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The Impact of Computerized Accounting System on the Financial Performance

for Selected Private Companies in Arusha, Tanzania

Article  in  SSRN Electronic Journal · January 2019

DOI: 10.2139/ssrn.3642377

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 website: www.ijieb.com ISSN 2665-0606 (Print) Vol.1, Iss.1, 2019 (pp. 1-7)

INTERNATIONAL JOURNAL OF INNOVATION IN EDUCATION AND BUSINESS

(IJIEB)

The Impact of Computerized Accounting System on the

Financial Performance for Selected Private Companies
in Arusha, Tanzania
Ndalahwa Musa Masanja, PhD
Lecturer of Accounting and Management, University of Arusha, Tanzania

Received December 20, 2018; Revised December 27, 2018; Accepted January 3, 2019

Abstract: Although the importance of computerized accounting system, there are many private companies which have not
implemented this system in Tanzania. This eventually has led to incidences of accounting malpractices, delays in
preparation of financial reports, misreporting of financial statements, misrepresentation of financial information which
results into distorted information. At the same time, there are no studies which have examined the impact of computerized
accounting in the financial performance in the private sector. For this reason, this study examines the impact of
accounting information system in financial performance in selected private companies in Arusha, Tanzania. Specifically,
the study adopted a descripto-exploratory research design. The population was generated from the number of employees
working in the accounting and financial department in 10 private companies located in Arusha region. The 10 private
companies were randomly selected in Arusha region. The population was 71 personnel working in the accounting and
finance department. The overall sample was 61 participants. However, the questionnaire retrieved were 56 in total. The
findings indicated that cost and management support are significant contributors toward the implementation of
computerized accounting system for selected private companies in Arusha Tanzania. The researcher recommended that
management should support the efforts to adopt computerized accounting systems to improve the overall performance of
selected private companies in Tanzania.

Key words: Accounting, Accounting Information system, financial performance, Arusha, Tanzania

1. Introduction Therefore, it is convenient to set a computerized

accounting system to record, analyze and interpret
The innovation of information and communication
financial or accounting information to management. This
technology (ICT) has drastically revolutionized the
is due to fact that computerized accounting system ensures
application of financial management and accounting
speed, accuracy and reliability of financial information
practices. ICT has become instrumental for providing a
compared to other traditional manual systems of
competitive edge for corporations, financial institutions,
accounting (Shiraj, 2015; Ware, 2015)
manufacturing industries and specifically in the
accounting profession. In particular, ICT has been a major
Prior the introduction of ICT into accounting practice, all
factor of efficient and reliable accounting system and
the accounting activities was performed manually.
hence improved organizational performance (Taiwo and
However, due to the introduction of computer accounting
Edwin, 2016).
system, it has been easier for every accountant or
accounting practitioner to use this system. As a study by
In regard on the subject of accounting, it is an integral part
Amahalu, Abiahu, and Chinyere (2017) conducted a
of any business whether large or a small entity. It has
comparative analysis of computerized accounting system
major role in measuring the financial performance of a
and manual accounting system in Microfinance banks in
company activities during a course of a stipulated time.
Nigeria from 2006 to 2015. The results of the findings
For this reason, accounting plays a very important role in
indicated that computerized accounting system had a
the management and success or failure of contemporary
significant contribution toward the profitability of banks
business-institutions.
compared to the manual system. The study further
1
recommended that banks should implement computerized 1.3. Research Questions
accounting systems because it improves the overall financial 1. What are the demographic characteristics of
performance of the business. accounting and financial practitioners in selected
private companies in Arusha Tanzania?
In Tanzania, computerized accounting information was 2. What factors affecting the adoption of
initially introduced at the Tanzania Public sector in 1992 Computerized accounting system at selected
where by the government assessed several computerized private companies in Arusha?
aspect of professional deals on financial management 3. What is the relationship between computerized
function which assisted them to move from manual accounting system and financial performance at
accounting system toward an automated (Anaeli, 2017). The selected private companies in Arusha?
introduction of this system was the beginning of improving
financial operations in Tanzania. Tanzania has been updating 2.0 Review of Related Literature
the accounting computerized system over the years. The This section provides an overview of various concepts,
system has been improving financial efficiencies in public theories and empirical literature of numerous studies that
and private sector. Before the installation of computerized all are related to this study. A number of studies have been
processes of accounting where performed manually including reviewed to develop and establish a strong literature
receiving financial data, recording, processing and reporting. framework to support this study. Specifically, the
The manually system of paper and pen made the accounting literature covers the progress and development of
work become relatively difficult to perform. It was easy for computerized accounting in relation to financial
accounting document to be misplaced and eventually lost. performance in Tanzania.
Sometime documents were stolen because there was not
back-up system to safeguard accounting data. Furthermore, According to Kingi (2013) computerized accounting
accounting information was deliberately changes or altered to system is an organized procedure to collect, record and
conceal accounting information for fraudulent financial interpret accounting data with the assistance of a computer
activities. Due to the shortcoming in the manual system, the or automated device. In other words, it is a computerized
report of the controller and auditor general of the government system where financial transactions are collected or
has been querying the weakness in the accounting system entered into a computer and further analyzed so as to
(Controller and Auditor General Report, 2017). create necessary documents and hence journalize the
financial records to provide the required accounting
Due to the weakness of the manual accounting system, many journals. In light of this definition, the main purpose of a
private and public organizations have been shifting to the computerized accounting system is to produce reliable and
computerized accounting system. There are a lot of studies accurate financial information or statements on a timely
basis. At the same time, the computerized accounting
which have examined the effects of computerized accounting should generate appropriate information for decision
system in the government or public sector (Anaeli, 2013; making.
Munisi, 2013; Mbelwa, 2015). However, there are no studies
which have examined the impact of computerized accounting 2.1 Empirical studies on Computerized Accounting
in the financial performance in the private sector. For this System
reason, this study examines the impact of accounting The influence of computerized accounting systems on
financial performance has been thorough discussed. With
information system in financial performance in selected
the substantial increment in computerized accounting
private companies in Arusha, Tanzania. system, there are several studies which have discussed this
topic in details.
1.2 Statement of the Problem
According to Okoye and Oghoghomeh (2011) conducted a
Although the importance of computerized accounting system, study to investigate the impact of computerized
there are many private companies which have not accounting system on external audit functions. The
implemented this system. This eventually has led to findings of the study revealed that though auditor’s
incidences of accounting malpractices, delays in preparation knowledge of computer makes significance difference on
of financial reports, misreporting of financial statements, his effective audit of a computerized accounting system,
certain factors serve as limitation to its effectiveness.
misrepresentation of financial information which results into
distorted information. Furthermore, it has prompted Another study by Sam, Hoshimo and Tahir (2012)
fraudulent activities perpetuated by accountants or conducted a study on the adoption of Computerized
accounting practitioners in the private companies. All these Accounting Systems (CAS) in Small and Medium
challenges pose negative repercussions to the overall Enterprises (SMEs) in Malaysia and found that the
financial performance of private companies. In light of these adoption of computerized accounting systems among
challenges, this study examines the effects of computerized SMEs is high. The study findings also showed that the
innovativeness of the CEOs of the SMEs contribute to the
accounting system on financial performance of companies. usage of CAS.

2
On accounting information in Tanzania, the following
studies provide a comprehensive analysis of the empirical
studies for this study.
According to Anael (2017) assesses the impact of
computerized accounting system usage on organization
performance in Tanzania with a focus in local government
authorities (LGAs) in Arusha. The study indicated that the
government should provide appropriate training to
accounting personnel to enhance the accounting system
knowledge in order to achieve higher performance.
Another study conducted by Munisi (2013) also assessed
the impact of computerized accounting system in ensuring
effective financial control in local government authorities
in Tanzania. This was a case study conducted in Musoma
district council. After a comprehensive data analysis, the
research results revealed that computer accounting system
has a significant impact in the overall financial control in
Musoma district council. In light of these results, the
author recommended that there should be a system of
administrators so as to monitor and restrict unauthorized
personnel from accessing the accounting system.
To further expand the overall discussion of empirical
studies, Bahati (2014) assessed the impact of
computerized accounting on the performance of payroll
accounting. This was a case study conducted in Urban
Water and Sewage Authorities (UWASA). The results
indicated that the adoption of computer accounting system
in accounting practices has both positive and negative
repercussions. Given these results, the author
recommended that UWASA should proceed to adopt
computer information system by providing staff training
in the finance and human resource department to prevent
financial losses and minimize the risk of fraud.
2. Research Methodology
2.1 Research Design
The study adopted a quantitative approach for the research
methodology. Specifically, the study adopted a descripto-
exploratory research design. This research design has both
attributes of descriptive and exploratory research design.
The study was descriptive in nature because it is a case
study of companies located in Arusha and the researcher
will administer a survey (Creswell, 2014). At the same
time, exploratory research determined the relationship
between the independent and dependent variable
(Creswell, 2014). This implies that a correlational method
was applied to determine the relationship between
computerized accounting system and financial
performance for selected companies in Tanzania
2.2 Population and Sampling Techniques
The population was generated from the number of
employees working in the accounting and financial
3
department in 10 private companies located in Arusha
region. The 10 private companies were randomly selected
in Arusha region. The population was 71 personnel
working in the accounting and finance department. Due to
the unwillingness of the companies to identify themselves
as research participants, the companies names were
undisclosed. However, the following table provides an
overview about the specialized industry for each company.
Table 1: Population Distribution of Companies
Name of Industry Population Sample
Size
Tourism 12 11
Food 5 4
Banking 8 7
Poultry 7 6
Transportation 4 3
Retail Shop 4 3
Energy 8 7
Farming 5 4
Wholesale Store 5 4
Manufacturing 13 12
Total 71 61
The sampling formula was used to determine the sample
size for the study. After the sample determination, the
survey was conveniently administered to 61 accounting
employees from 10 randomly selected private companies
located in Arusha.
2.3 Research Instruments
The study used both primary and secondary data. A
questionnaire or survey was the main instrument for
collecting data. The questionnaire was divided into three
sections. Section A contained demographic questions to
the research participants. Section B contained questions
about computerized accounting system. Section C
contained questions of the financial performance of the
private companies.
2.4 Validity and Reliability of Research
Instruments
Prior to data collection, a pilot study was conducted to
determine the internal consistency or reliability of the
research instrument. 30 employees participated in the pilot
study and it was conducted in 3 private companies located
in Moshi. . Afterwards, Cronbach Coefficient Alpha was
used to determine the reliability of the research
instrument. At the same time, content validity, construct
validity and face validity was used to determine the
overall validity of the research instrument. Content
validity was determined by the content validity index
while construct validity will be measured by factorial
analysis through Kaiser-Meyer-Olkin measures of
sampling adequacy (Masanja, 2018).
 experience between 1 to 5 years. In addition, 23 (41.1%)
At the same time, the face validity was determined by had work experience between 5 to 10 years while 7
asking the feedback for the research participants about the
(12.5%) had work experience for more than 10 years.
overall questions in the research instrument. Table 2
indicates reliability of the survey
2. What are the factors affecting the adoption of
computer accounting system in selected private
Table 2: Reliability Results for the Survey companies in Arusha Tanzania?
Name of Variable No. of Cronbach's
Table 4 provides the results about the factors affecting the
Items Alpha
adoption of computer accounting system in selected
Computer Accounting Sy 15 0.825 private companies in Arusha.
Financial Performance 5 0.902
Table 4: Factors Affecting Adoption of Computer
2.5 Data Analysis and Interpretation Accounting System
Descriptive and inferential statistics were applied in data Question Mean Interpretation
analysis. Specifically, descriptive statistics was used to
analyze the demographic characteristics of the research Cost 4.53 Strongly Agree
participants. On the other hand, inferential statistics was Technology 4.07 Agree
applied to analyze question 2 and 3. Furthermore, Pearson Personnel Perception 1.10 Strongly Disagree
correlation was used to determine the relationship Business Size 1.32 Strongly Disagree
between computerized accounting system and the Management Support 4.57 Strongly Agree
financial performance in selected private companies in Ease of Use 3.18 Somewhat Neutral
Arusha Tanzania. Infrastructure 2.31 Disagree
External Environment 2.43 Disagree
3. Results and Discussion The finding in Table 4 indicate that accounting and
The section provides the results of each research question
finance personnel tend to strongly agree (Mean = 4.53)
in this study. The first part provides the descriptive
that cost is a predominant factor in the adoption of
analysis of the demographic characteristics of research
computer accounting system in the companies. In addition,
participants for this study. The second part provides the
inferential statistics for question 1 to 3. 56 questionnaires accounting and finance practitioners tend to strongly agree
were collected back from the research respondents. (Mean = 4.57) that management support is determining
factor toward the adaptation of computer information
1. What are the demographic characteristics of system. In connection to this, accounting and finance
accounting and finance practitioners in selected personnel tend to agree (Mean = 4.07) that technological
private companies in Arusha Tanzania? issues is another reason for adopting computerized
accounting system. Concurrently, respondents were
Table 3: Demographic Characteristics of Accounting and somewhat neutral (Mean = 3.18) about the ease of use of
Finance Practitioners accounting system as a determining factor on its
Description Frequency Percentage adaptability by a company. Contrary to these results, the
Attribute
findings also revealed that research participants tend to
strongly disagree that personnel perceptions (Mean =
Gender Male 24 42.9
Female 32 57.1 1.10) or business size (Mean = 1.32) was a significant
factor to consider in computerized accounting system
Designation Manager 11 19.6 adaptation. The data further revealed that accounting and
Accountant 37 66.1 finance practitioners tend to disagree that infrastructure
Finance 8 14.3 (Mean = 2.31) and external environment (Mean = 2.43)
has a significant influence on the adaptation of
Experience 0-1 Year 12 21.4 computerized accounting system
1-5 Years 14 25.0
5-10 Years 23 41.1 3. What is the relationship between computerized
<10 Years 7 12.5 accounting system and financial performance at
Total 56 100 selected private companies in Arusha?

According to Table 3, results indicate that 24 (42.9%) were
female while 32 (57.1%) were male participants. At the same
time, there were 11 (19.6%) managers, 37 (66.1%) accountants
and 8 (14.3) other finance personnel. Furthermore, 12 (21.4%)
had experience between 0 to 1 year while 14 (25%) had
Table 5 provides the bi-variate analysis of the relationship
between factors affecting the implementation of
computerized accounting system and the financial
performance of selected private companies located in
Arusha. The correlation is significant at the level of 0.01
and-0.05.

4
There is significant positive relationship between cost and
financial performance (r = 0.543, p<0.04). This implies
cost has an effect on financial performance. At the same
There is a significant positive relationship between
management support and financial performance (r = 0.697,
p<0.05). This means management support has a significant
influence on financial performance of selected private
companies in Arusha.
Other factors contributing toward financial performance
have a slightly positive relationship. For instance,
Technology has a relatively weak relationship with
financial performance (r = 0.291, p<0.05). This is also
experienced for the relationship between personnel
perception of computerized accounting system and its
influence on financial performance (r = 0.065, p<0.05).
There is a no significant relationship between ease of
use of computerized accounting system and the financial
performance (r = 0.169, p>0.05). Likewise for external
environments on financial performance (r = 0.287, p>0.05).
In addition, there is an inverse relationship between
Business size and financial performance in private
Companies (r = -0.432, p<0.05)
Table 5: Pearson Correlation (Relationship) between Computerized Accounting System Factors and
Financial Performance in Selected Private Companies in Arusha
SN Variable Results
Pearson Correlation
1. Cost 0.543
2. Technology 0.291
3. Personnel Perception 0.065
4. Business Size -0.432
5. Management Support 0.697
6. Ease of Use 0.164
7. Infrastructure 0.487
8. External Environments 0.287
*Difference is significant
As it can be seen in Table 5, these results have provided
different perception on the adoption of computerized
accounting systems on the overall financial performance
of selected private companies in Arusha. This means these
results are not similar to other studies conducted. For
instance, according to Munasinghe and Munasinghe
(2014) the regression analysis indicated that business cost,
business size and external environment are significantly
influenced on use of CASs of SMEs at 0.05. This study
also revealed that all other factors such as government
support, perceived ease of use and management support
are not significance since the p values was greater than
0.05. The difference in results might be attributed to
different geographic locations which has a significant
effect on people’s perception about a particular subject.
As supported by Masanja (2018) differences of results is
due to several reasons including the difference in
perception of the respondents.
5
5. Conclusion and Recommendations
Based on the findings of this study, the following are the
conclusion.
1. Cost and management support is the major
determinant for the adoption of computerized
accounting system for selected private companies
in Arusha Tanzania..
2. Technology also is a another important factor to
considered in the adoption of computerized
accounting statement for selected private
companies in arusha Tanzania
3. There is a significant relationship between cost,
technology, personnel perception, management
support, business size, infrastructure for the
adoption of computerized accounting system and
the financial performance of selected private
companies located in Arusha Tanzania.
4. There is no significant relationship between the
ease of use or external environment that influence
the adoption of computerized accounting system
and financial performance of selected private
companies located in arusha Tanzania
Significance
Mean P
3.32 0.00*
2.28 0.00*
2.38 0.00*
3.45 0.02*
3.42 0.04
2.20 0.23
2.27 0.03*
2.43 0.12
Based on the conclusion which was built on the research
findings, the following are the recommendations for the
adoption of computerized accounting system at selected
private companies located in Arusha Tanzania
1. Management support is an important for the
implementation of computerized accounting
system. Since they are decision makers in the
companies, they are supposed to encourage the
implementation of computerized accounting
system.
2. Cost is another area to be considered by
companies planning to implement computerized
accounting system. Therefore, management
should acquire low priced accounting system
packages which meet the needs of the
organization.
 3. The appropriate technology and personnel
perception should be considered in implementing
and computerized accounting system. Personnel
should be acquainted with the benefits of the
accounting system so they are receptive toward
the system introduction.
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