusted

the

1
1

.985

square
.969

R Square
.967

estimate
343.718

.969

359.536

Sources: student field survey 2015 using SPSS version 16.0

lxxiii

df1

df2

34

Sig. F

Durbin-

Change

Watson

.000

1.798

(a)Predictors: (constant), Capital investment, Demand for enterprises product,


computerised accounting information.
(b)Dependent variable: Annual profit figures
The adjusted R square stood at .967 implying that 96.7% of the variations in
annual profit are explained by variations in computerised accounting
information, Demand for enterprise product and capital investment, while the
remaining 3.3% is explained by variables not included in the model. These
show that there exist a strong positive relationship between the 3 predictors
(AI, De & CI) and the response variable (PF).

Mode

1(constant)
AI
DE
CI

95%

Collinearity

Standardize

Confidenc

statistics

Understanding

e interval

Coefficient
B
Std Error

Coefficient
Beta

Sig.

for B.
Lower

.179
.770
.068

-2.561
2.894
12.597
1.157

.015
.008
.000
.255

Bound
-431.963
3.893
.571
-.003

-240.859
14.603
.680
.004

94.036
5.226
.054
.004

Table 4.8; Regression Coefficient for Model 1


PF = +B1AI+B2DE+B3CI+ +ei
lxxiv

Toleranc

VIF

e
.220
.214
.257

4.544
4.157
3.894

Source: Student Field survey using SPSS version 16.0

(a)Dependent variable: Annual Profit Figures.


This table show a negative intercept of -240.859 which imply that if all
predictors are held constant a negative profit or a loss will be realized. This is
supported by the fact that profit cannot be made in the absence of demand for
a firms product or where no capital has been invested.
i.

The coefficient for computerised accounting information (AI) which is


14.603 imply that a unit change in the rate of utilization of
computerised accounting information will cause a corresponding

ii.

change in profit values to the tune of 14.603 cedi.


The coefficient for demand for enterprise product (DE) and capital
investment (CI) stood at .680 and .004 and could be interpreted in like
manner.

However, to be more direct on the objective of the study the control variables
will be eliminated so as to ascertain the direct impact of computerised
accounting information on the profitability of SMEs. This necessitates the
adjustment of model 1. To the following;
PF = + B1RC + B2Sd + B3Sb + B4La+B5Fpa+BFaa + ei
Below is the summary of regression result for the new model.

Table 4.9 Model Summary for Adjusted model 1


Std.

Change statistics

Error
of
Mod R

R-

Adjuste

square d

the

estimat

R e

R-

df

df

Sig. F

Squar

change

Chang

e
chang

lxxv

Durbin
Watso
n

1
1

Square
.865

.887

69.597

e
.887

40.636

31

.000

1.497

942
Source: Field survey 2015 using SPSS version 16.0

The adjusted R2 stood at .865 implying that 86.5% of variation in the


dependent variable (PF) could be explained by changes in the independent
variables (Rc, Sd, Sb, La, Fpa, Faa) while the remaining 13.5% could be
explained by factors other than the independent variable. This result shows
that there is a positive relationship between computerised accounting
information to small business performance, measured in terms of profits.

Table 4.10: Regression Coefficient for Adjusted Model 1


PF = +B1Rc+B2Sd+B3Sb+B4La+B5Fpa+B6Faa+ei
95%
Standardize

Confidenc

Collinearity

Understanding

d Coefficient

Statistics

Coefficient
B

Std Error

Beta

1(constant)

-1884.352

.618

Rc
Sd
Sb
La
Fpa
Faa

42.475
668.560
-39.807
495.967
-29.126
3.166

.014
.240
.388
.364
.106
.081

Mode

.363
.436
-.024
.330
-.045
.005

Sig.

for B.
Lower

.001

Bound
-2937.480

3.649
3.527
3.338
.123
1.629
-.330
.047

.001
.002
.903
.113
.743
.963

17.913
260.028
-700.964
125.046
-209.002
-34.661

.344
.214
.097
.088
.196
.289

Source: Field survey 2015 using SPSS version 16.0

(a)Dependent variable: Annual profit figures


lxxvi

interval

Toleranc

VIF

2.904
4.682
6.321
7.309
5.098
3.455

The above table shows that the regression coefficients for the various
measures of computerised accounting information and the measure of SME
development. It shows a negative intercept of -1884.352 which should be
ignored since profit could actually be made in the absence of computerised
accounting information. The coefficient for Rc of 62.475 implies that a unit
change in rate of consultation of computerised accounting information (RC)
will cause a change in annual profit to the tune of 42.475. The coefficient of
the other independent variables could be interpreted in like manner.

Regression Result for Model 2


NOB =

Table 4.11; Model Summary for model 2


+B1AI+B2DE+B3CI+ei
Adjuste
d

1
1

.511

Change statistics

Error of

Durbin-

the

R-

df

df

Sig. F

R-

estimat

Square

change

Chang

square

chang

.971

e
.261

Square
Mode

Std.

.261

.195

e
3.997

34

.015

Source: Field survey 2015 using SPSS Version 16.0


(a) Predictors (constant), capital investment, demand for enterprises product,
Accountings Information.
(b) Dependent variable: Number a branches
The adjusted R square stood at .195 implying that 19.5% of the variations in
number of branches are explained by the independent and control variables of
the study while the remaining 80.5% is explained by other factors not included
in the model. Notwithstanding the low adjusted coefficient of determination,
lxxvii

Watson

1.890

there still exist a positive relationship between the predictors (AI, DE & CI)
and the response variable (PF).

Table 4.12: Regression Coefficient for model 2


NOB = +B1AI+B2DE+B3CI+ei

Mode

1(constan

95%

Collinearity

Standardiz

Confidence

Statistics

Understanding

ed

interval

Coefficient
B
Std

Coefficient
Beta

1.939

Error
.266

Sig

B.
Lower

.
.

Bound
1.399

5.398

-.040

.220

t)
AI

for
Toleranc

00
-.010

.015

-.222

3.707

0
.
48

DE

.000

.000

.397

1.321

5
.

1.146E-

.000

.332

1.142

5
.

.000

.241

4.15
7

.000

26
2

Source: Student field survey 2015 using SPSS version 16.0

lxxviii

4.54
4

19
CI

VIF

.257

3.89
4

The constant 1.939 indicates that there would be approximately 2 branches


even if there is none of the independent variable in the model, i.e. in the
absence of the predictors there would still be some branches networks for the
SMEs. The coefficient for computerised accounting information is .010
indicating that a unit change in computerised accounting information will
induce a corresponding change in branch network to the tune .010. The most
prominent predictor to number of SME branches capital investment values had
a coefficient of 1.149 implying that a unit change capital investment will
induce a change in the number of branches to the tune of 1.149. Also, to
specifically determine the relationship between computerised accounting
information and number of branches of SMEs the above model is adjusted by
excluding the control variables. The new model is;
NOB= +B1Rc+B2Sd+B3Sb+B4La+B5Fpa+B6Faa+ei.
The summary of regression results for this model is shown below:

Table 4.13: Model Summary for Adjusted Model 2

(a)Predictors: (Constant), Rc, Sb, Sd, La, Fpa, Faa


(b)Dependent variable: Number of Branches

lxxix

The adjusted R square of .416 indicates that 41.6% of the variations in the
number of branches are explained by variation in computerised accounting
information while the remaining 59.4% is explained by factors not included in
this model. This also shows that other variable outside the model contributes
more to branch expansion than the independent variable. Notwithstanding
computerised accounting information still has a positive relationship with the
number of branches of SMEs as shown in the adjusted R-square of 41.6%
which is greater than zero.

Mode

95%

Collinearity

Standardiz

Confidence

Statistics

Understanding

ed

interval for

Coefficient
B
Std

Coefficient
Beta

Sig.

Erro
1(constan

1.286

r
.418

t)
Rc
Sd
Sb
La
Fpa
Faa

-.029
.445
-.342
.085
.203
.058

.014
.240
.388
.364
.106
.081

B.
Lower
Bound

-.434
.505
-.355
.099
.547
.168

2.081

.046

.026

-2.027
1.857
-.881
.233
1.928
.719

.051
.073
.383
.817
.063
.478

-.059
-.044
-1.133
-.658
-.012
-.107

.344
.214
.097
.088
.186
.289

Table 4.14; Regression Coefficient for Adjusted Model 2


NOB = +B1Rc+B2Sd+B3Sb+B4La+B5Fpa+B6Faa+ei
Source: Field survey 2015 using SPSS version 16.0

(a)Dependent variable: number of branches


The coefficients for the model are low indication of low predictive ability.
However, the coefficient of .445 for number of source document (Sd) has the
lxxx

2.904
4.682
6.321
7.309
5.098
3.455

highest predictive power. The coefficient of .445 implies that a unit change in
number of source document will induce a corresponding change in number of
branches to the tune of 0.445.

4.6

Test of Research Hypotheses

The research hypotheses stated in chapter one of this study are tested in these
section using decision rule stated in chapter three and the t-values in table 4.7
and 4.11.The first hypotheses is stated below in its null form; Ho1: There is no
significant relationship between computerised accounting information and the
performance of small and medium enterprise.
This hypothesis relates to adjusted model 1 which is PF =
+B1Rc+B2Sd+B3Sb+B4La+B5Fpa+B6Faa

The computed t-statistic for this model as shown in table 4.6 is 2.894 while the
critical value from T-table at 31 degrees of freedom, significant at .05 is 2.040
(see appendix v for the T-table). This clearly shows that the computed tstatistics is greater than the critical value of t and as such the null hypotheses
would be rejected (see decision rule in chapter 3). This also implies that the
alternative hypothesis which states that there is a statistically significant
relationship

between

computerised

accounting

information

and

the

performance of SMEs would be accepted. This finding is however supported


by relevant existing literature which shows that computerised accounting
information facilitates improvement in performance of SMEs, thereby
inducing their development in the following ways;

lxxxi

(a)

Providing control on small business activities thereby preventing the

stealing of business assets used in generating revenue or the stealing of sales


proceeds by staffs.
(b)
It facilities small business decision by providing information on the
economic activities of such small businesses.
(c)
It reveals information on performance which induces corrective
actions if there is need for one. (see Glantier et al., 2011; Okoh & Uzoka,
2012).
The second hypothesis is stated below in its null form; Ho2: There is no
significant relationship between computerised accounting information and
expansion/diversification of SME. This hypothesis relates to adjusted model 2
NOB=+B1Rc+B2Sd+B3Sb+B4La+B5Fpa+B6Faa+ei

The computed t-statistics for this model as stated in table4.10 is 5.398 while
the critical value from T-table at 31 degrees of freedom, significant at .05 is
2.040 (see appendix v for the T-table). This clearly shows that the computed tstatistic is greater than the critical value and as such the null hypotheses which
state that there is no significant relationship between computerised accounting
information and expansion/ diversification of SME should be rejected since
the computed t-statistics is greater than the critical value (see decision rule in
chapter 3). This also implies that the alternative hypothesis which state that
computerised accounting information has a significant relationship with
expansion of SME should be accepted. This significant positive relationship
between computerised accounting information and SME expansion further
attest to the fact that computerised accounting information is useful for
planning expansion programmes of SMEs. The fact that financial institutions
demand for the financial statements of SMEs before granting loans to them
(which is used for funding their expansion programmes) also supports the fact
lxxxii

that computerised accounting information is useful to the development of


SMEs.

4.7 Discussion of Result


The first objective of the study is to determine the relationship between
computerised accounting information and the performance of SMEs. The
performance of SME captured in their annual profits is used as a Yardstick for
measuring the development of SME. To achieve this objective model one was
adjusted by excluding the control variable to see the direct effect of
computerised accounting information on the performance of SME. The result
of the model showed a high predictive ability of 96.7% (measured in terms of
Adjusted R square), when the control variables were included in the model.
This predictive ability of the model however dropped to 86.5% after
eliminating the control variables from the model, thus implying the remaining
13.5% variation were associated with the control variables and others factors.
To be more specific on the objective the null hypothesis one was formulated
and tested of .005 level of significance. The test result rejected the null
hypothesis thus implying that there is statistically significant positive
relationship between computerised accounting information and SME
development measured in terms of annual profits. This finding is supported by
available literature which points out the diverse roles computerised accounting
information play in the development of SMEs. They include:
(a)

Providing a tool for control of SME activities which prevent stealing

of business assets used in generating revenue as well as preventing the


diversion of sales proceeds.

lxxxiii

(b)

Computerised accounting information reveals the profitability and

solvency position of a business and as such induces corrective actions where


there is need for one. This facilitates survival and growth of SMEs.
(c)
It serves as an aid for controlling excessive business expenditures as it
reveals the limited resources at the disposal of SMEs.
(d)
It aid pricing decision which is a determinant of profit
(e)
The result for Adjusted Model 2 showed a predictive ability of 41.6%
(reflected in adjusted coefficient of determination) on number of branches
while the remaining 59.4% were attributable to the control variable and other
factors.
The null hypothesis formulated on this model was tested to determine if there
exist

any

statistically

significant

relationship

between

computerised

accounting information and number of branches. In line with this, the tstatistic was used to test positive relationship that was shown by the regression
result and rejected the null hypotheses which stated that there is no statistically
significant relationship between computerised accounting information and
expansion of branches network of SME. The rejection of the null hypothesis
showed that there exist a statistically significant positive relationship between
computerised accounting information and expansion of SMEs. This finding is
supported by the fact that computerised accounting information aids funding
of SME activities by assisting them in sourcing loans from financial
institution. It also aid in the optimal use of available funds by providing
information that is useful for monitoring and controlling expenditure. To wrap
it up, the analysis revealed that computerised accounting information had a
statistically significant positive relationship with the two measures of SME
development (SME performance and branch network) and as such
computerised accounting information is considered useful for the development
of SMEs.

lxxxiv

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction
This study set out to establish the impact of computerised accounting
information on the development of SME's in Ghana. This chapter seeks to
summarises the main findings of the study and draw conclusion out of the
study. It will also make some recommendations and suggestions for further
studies.

5.1

Summary of Findings

In pursuit of the major and specific objectives of the study relevant data on the
variables of the study were collected, analyzed and used to test formulated
hypothesis from which the following findings were deduced.
(a)

Computerised accounting information, demand for enterprise product

and capital investment constituted the major prediction of SME development


measured in terms of annual profits. This is evidence in the fact that the three
predictors showed a high predictive ability of 96.7%.
(b)
Upon elimination of the control variables (Demand for enterprise
product and capital investment) computerised accounting information showed
a predictive ability of 86.5%. This showed a positive relationship between
computerised accounting information and performance of SMEs which stood
lxxxv

as the measure of SMEs development this attest to the fact that computerised
accounting information is useful to the development of SMEs.
(c)
The positive relationship between computerised

accounting

information and the performance of SME was statistically tested by


formulating and testing the first research hypothesis which revealed that
computerised accounting information has a statistically positive relationship
with the performance of SME and consequently the development of SMEs.
(d)
The predictive ability of computerised accounting information,
demand for enterprise product and capital investment showed a low but
positive prediction ability of 19.5%.
(e)
The predictive power of computerised accounting information on
branch network after eliminating the control variables increased to 41.6%,
indicating

positive

relationship

between

computerised

accounting

information and branch expansion.


(f)
The verification of the positive relationship between computerised
accounting information and branch expansion via the test of formulated
hypothesis two revealed computerised accounting information has a
statistically positive relationship with branch expansion.
(g)
The study finally revealed that computerised accounting information
has a positive relationship with the two measures of SME development and as
such considered useful for the development of SMEs.

5.2

Conclusion

Previous research effort on the variable of these study shows that most SMEs
do not maintain an effective and up to date accounting system (Abdurasheed
et al). This make it imperative for one to determine whether computerised
accounting information provided by an up to date accounting system is useful
for the development of SMEs. It is against these backgrounds that the research
effort was embarked on to empirically verify the usefulness of computerised
lxxxvi

accounting information to SMEs. However, the following conclusion can be


drawn from the enquiry.
i.

Computerised accounting information is useful to the development of

SME's.
ii.
Computerised accounting information promotes SME development by
positively imparting on the performance of SME.
iii.

Computerised accounting information promotes expansion of SME

branch network by positively importing on the planning of expansion


programmes of SMEs. It does this by providing relevant information for such
planning exercise.

5.3

Recommendation

Flowing from the findings of the study, the following recommendations have
been deduced by the researcher:
i.

SME owners should always consult their accounting information

when embarking on expansion programmes as this would aid them in


making good investment decisions that facilitate development and prevent
loss of business resources.
ii.
Government should develop policies that encourage the preparation
and use of computerised accounting information by SMEs.
iii.
Small and Medium Enterprise commission should develop policies or
programmes that would train SME owner or managers on how to make and
effectively use computerised accounting information.
iv.
SME owners should strive to establish an effective computerised
accounting information system that would provide adequate information
system needed for making operative decisions in their businesses.

lxxxvii

v.

Fresh graduates who intends to establish small business should ensure

that they pay due attention to available accounting data when drawing out plan
for the establishment of a new business.

5.4

Suggestion for Future Research Direction

The nature of this research work clearly shows that there is enormous scope on
which further research needs to be carried out on the subject matter. This is
based on the fact that the study was limited to only SMEs in Accra, pointing
out the need for a nationwide research to be embarked on. Also, the study was
centred on SMEs only, thus pointing out the need for further study could be
carried out on large firms or corporations so as to substantiate the usefulness
of computerised accounting information to all types of businesses. In line
with the foregoing this study suggests the following for further research:
1.

Additional investigation should be carried out on the usefulness of

Computerised accounting information listed and non-listed companies in


Ghana.
2.
Further research should be carried out on the Effect of Computerised
accounting information on the Operating Activities of Non Profit making
Organisations.
3.
Further research should be carried out on other factors that affect the
development of SMEs, such as demand for their product, availability of funds,
good management practise e.t.c. specifically; research should be carried out on
the Factors Affecting the Survival and Growth of SMEs in Ghana. Research
should also be carried out on the approaches for developing efficient and
effective computerised accounting information for SMEs.

lxxxviii

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xcv

APPENDIX I: SUMMARY OF RAW DATA AND EXTRACTED FROM


ADMINISTRED QUESTIONNAIRE

Name of SME's
Ashanti Home Touch
Avenue Chemist and Mart
Avtech
C and E Bethel Ltd
CCT
City paints supply ltd
Coral paints
Dart Pharmacy
Delta Unic
Easy stitch collection
Falcon coating ltd

Rc Sd Sb La Fpa Faa AI DE'000 CI'000

PF'000

52
3
52
12
9
8
2
52
52
52
8

5,650
522
5,724
4,285
3,453
2,431
345
6,831
4,635
4,462
2,051

4
2
5
4
3
3
2
6
4
6
3

4
2
2
3
3
3
2
6
4
4
4
xcvi

5
2
3
4
3
3
2
7
4
4
4

4
2
4
4
3
2
1
12
4
12
4

4
1
12
3
2
2
1
12
12
6
4

73
12
78
30
23
21
10
95
80
84
27

6,000
800
6,245
5,110
3,700
3,120
450
7,010
5,500
5,760
3,200

52,000
4,000
55,000
51,000
53,000
50,000
2,000
150,000
105,000
65,000
52,000

Fevnik Ghana Ltd


Franko Trading Ent
Freddies corner
Globnet solution
Jandal
K-Badu Agro Chemical co.ltd
Las Palmas
Look and pick co.ltd
Malcom Forex bureau
Masai computers services ltd
Maxconsolidated
Motorway mother care
Nasec Forex bureau
Rain coat Roofing systems
Rans logistics
Respect Ghana Distribution
ltd
Royal computers and
Electronics ltd
said's Jewellery
Sdant Ventures
sun seekers Tours
Tatters
The Orangery
The stationary clink
Trip
Ultimate Phones
Zakour Trading
ASOL Business & IT
Solution

15
9
10
6
7
8
6
6
15
4
3
4
3
4
4
5

5
4
4
3
4
5
4
3
6
3
2
3
2
3
3
4

4
3
4
2
4
6
4
4
4
4
2
2
2
2
3
2

4
3
4
2
5
6
4
4
4
4
2
2
2
2
3
2

9
4
8
3
5
9
4
2
6
3
2
2
2
1
3
2

6
4
4
2
9
5
2
2
3
2
1
2
1
2
3
4

43
27
34
18
34
39
24
21
38
20
12
15
12
14
19
19

3
3
5
4
6
6
4
3
2
6

2
2
3
2
3
2
2
2
2
3

2
2
2
2
3
2
2
2
2
3

2
2
2
2
3
2
2
2
2
3

1
1
1
1
2
1
2
1
1
2

1
1
1
1
2
1
2
1
1
2

5,500
3,200
5,600
2,900
5,000
4,500
4,000
2,930
6,000
2,000
1,020
1,500
710
1,510
1,900
915

25,000
32,000
34,000
10,000
50,000
40,000
35,000
50,000
75,000
10,000
6,000
10,000
20,000
15,000
17,000
8,000

4,325
2,234
4,150
1,865
3,152
3,985
2,546
1,995
5,022
1,161
506
901
485
701
876
1,105

14 800

5,000

651

11
11
14
13
19
14
14
11
10
19

7,000
5,000
7,000
9,000
12,000
7,000
15,000
5,000
6,500
20,000

495
467
625
610
725
634
602
510
465
995

700
825
795
832
855
912
759
650
610
600

Source: Field survey 2015

APPENDIX II: LIST OF SOME SELECTED SMEs UNDERSTUDY


Location
Lapaz
Lapaz
Adabraka
Adabraka
Accra
Accra
Accra
Abeka
Circle Accra
Accra
Accra
Accra
Circle Accra
Circle Accra
Adabraka

Name of SME's
Ashanti Home Touch
Avenue Chemist and Mart
Avtech
C and E Bethel Ltd
CCT
City paints supply ltd
Coral paints
Dart Pharmacy
Delta Unic
Easy stitch collection
Falcon coating ltd
Fevnik Ghana Ltd
Franko Trading Ent
Freddies corner
Globnet solution
xcvii

Jandal
K-Badu Agro Chemical co.ltd
Las palmas
Look and pick co.ltd
Malcom Forex bureau
Masai computers services ltd
Maxconsolidated
Motorway mother care
Nasec Forex bureau
Rain coat Roofting systems
Rans logistics
Respect Ghana Distribution ltd
Royal computers and Electronics ltd
said's Jewellery
Sdant Ventures
sun seekers Tours
Tatters
The Orangery
The stationary clink
Trip
Ultimate Phones
Zakour Trading
ASOL Business & IT Solution
Source: Student Field survey 2015

Achimota
Achimota
Lapaz
Accra
Circle Accra
Adabraka
Adabraka
Lapaz
Circle Accra
Adabraka
Adabraka
Adabraka
Adabraka
Adabraka
Adabraka
Adabraka
Adabraka
Adabraka
Accra
Accra
Circle Accra
Accra
Accra

APPENDIX III: Sample Questionnaire

QUESTIONNAIRE
Section A (Bio Data)
1. Please tick as appropriate.
Sex:
Male [
]
Female [
]
2. Marital Status:[
]
Single [ ]
Married [
3. Age: 20-30[ ] 31-40[ ]
41-50[ ]
51 and above[
4. Educational qualification:
Basic School Living Certificate [
]
Senior School Certificate Examination SSCE [
]
Diploma/Certificate [ ]
HND/Degree [ ]
xcviii

]
]

2nd Degree [ ]
PhD/Professional [ ]
5. Nature of Business --------------------------------------------------------6. Number of Employees: 1to 10 [ ] 11 to 50[ ] 51to 200 [ ] 201 and
above [ ]
7. Number of years business existence:
1 to 5 [ ] 6 to 10 [ ] 11 to 15 [ ] 16 to 20[ ] 21 and above [ ]
8. Number of branches:--------------------------------------------------------

Section B
Please tick the appropriate option that applies to your business
1. How frequently do you consult your business computerized accounting
information such as sale day book, purchase day book
(a) Daily (b) weekly (c) Monthly (d) Quarterly (e) Semi-annually
(f) annually. (g) Others, please specify__________
2. How often do you assess the computerized accounting information of
your business to monitor and evaluate the progress of your business?
(a) Daily (b) weekly (c) Monthly (d) Quarterly (e) Semi-annually (f)
Annually. (g)others______
3. How often you consult your computerized accounting information
system to monitor business spending? (a) Daily (b) weekly (c) Monthly
(d) Quarterly (e) Semi-annually (f) Annually. (g) others, please
specify__________
4. How often to you consult your computerized accounting information to
monitor sales proceeds? (a) Daily (b) weekly (c) Monthly (d) Quarterly
(e) Semi-annually (f) Annually. (g) others, please specify__________

xcix

5. How often do you consult your computerized accounting information


to prevent fraudulent activities of staffs such as stealing of business
property? (a) Daily (b) weekly (c) Monthly (d) Quarterly (e) Semiannually (f) Annually. (g) others, please specify__________
6. Which of the following range do a rough estimate of your annual profit
fall into (please specify if it does not fall into these range) (a)5000 to
10,000 (b) 20,000 to 100,000 (c) 200,000 to 500,000 (d) 500,000 to 1
million (e) 2 to 3 million (f) others .
7. Which of the following does a rough estimate of your capital base fall
into (a)2 million to 20 million (b)21 million to 50 million (c) 51
million to 100 million (d) 101 million to 200 million (e) 201 million
and above
8. Which of the following does an estimates of number of source
documents, (like purchase invoice, sales invoices receipts etc) of your
firm fall into. (a) 1to 5 (b) 6 to 10 (c) 11 to 15 (d) 16 to 20
9. Which of the following does number of subsidiary books, (like sales
day, purchase day book return journals books etc) of your firm fall
into. (a) 1to 5 (b) 6 to 10 (c) 11 to 15 (d) 16 to 20
10. Which of the following does estimate number of ledger account, (such
as: sales account, purchase account, Asset account etc) of your firm
fall into (a) 1to 5 (b) 6 to 10 (c) 11 to 15 (d) 16 to 20
11. How frequently do you prepare financial statement or reports to be
used by your firm? (a) Daily (b) weekly (c) Monthly (d) Quarterly (e)
Semi-annually (f) Annually. (g) 0thers please specify________
12. How frequently do you audit the account or records of your firm? (a) Daily
(b) weekly (c) monthly (d) quarterly (e) semi-annually (f) annually. (g)
others please specify.