CHAPTER II

REVIEW OF RELATED LITERATURES AND STUDIES

This chapter presents the related literature and

studies after the thorough and in-depth search done by the

researchers. The review of related literature stresses the

importance of Accounting Information System in

the different aspects of many businesses. The review

is utilized to retain a direct relevancy to the study in

hand.

Related Literature

In the study of Reuters (2016), the author presented two

main points. First is the present impact of

information technology on modern accounting systems. The

other point is the cons of using Information Technology

on the modern accounting systems. The author found out

that information technology on modern accounting systems

has variety of benefits. Some of these are it

improves the business performance, transactions were

simplified thus creating efficient operations,

information technology advancements make effective and

efficient information flow that enhances the managerial

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decisions and it helps the companies to develop and

use computerized systems to track and record

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financial transactions. On the other hand, it also

has drawbacks concerning the use of information technology.

It includes heavy cost of installations, cost of

training, fear of unemployment, disruption in work, system

failure, time consuming, anticipated errors not known,

breaches of security and health dangers.

Esmeray (2016) in his study revealed that there is a

positive and statistically significant relation between the

use of Accounting Information System and educational status

of the managers. In addition, the study also proved that

there is a positive relation between the use of Accounting

Information System and growth of the business in terms of

sales, customer and revenue. Among the positive effects of

the implementation of the Accounting Information

System, customers’ growth can be seen as the

strongest. Furthermore, the author concluded that as

the number of employees increases, the use of

Accounting Information System also increases.

Arcega, et. al (2015) mentioned in their study that

most of small and medium enterprises in Lipa City,

Philippines have been using computerized accounting system

for six to ten years in performing their business

operations. Moreover, the authors want to determine

the
level of performance of the businesses in

using computerized accounting system as compared with

the non- computerized ones. The study also presented

evidences for the benefits as well as the drawbacks of using

computerized accounting system.

In the study of Adjei (2015) it showed

that computerized accounting system enhances higher turnover

and profitability and it is also an effective means of

keeping accounting records. The author also proves

that the application of computerized accounting system

supersedes that of manual accounting system. After a

thorough research and study, the author concluded that the

advantages of a computerized accounting system far outweigh

its associated challenges as it has impacted positively

the financial reporting of the banks, thus, the

author concluded that businesses particularly rural

banks should adopt computerized accounting system.

The author further recommends that the Ga rural bank

should channel most of its resources in the training and

development of bankers and accountants in computerized

accounting system.

In the research of Muhindo, Kapute, and Zhou (2014) it

presented the impacts of Accounting Information System in

small scale business in Kampala City in terms of

their
profitability and performance levels. The research findings

revealed that accounting information plays an

important role in our economy and social systems especially

in its management and a great works it does in

facilitating management decision making process. The authors

also found out that most small scale businesses do

not apply Accounting Information Systems which results

into low profit. Moreover, the study concluded that

implementation of Accounting Information System even in

small scale business can be beneficial especially when

it comes to profitability.

Saeidi and Prasad (2014) provided that a data quality

management is a significant factor for

Accounting Information System in organizations. In addition,

financial managers are highly complacent as they are not

taking any initiatives on their own to reach out and

meet the organizational goals. Moreover, the role of

Accounting Information System is crucial in managing the

organization and in implementing an internal control.

The results revealed that there is a positive

relationship between Accounting Information System and

influence factors on the performance of the organization.

Related Studies

In the research study of Chouhan, et. al (2018)

it showed that if the attributes configuring impact

of Accounting Information Systems on various

dimensions significantly influence the organizational

effectiveness of a business. Furthermore, the research

findings revealed that the investment in Accounting

Information System has given improvement in the

strategy and long-term productivity of the companies.

In the study of Rodriguez (2017) it showed that there

were significant differences in the extent of

Accounting Information System utilization among comprada

businesses in the different areas of Partido, Camarines

Sur. Also, majority of the comprada businesses utilized

general ledger or financial accounting rather than

management accounting. The study recommended to the comprada

owners to embrace and invest the aspect of business

processes in computerized accounting platform. Moreover,

comprada businesses need to have an effective Accounting

Information System in order to handle their various

needs for effective business decisions, timely and

accurate financial reporting to efficiently gauge

business status and meet government regulatory

requirements.
 Pan and Seow (2016) gave accounting students an idea

about the importance and usefulness of understanding

and the benefit of being well-versed in using the Accounting

Information System. The research provides that Accounting

Information System is heavily used in Accounting and

Auditing functions. Therefore, it is important

for accounting students, the future Accountants and

Auditors, to receive proper training in their tertiary

education covering the topics in connection with the

Accounting Information System for the reason that this

knowledge will help in their long term careers.

The research study of Chakraborty (2015) focused

on how poor accounting practices hamper the growth

and sustainability of Small and Medium-Sized Enterprises.

The study also showed how stakeholders were affected

due to lack of quality accounting information. In

addition, the research revealed that poor accounting

practices create threat for the growth and

sustainability for small and medium enterprises such as

inefficient business operation and control, poor strategic

decision and poor management in all aspects of the

business. The author concluded that effective and

systematic accounting practice is necessary

to increase the operational efficiency, profitability and

growth of small and medium enterprises.

Patel (2015) in his study gave an idea that an

Accounting Information System can help businesses in

gathering, storing, directing, processing, recovering

and reporting its financial data. This study has evaluated

the effectiveness of Accounting Information Systems in

decision making from various aspects such as a better

decision- making by managers, more effective internal

control systems, and improvement of the quality of

financial reports, enhancement of performance measures,

facilitating financial transaction processes and helps in

expansion of profitability of the organization.

Budiarto (2014) studied the effects of Accounting

Information System alignments on non-financial performance

in small and medium enterprises. Moreover, part of

the study is the factors that influence Accounting

Information System alignments. The result of this research

showed that Accounting Information System

sophistication, owner commitment, and external

Information Technology expertise have significant effects

on Accounting Information System alignment. The development

of small and medium enterprises necessitates the government

role in spearheading small and

medium enterprises owners the training on the proper

procedures of adopting Information Technology for the

growth of the business.

In the research study of Mahmoud and Alrabei (2014) it

presented that the Accounting Information System are most

common in the Jordanian Islamic banks and it helps

in providing appropriate information about

available substances at the right time. The research found

out that banks rely on accounting systems, by

connecting all the banking services of banks each

department separately and linking between all

departments at the same time, dependence on

accounting information systems to satisfy the clients

through the implementation of banking clients as quickly

and with minimal effort. Thus, Accounting

Information System helps in providing information at the

right time.

Tarute and Gatautis (2014) presented the direct and

indirect impact of ICT on the performance of the small and

medium enterprises. The results showed that ICT

improves the overall, financial and operational performance

of SMEs if only used appropriately. Moreover, ICT has impact

on the improvement of external and internal communication.

Thus, ICT played a major role in the innovation performance

of
small and medium enterprises. Findings highlighted that in

order to attain the best performance, it is important to

align the ICT investments with internal capabilities

and organizational processes.

State of the Art

Accounting Information Systems is an essential part of

the operations in businesses all over the world. May it be

in Banks, Non – Financial Institutions, E – Commerce, Large

Firms, etc. This is because of the effect it gives in the

timeliness of issuance of reports and records that

is needed in making decisions.

An accounting information system is one

that

accumulates, stores, and processes financial and accounting

information. The system generates reports that are used to

make decisions regarding how an organization is to be run.

These reports are also used by outsiders to evaluate

lending and investment opportunities with the

firm. (AccountingTools)

Accounting Information Systems are implemented in

companies because of the reduction of transactional errors

and the speed of the reporting phase making the financial

information readily available. Additionally, use

of
automated systems ensures task and operational efficiency in

reporting and decision making phase.

The studies showed the importance of Accounting

Information Systems in the business world and development of

the Accounting Systems and Control of the company or

industry. It contributes to the enhancement of the

performance of the companies, in productivity,

financial and even non - financial performance. For

example, companies become productive as a result readily

available financial information needed for decision

making. Additionally, automated systems would only be

effective and could improve performance if the users of

which have the required technical skills for its use.

Essential skills would only be acquired through

training and education acquired by the employees in their

bachelor’s degree. The most required skill is computer/ IT

expertise.

With the information above available, it shows

that

implementation of Accounting Information Systems is really

essential. Yet, some enterprises or business find it hard to

consider the implementation of the system. The

researchers aim to give light on the cost-benefit analysis

of the implementation of AIS which would be helpful in the

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decision of whether to implement or not Accounting

Information Systems.

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