THE EFFECTS OF COMPUTERISED ACCOUNTING ON FINANCIAL

PERFOMANCE IN BANKS:

A CASE STUDY OF CENTENARY BANK, ISHAKA BRANCH

BY

AMANIGARUHANGA BENJAMIN

1153-05014-00638

A RESEARCH REPORT SUBMITTED TO COLLEGE OF ECONOMICS AND

MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE AWARD OF A DEGREE OF BACHELOR OF BUSINESS

ADMINISTRATION IN ACCOUNTING AND FINANCE OF

KAMPALA INTEHNATIONAL UNIVERSITY

SEPTEMBER 2018

DECLARATION

I AMANIGARUHANGA BENJAMIN do declare to the best of my knowledge that

this research report titled "The effect of computerized accounting on financial

performance in banks (A case study of Centenary Bank Ishaka Branch)" is my

original work and it has never been submitted by any institution or university for any

academic award.

AMANIGARUHANGA BENJAMIN

Signature ... ~ ..... .... . . Date .. . lW f()_ [!?:.~1.~: ... ... .

APPROVAL

This special research report has been submitted to College of Economics and

Management with the approval from the academic supervisor.

Supervisor

MRS. IRAU FLORENCE

Signature . . . ~ .. . . .. .. .. . ..... .. .. . .

ii

DEDICATION ! dedicate this work to my Family, most especially my parents for the financial and

emotional support during my study at KIU. I also thank my classmates who stood by

me in all the three years of my study at Kampala International University. A vote of

thanks also goes to my colleague Felix Tusiime who helped in the typesetting of this

academic work. Lastly and most imp01iantly the untiring eff01is of my Supervisor

Madam Erau Florence who spared her most precious time in guiding me to come up

with the final thesis. May the almighty God Bless you.

iii

TABLE OF CONTENTS

DECLARATION ....................................................................................................... i

APPROVAL ............................................................................................................. ii

DEDICATION ........................................................................................................ iii

LIST OF TABLES ................................................................................................. vii

ABSTRACT ............................................................................................................ ix

CHAPTER ONE ........................................................................................................ I

1.0 Introduction ....................................................................................................... !

l.l Background of the study ...................................................................................... I

1.1.1 Historical Perspective ..................................................................................... !

1.1.2 Theoretical perspective .................................................................................. 2

1.1.3 Conceptual perspective .................................................................................. 3

1.1.4 Contextual Perspective ................................................................................... ]

1.2 Statement of the problem ................................................................................... .4

1.3 Purpose of the study .......................................................................................... .4

14. Objectives of the study ..................................................................................... .4

1.5 Research objectives ............................................................................................. 5

1.6 Research Questions ............................................................................................. 5

1.7 Scope of the study ............................................................................................... 5

1.7.1 Content scope ................................................................................................... 5

I. 7.2 Geographical scope .......................................................................................... 6

1.8.3 Time scope ....................................................................................................... 6

1.9 Significance of the study ..................................................................................... 6

1.10 Conceptual framework ...................................................................................... 6

iv

CHAPTER TWO ..................................................................................................... 8

LITERATURE REVIEW ........................................................................................ 8

2.0 Introduction ......................................................................................................... 8

2.1 Theoretical Review ............................................................................................ 8

2.2 Conceptual Review ............................................................................................ 8

2.3 Benefits of computerized accounting ............................................................... 9

2.3 Limitations of Computerized accounting .......................................................... 14

CHAPTER THREE .............................................................................................. 17

RESEARCH METHODOLOGY ............................................................................ 17

3.0 Introduction ....................................................................................................... 17

3.1 Research Design and Procedure ........................................................................ 17

3.2 Study population and composition .................................................................... 17

3.3 Sampling Design ............................................................................................... 18

3.4 Sample area ....................................................................................................... 19

3.5 Data collection tools .......................................................................................... 19

3.5.1 Questionnaires ................................................................................................ 19

3.5.2 Interviews ....................................................................................................... 19

3.5.3 Observation .................................................................................................... 19

3.6 Reliability .......................................................................................................... 20

3.7 Validity .............................................................................................................. 20

3.8 Sources of data .................................................................................................. 20

3.9.1 Primary data ................................................................................................... 20

3.9.2 Secondary data ............................................................................................... 20

3.10 Variables .......................................................................................................... 20

3.10.1 Independent Variable ................................................................................... 20

v

3.I0.2 Dependent Variable ..................................................................................... .20

3. I I Data Collection Procedures ............................................................................. 21

3.11 Data Analysis and presentation and Ethical consideration ............................. 21

3. I I. I Data analysis ................................................................................................. 21

3.12 Limitations and delimitations of the study ...................................................... 21

CHAPTER FOUR ................................................................................................. 23

4.0 INTERPRETATION OF THE FINDINGS ...................................................... 23

Response on quality of financial reports as a result of computerized accounting .. 27

4.1 INTERPRETATION OF DATA FROM INTERVIEW ................................... 33

CHAPTER FIVE ................................................................................................... 35

5.0 DISCUSSION OF FINDINGS, CONCLUSION AND

RECOMMENDATIONS ........................................................................................ 35

5.1 INTRODUCTION ............................................................................................. 35

5.2 DISCUSSION OF FINDINGS .......................................................................... 35

5. 3 CONCLUSION ................................................................................................ 37

5.4 RECOMMENDATIONS ................................................................................. .38

REFERENCES ...................................................................................................... 40

APPENDIX ............................................................................................................. 45

QUESTIONNAIRE ........................................................................................................ 45

vi

LIST OF TABLES

Table I: A table showing the gender of the respondents ................................................ 23

Table 2: A table showing the age bracket of the respondents ........................................ 23

Table 3: A table for marital status of the respondents .................................................... 24

Table 4: A Table showing The level of education of respondents ................................. 25

Table 5: A table showing the number of years that employees have served at Centenary

Bank ................................................................................................................................ 26

Table 6: A Table Position occupied by respondents in the Bank ................................... 27

Table 7 Response on quality of financial reports as a result of computerized accounting .

........................................................................................................................................ 28

Table 8 Response on the effectiveness of the Human capacity for computerized

Accounting at Centenary Bank. ...................................................................................... 30

Table 9 Response on how the organizations structure influences computerized

accounting ....................................................................................................................... 32

vii

LIST OF GRAPHS Graph 1. A Pie chart showing Gender of Respondents .................................................. 23

Graph 2 A Bar Graph Showing Age Bracket Of The Respondents ............................... 24

Graph 3 A Graph Showing Marital Status Of The Respondents .................................... 25

Graph 4 Pie Chart Showing Level Of Education ........................................................... 26

Graph 5 A Graphs Showing The Number Of Years Employee Respondents Has Served

At Centenary Bank Ishaka Branch ................................................................................. 27

Graph 6 A pie chart showing responses on quality of financial reports as a result of

computerized accounting at centenary bank Ishaka Branch ........................................... 29

Graph 7 Effectiveness Of Human Capacity For Computerised Accounting ................. .31

Graph 8 Response on how the organizations structure influences computerized

accounting ....................................................................................................................... 33

viii

ABSTRACT

This study is sought to examine the effects of computerized accounting on financial

performance in banks. The study used a case study of Ishaka Branch centenary Bank,

research design and both quantitative and qualitative methods were used to collect data.

The sampling was purposive and simple random sampling techniques that were used to

collect data from respondents of any category. The research findings indicated that the

possibility of making errors as a result of computerized accounting is generally low.

The Findings also indicated that computerized accounting affects profits making at

Centenary bank. This was reached upon through an interview with Head of IT

Department of lshaka branch. He sighted some areas where computerized accounting

assists in profit making like aiding in forecasting, and accounting financial ratios.

Findings indicated that quality financial reports are as a result of the use of

computerized accounting systems but if there is one thing to reckon over and over, it is

the fact that there is need to keep the standard high as already set. And Lastly, Findings

showed that there is cost reduction as a result of computerized accounting. This is

affiliated to the cost reduction as was highlighted through an interview with the Head of

IT department.

ix

CHAPTER ONE

1.0 Introduction

This chapter will present the background of the study, statement of the problem

and the objectives of the study, research questions, and significance of the study, scope

and definitions of key terms.

1.1 Background of the study

1.1.1 Historical Perspective

Computerized accounting according to Jennifer Van Baren (Computer based

Accounting, 1997) is defined as the accounting done with the aid of a computer. It

tends to involve dedicated accounting software by digital spreadsheets to keep track of

a business' or clients financial transactions. Business depends on computers to handle

all kinds of accounting and book keeping jobs. Banks use computers to record money

deposited and withdrawn. You can also book and plan your entire travel agenda,

including your ticket booking through e-mail facility, (Boyett et al., 2005).

Up to 1974, accounting was done largely in the same manner as the ancient

Egyptians had started doing it 3000 years before. Accountancy migrated to Europe

towards the end of the Crusades, which saw a rise in trade between Europe and the

Middle East. Like many other sciences- medicine and mathematics -trade opened the

door for Eastern knowledge to filter into the West.

However, for the next few centuries any technological advances were limited to

painting green and white alternating lines on paper to make it easier to follow a row

across a 36 inch ledger page. Fountain pens replaced quills, which in turn gave way to

ball-point pens.

Little changed in this pen and paper methodology for 800 years that is, until

computers finally became relatively 'cheap', and could be bought for R80 000. Mark

Silberman, managing director of AccFin, relates how he had to lease out the firm's

computer at R900/hour to break even.

1

This was before the days of Microsoft or even personal computers (PCs). Bulky

CRT monitors offered just 20 lines and 80 characters width on their screens. Still, it

was so much easier to see data on-screen than it was to fumble about with data cards.

Then, in the mid-1980s, IBM launched the PC. The consequent rapid evolution from

paper-based trial balances to spreadsheets on Lotus 123 was as revolutionary as the

original double entry system.

Still, the balancing of books was done manually, but soon the first accounting

packages appeared on the market. In South Africa, TurboCash launched in 1987 with

an automated system for trial balance, balance sheet and income statement. A 15-day

process of consolidating ledgers was reduced to minutes. But there were many

functions this programme couldn't do, such as calculating tax or invoicing clients.

TurboCash couldn't 'think' for itself, and it was not yet web-based.

Silberman explains that the early DOS-based accounting systems were highly

stable and hardly updated, but with the advent of Microsoft and its regular upgrades,

continuous adaptation of systems became the norm.

1.1.2 Theoretical perspective

The theory of Computerized Financial accounting systems is wide one. The

Computerised Accounting model is one of the most highly-cited IT adoption models

describing how IT is adopted by end-users. However, to enable a broader perspective,

the Computerised Accounting model was extended by incorporating other important

influential factors not previously examined, particularly in AIS adoption research.

These factors were derived from the TTF model (Goodhue and Thompson, 1995) and

institutional theory (DiMaggio and Powell, 1983). This is because it is argued that,

although Computerised Accounting is a powerful theory, it is limited (Dishaw et al.,

2004). Venkatesh et al. (2003) suggest that Computerised Accounting needs to be

strengthened by including additional factors in its structures. Several studies (e.g.

Dishaw et al., 2004, Klopping and McKinney, 2004, Zhou et al., 2010) suggest that

Computerised Accounting's ability to explain the adoption and usage of new systems

could be enhanced by extending or combining it with other theories or models to

account for more potentially important factors that might affect end-users' behavioural

2

intention. Furthermore, the combined theoretical perspectives are more effective in

measuring individuals' intention regarding factors that influence the adoption of new

technology (Dishaw and Strong, 1999, Venkatesh et al., 2003, Zhou et al., 20 I 0). For

the financial function to be effective there must be timely use of information generated by

various repmts and statements (Marivic, 2009).Financial management is not an end itself

but it supports better performance by an organization through direction, control, monitoring,

advice, training, and support among other. As a result, many companies are replacing

traditional manual accounting systems with computerized systems. The emergency

of computerized accounting is providing timely and effective information (ACCA,

2007).

1.1.3 Conceptual perspective

According to Mauldin and Ruchala (1999, p. 317-18) a Computerized

accounting system software is a software package that is operated on a computer

system and used to accomplish all accounting tasks, including recording, storing,

retrieving, sorting, analyzing, presenting and transferring accounting information to

different stakeholder groups. In the past, especially in developing countries

Uganda inclusive, financial management was done manually implying that the

employees would perform the whole accounting process manually on periodic

basis, they calculated trial balances, journalize transaction, and prepare financial

statement reports and other routines. However manual systems have not provided

efficiency owing to the large number of transactions hence lack of reliable and

timely revenue and expenditure data for budget planning, monitoring, and expenditure

control. This has negatively impacted financial performance and hence a necessity

to develop a system where a vast number of transactions can be handled within the

shortest time hence introduction of computerized accounting packages like Tally,

Quick books among others (Horald et al., 2005).

1.1.4 Contextual Perspective.

This study will be conducted in Centenary bank because the banking industry in

Uganda continues to witness tremendous changes linked with the developments in

computerization over the years, Centenary Bank needs to re-examine their service and

3

delivery systems in order to properly position themselves within the framework of the

dynamism of computerization, (Woherem, 2000). The quest for survival, global

relevance, maintenance of existing market share and sustainable development has made

exploitation of the many advantages of computerization through the use of automated

devices imperative in the banking industry today. This situation will be seriously

investigated by the researcher by finding out the effect of computerized accounting

systems on financial reporting with particular reference to Centenary Bank, lshaka

branch.

1.2 Statement of the problem

The advancements in information technology have led to the adoption of

Computerized accounting systems in corporate reporting to help produce relevant,

timely, efficient, error free and reliable financial repotts for both management and

external users for effective decision making (Greuning, 2006). In fact most high profile

companies have I 00% computerized accounting and repotting systems, (Adetayo et a!.

2009).Despite efforts to completely adapt computerized accounting systems like Quick

books and Tally, with hopes of tapping into the above benefits, most banks with no

exception of Centenary bank still face challenges of computer security like fi'aud and

money laundering, failure to completely track down errors, data loss among others. These

challenges have constantly slowed down financial reporting and management of

Centenary bank among many firms. It's these problems that propelled the researcher to

investigate the effect of computerized accounting on financial perfomance at

Centenary Bank Ishaka branch.

1.3 Purpose of the study.

The purpose of this research was to assess the effects of computerized accounting on

financial performance in banks, a case study of centenary bank Ishaka Branch.

14. Objectives of the study.

To evaluate the effect of computerized accounting on financial perfomance at

Centenary Bank, Ishaka.

4

1.5 Research objectives

I. To establish the impact of Human capacity for computerized a systems on

financial performance

II. To assess the Quality Financial Reports with the use of computerized

accounting on financial performance.

III. To find out the Organization structure for Computerized accounting system and

its impact on financial performance.

1.6 Research Questions

In order to provide a well laid strategy of achieving objectives for this study, the

following research questions were used.

I. What is the impact between Human capacity for computerized a systems on

financial performance

II. What is the Quality Financial Reports with the use of computerized

accounting on financial performance?

III. How does Organization structure for Computerized accounting system impact

on financial performance?

1.7 Scope of the study

I. 7.1 Content scope

The study basically focused on investigating the effects of computerized

accounting on the financial performance of banks taking Centenary bank lshaka branch

as the case Study. It covered all the activities related to investigating the significance of

financial performance at Centenary bank. The researcher used questionnaires,

interviews and observation plus other appropriate qualitative methods to obtain the data

to use. The researcher also limited the study to the specific objectives. The sample was

drawn from both Centenary bank staff and clients to enable the researcher obtain

reliable data. The researcher used simple random sampling and systematic sampling to

obtain the sample.

5

I I

I I I I

1. 7.2 Geographical scope

The study was carried out at Centenary bank Ishaka branch in Bushenyi

district. The branch is located in Ishaka town. It was selected because it is near the

researcher's home of residence hence being so convenient. Similarly, Ishaka branch

uses numerous computerized accounting systems since it is used by a section of

wealthy residents of Bushenyi. It was anticipated therefore that the researcher would

easily get authentic information.

1.8.3 Time scope

The study period used was from June to September 2018 in order to be able to

capture and collect the current and relevant data for the success of the study. The

performance of Centenary bank-Ishaka was examined for the past 3years while

I iterature used was in the limit of I Oyears.

1.9 Significance of the study

The study helped Centenary bank and the entire banking industry to know the

effects of computerized accounting on their performance and how they can improve on

its performance. It will also be used as additional literature on the already existing one.

lt also helped the researcher to acquire more knowledge about computerized accounting

and skills of doing research.

1.10 Conceptual framework

A computerized accounting system is an information system that processes the

financial transnctions and events as per Generally Accepted Accounting systems

(GAAP). To produce reports as per user requirements.

6

The conceptual framework illustrating the effect of computerized accounting on

financial pel"formance in banks.

Independent Variable

Computerized Accounting Systems

Human capacity for computerized a systems

• Speeding up transactions

• Efficiency • Automation of complex tasks

• Cutting down costs

Quality Financial Reports • cost effective • no more fraud and laundering • Understandability

Organization structure for Computerized accounting system.

• Computerized Accounting Unit.

• Resources .

• Roles and Functions .

Source: Adapted from Mastering Research by Fredrick Etyang and modified by the researcher

7

Dependent Variable

Financial Performance

• Effectiveness/ productivity .

• Timeliness .

,.--- • Efficiency

• Responsiveness .

I_....

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter presents existing literature on the effectiveness of computerized

accounting on financial perfonnance of banking institutions. The chapter is presented 3

in sub-sections; the benefits of computerized accounting, the qualities of good financial

repotts issued by banks and the limitations of computerized accounting.

2.1 Theoretical Review

Computerized accounting according to Jennifer Van Baren (Computer based

Accounting, 1997) is defined as the accounting done with the aid of a computer. It

tends to involve dedicated accounting software by digital spreadsheets to keep track of

a business' or clients financial transactions. Computerized accounting involves the use

of computers to handle large volume of data with speed, efficiency and accuracy aimed

at overcoming the limitations of manual accounting. However, this does not mean

change in principle. The principle of accounting remains focused on producing quality

and reliable work same way, day book ledgers (double entry) only that the accounting

process is done by computer packages (ACCA, 2007).

Marivic (2009) described a computerized accounting system as a method or

scheme by which financial information on business transactions are recorded,

organized, summarized, analyzed, interpreted and communicated to stakeholders

through the use of computers and computer based systems such as accounting

packages.

2.2 Conceptual Review

Computerized Accounting System (CAS) refers to the integration of different

component systems to produce computer books of accounts and computer-generated

accounting records and documents. Frank wood (Business Accounting in a

computerized environment 2002). According to ACCA (2009), Computerized

accounting system involves the use of computers to handle large volumes of data with

8

speed and efficiency aimed at overcoming physical limitations of manual accounting

and producing quality reports.

2.3 Benefits of computerized accounting

Computerized accounting improves reporting to users. It is associated with

better record keeping and minimized errors. With the system automatically generating

reports, a lot of time will be saved in the long run and unnecessary cost will be reduced.

Few staff will also be needed to operate the system (Van briefing, 2005). Computerized

accounting is used to maintain journals, ledgers and prepare financial statements

(Meigs and lvleigs, 1998). Easy posting of transactions to the ledgers and facilitating the

principle of double entry to do accounting function using computerized accounting

system makes the exercise enjoyable. It can be largely automated by use of systems

(Cook, 2001).

Better Record keeping and data Security. Whilst human error can still corrupt

your data e.l<. entering figures in wrong fields, a good package will reduce this

possibility and ensure that there is a reference for all transactions e.g. for every cheque

or receipt entered/created (Me Bride, 2000).However, this does not eliminate all

manual work. Vouchers, invoices, receipts etc will still need to be filed in a logical

order and det,Jils of what was entered onto the system should also be recorded on paper.

This will he! p when you need to track errors, in the annual audit and if disaster strikes

and you have to re-enter all transactions. With a computerized accounting solution, files

and important financial information can be stored online or on off-site data cartridges or

both giving a business the level of redundancy that it needs to recover from a

catastrophe nnd ensuring compliance with all applicable data retention laws (Me Laney

and Atrill, 21lrl5)

Time and Cost Saving. Using a Computerized Accounting Systems saves companies

time and money (Baren, 20 I 0). More importantly, the system helps produce instant

financial rei'' 'Its to aid in the economic decision making process of external users

(Woode & s.,ngster, 2008).

9

Organization and accuracy. Computerized Accounting Systems enable

businesses to stay organized. When information is entered into the system, it makes

collaboration 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 records are

automatically updated and so account balances will always be up-to-date (Mike et al,

2006). Computerized accounting systems have automatic calculations built in and

therefore there is a slim chance of making mistakes while making invoices as the

system automatically calculates inclusive and exclusive figures (Me Laney and Atrill

(2005).Therc is an old proverb that begins with the statement "to error is human".

Although the sentiment of this statement was not originally intended as a comment on

life in the inl'ormation technology age, it still applies. Humans do make errors. An

absent decilll:tl point or the addition of one too many zeros can drastically alter the

accuracy of a financial report. Computerized accounting systems, on the other hand, are

designed to nlinimize the existence of such blunders. Additions, subtractions and other

calculations '' re performed by the machine. This ensures that only the correct total is

listed at the c•H.l of the general ledger (KJ Henderson 1999).

Ston'"'' of important information (Section 123 of the Companies Code (1963),

Act 179). St• 'ing information is vital to a business. After information is entered into the

system, the 'nformation is stored indefinitely. The introduction of Computerized

Accounting ' 'stems provides the ability to see the real-time state of the company's

financial position (Carol2002).

Human cap<•dty for computerized systems.

Retric'<al of information (Nash 2003). A computerized accounting system can

store many : c~rs of information. If the audit requires it, the employer can access

information .fating from many years back. If, during the audit, the auditor

spontaneoud · requests an accounting document, the employer can quickly retrieve it

from the syst ·m instead of rummaging through storage boxes to locate hard copies. The

majority of' •)mputerized accounting systems have features such as order-entry and

generation o: associated invoices. The employer can create accounts for their clients,

10

storing their names, addresses, orders and invoices for as long as necessary. A

computerized system allows the employer to make and print account statements.

Further, many accounting systems have a payroll feature, which enables complete

payroll processing, including the generation and printing of checks and reports (McRae

1998).

Easy distribution of useful financial information Computerized Accounting

Systems allow companies to distribute financial information easily. 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(Nash and Hearly, 2003). In

effect, Computerized Accounting Systems enable financial statements to be prepared

and presented to meet the relevance and faithful representation criteria of financial

statements.

Speed and accuracy leading to operational efficiency (Frank wood 1999). With

computerized accounting, you reduce the amount of time you have to spend monitoring

and organizing your accounts. (Me Rae, 1998). This will help you improve your

business efficiency in areas such as customer relations, production, and employee

management. You will have the potential to increase your profits and improve general

business efficiency. A computerized accounting system eliminates many cumbersome

and time consuming manual processes .. A document that once took junior accountant

hours to compile can now be created in a matter of seconds. Information regarding

business accounts can be independently entered into an automated system by multiple

authorized parties. In addition, accounting documents, such as financial statements, can

be emailed from one colleague to another in just a few moments (KJ Henderson, 1999)

Enables compatibility (Da Costa, 2012). The implementation of a computerized

accounting system also allows various businesses to more easily share financial

information.

Lower cost of operations (AramentaWaithe2008). Accounting can become

expensive for businesses, as the level of work can result in the businesses needing to

hire an accounting service on contract or hire several full-time employees. Accounting

11

software eliminates much of the manual work, which may allow you to reduce your

full-time staff and lower your cost.

Indira (2008) pronounced the improvement in business performance as a result

computerization of the accounting systems as it is a highly integrated application that

transforms the business processes with the performance enhancing features which

encompass accounting, inventory control, reporting and statutory processes. He then

says, this helps the company access information faster and takes quicker decisions as it

also enhances communication.

McBride (2000) stated that managers cannot easily satisfy statutory and donor

reporting requirements such as profit and Joss account, balance sheet and customized

repmting without using computerized accounting systems. With the system in place,

this can be done quickly and with less effort.

Organization structure for Computerized accounting system.

Relevance and materiality. Relevance is the capacity of information to make a

difference in a decision. It is important to report and disclose information that is

relevant for anyone to make a decision. Accounting information must also deal with

things that are significant enough to impact decisions that are made by those who use

the financial reports (Marquez, 20 II). Since financial statements are for users to make

economic decisions, the information must be relevant to the decisions that those users

have to make. Whether the information affects the economic decisions of users

(materiality) and the nature of information affect relevance as well. Materiality is one

of the assumptions used in financial reporting that contributes to relevance (Den·ell V.

201 0).

Reliability. Frank and Alan (I 999) agree that reliability is regarded as one of the

main qualities. People must be able to depend on the figures and the facts printed on

your financial statements and to make sure that they are true. It must be verifiable. Free

from error for example you can always look at a receipt to verify the amount of an

expense. As you already know, when you get audited, you must verify all transactions

that occurred in your business.

12

Comparability and Consistency. Furthermore, comparability relates to the

ability of information to be compared with those of other similar companies, without

comparability the accounts would be of little use Frank and Alan (1999). General

Accepted Accounting Principles (GAAP) allow for certain choices of different

accounting methods for depreciation and inventory management. If a financial

statement from one company that was prepared differently from other companies in the

industry, or even prepared differently from previous statements, it is likely that the

users will not be able to compare the statements among companies and over time.

Comparability is affected by consistency of presentation and disclosure of

accounting policies-particularly when comparing items among entities that might use

different (but equally valid) methods like straight-line/ reducing balance depreciation or

FIFO/ average cost method. This indicates that comparable financial statements are not

necessarily uniform, but merely allow suitable comparisons (Den·ell V. 2010)

Objectivity. Information which is free from bias will increase reliance the users

place on it (Frank and Alan, 1999). The information should meet all the proper user

needs and be neutral in that the perception of measures should not be biased towards

the interest of any one user group. The accounts should always show a true and fair

view of financial statements.

According to Turner (2000), neutrality is the demand that accounting

information should not be selected to benefit one class and neglect to other. Reliable

information is verifiable, neutral and has representative faithfulness. Relevance is also a

very important characteristic of quality. Frankwood indicates that financial information

is relevant if it is capable of making a difference in decisions made by helping users to

form predictions about the outcomes of the past, present and future events either to

confirm or correct prior expectations.

13

Quality financial reporting.

Computerized accounting on financial reporting is linked to benefits of applying

computer systems while generating financial reports. Computerized accounting

systems have been credited for their quick processing speed and large storage capacity.

Using computerized accounting system ensures up-to-date account balances are

available any time for management to make quick decisions (Lancouch, 2003).

Quality of financial reports is assured with computerized accounting system as

compared to manual systems. The method of inputting and processing data is

sophisticated thus accuracy of data is improved. This means that financial reports will

bear minimum errors. Computerized system will foster accessibility and faster

transformation of information stored in computers, hence financial reports can easily be

accessed through online system without delay and timely decision making (K warijuka,

1998).

The use of computer based systems in manufacturing firms will enable

employees from various functional areas and branches to generate timely financial

reports which enable managers to monitor business operations and impmtant finance

decisions (Wailes, I 999). A computerized accounting system is a delivery system of

accounting information as providing reliable accounting information to users. So

records of expenditure and incomes and assets, liabilities, revenue expenses must be

documented and transferred to general ledger of firm's financial details to be analyzed

for future financial decisions.

2.3 Limitations of Computerized accounting

Despite the numerous benefits of Computerized Accounting Systems that can be

listed they are not without challenges. The impediments to implementing a CAS

include: lack of time (Proudlock et a!. 1999), owner-manager's view that the CAS is

costly (Head 2000), perception that the technology is not suited to the nature of the

business (ABS 2000), and lack ofiT expertise (ABS 2000; Burgess 1997).

High installation costs (S, NORA Computerization of Society 1981) notes that

the cost of installing computers in an organization is very high as it needs huge sums of

14

money. This is a major hindrance as to why organizations do not have computers.

Accounting systems costs have decreased substantially, but they still can be costly, not

only to purchase, but to maintain them as well. Extra costs for training new employees

in the system should be considered along with ongoing customer service. Charges for

customizing reports and other processes can pose limitations on small and medium­

sized businesses that cannot afford these services. Other program costs to consider

include new version upgrades and even hardware that may be required as technology

progresses. If businesses can't afford these costs, they will be left behind.

Power Failure (S, NORA Computerization of Society 1981 ). When dealing with

accounting programs, you should consider electrical power as a major limitation of the

system. Without electricity, most small-business accounting systems are useless, no

data can be input or reports generated. Any electrical fluctuation can have a negative

impact on accounting data, deleting information and creating confusion. Another

consideration that limits the usage of accounting systems is the network where the

program may reside if the computer network is not properly set up; the software cannot

be accessed and cannot be utilized. Most organizations are faced with tl·equent power

failure that slows the rate at which operations are executed in organizations. This leads

to loss of data hence taking more time to be retrieved

Computer virus (Wahab, 2003), another threat and limitation of computerized

system is the computer virus. Computer virus is a computer code (program) specially

designed to damage or cause irregular behavior in other programs on the computer. The

adverse effect is that it may lead to breakdown of the hardware thus leading to loss of

valuable information (for instance in financial institutions information such as

customers' accounts, previous financial report, information pertaining loans advanced

among others) already saved on the computer.

The major stressing challenges in the whole world today are the problem of

computer viruses (McBride (2000). Computer viruses usually infect systems introduced

via external storage devices which have already been infected. This has led to loss of

data most of which is very costly to get back as it will need experts who are paid to

install and design new packages. System security concerns can pose limitations on

15

accounting software. Besides worrying about viruses and worms, small-business

owners also should be concerned with unauthorized access of computerized accounting

data. IDs and passwords are common minimum security measures businesses can use to

protect the accounting software against intrusion, but they may not be enough.

According to Kiplinger magazine, hacking is very common with small businesses;

however, only one in five small firms owns antiviral software and over half don't use

encryption on wireless connections.

There is also a risk of improper human intervention with the computer programs

and computer files. Employees in the organization may temper with the computer

programs and computer based records for the purpose of deliberately falsifying

accounting information (Meigs1986). This may result into distortion of information

that would essential be for decision making.

Computer Hacking (Kiplinger magazine, 2010). This refers to when individuals

make unauthorized access to computerized systems especially via dial-in-lines or across

computer networks. This leads to loss of data and inconveniences to the individual

affected by the hackers.

Before converting from manual to computerized accounting systems, planning

is of great importance(S, NORA Computerization of Society 1981 ). There is need to

consider the principle of procedure, costs associated with new system, feasibility and

reliability of the new system. Richard Back and Rueben T. Hurns (1998) recommended

two ways of changing a manual accounting system to a computerized system, either

direct or parallel method. However, the choice of the method to use will depend on the

nature, resources, objectives and purposes of the organization. For example, large scale

or complex organizational change can be conceptualized in movement from present to

future state. All this would affect organizational ·operations positively hence

effectiveness and improved financial performance.

16

CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This chapter explains the methods that were used during the study. It consists of

the research design, the study population, the sample size, the sampling procedure, data

collection method and also explains how the data will be analyzed.

3.1 Research Design and Procedure

The Study focused on quantitative and qualitative information for a

comprehensive assessment of the situation. Quantitatively, the researcher established

the level of computerised accounting at Centenary Bank-Ishaka Branch. Qualitatively,

the researcher investigated the effectiveness of financial management at Ishaka branch.

Both qualitative and Quantitative techniques were applied in finding the relationship

between Computerisation and effectiveness of Financial Management at Centenary

Bank Ishaka Branch.

The researcher used a descriptive design. The major purpose was to describe

the state of affairs as they presently are. The research design gave the effectiveness of

computerized accounting on financial performance. This design helped the researcher

to reach conclusions and make constructive recommendations.

3.2 Study population and composition

The target population of research was 29 respondents. The bank employees,

patiicularly those who are familiar with computerized accounting helped in revealing

their experience and expectations. Bank administrators gave a concrete ethical and

professional view about computerized accounting and its effectiveness.

17

I I I

I

I

Category Population

Employees IT Dept 4

Tellers 5

Customers (A TM) 20

Total 29

N Formula used: n = -N 2 1+ e

Where

n = sample size

N= population

e= Level of significance

_ _:2~9:___ n=-1+29(0.05)2

29 n = _::..:__ 1+0.0725

29 n=--

1.725

n= 27

3.3 Sampling Design

Sample size Sampling technique

4 Purposive sampling

5 Purposive sampling

18 Simple Random

27

The researcher used two techniques, purposive and simple random sampling.

Purposive sampling method was used by selecting the samples such as among the

employees of Centenary bank because of the significant information that the researcher

needed to gather fi·om them. The researcher also used a simple random sampling

procedure to have a fair representation and minimize bias. Random sampling was also

be used by choosing elements that are convenient.

18

3.4 Sample area

The study was carried out in Centenary Bank, Ishaka branch. The area was

preferred because of its strategic location at the heart of the city and because of a big

clientele. This availed the researcher with dependable data about the effectiveness of

computerized accounting.

3.5 Data collection tools

The researcher collected primary data mainly using questionnaire method,

observation and an interview guide

3.5.1 Questionnaires

In the study, three sets of questionnaires shall were used. The questionnaires

had closed and a few open ended questions. The aim was to enable the respondents

produce more data and vital suggestions concerning the study.

Control questions were used to assist the researcher check whether the information

given was not only correct but also consistent.

3.5.2 Interviews

Interviews, included face to face interaction between the interviewers and the

respondents. The questions were based on the answers provided in the questionnaire.

Interviews were paramount to the researcher as they would stimulate development of

new ideas.

3.5.3 Observation

Observation was also be employed as an instrument of data collection alongside

the questionnaires and interviews. This enabled the researcher to supplement on the

data collected using both questionnaires and interviews. Besides. original physical

evidence was gained by the researcher while observing.

19

3.6 Reliability

The reliability of the instruments used in the study ensured by requesting for

comments from various stake holders like bank employees, academicians, active

researchers, bank clients and any other category.

3.7 Validity.

The validity of each item in the questionnaires was approved as being adequate

and appropriate to capture data from respondents. The researcher futther went ahead to

capture this information by cross checking it with interviews fi·om top managers to

ensure its validity.

3.8 Sources of data

In the collection of data, the researcher used both primary and secondary data

3.9.1 Primary data

The major source of primary data was the area under investigation, Centenary

bank. Primary data was collected using personal interviews, observation and self­

administered questionnaires.

3.9.2 Secondary data

The secondary data was mainly used to supplement primary data so as to enable

the researcher get more information concerning the subject under study. Such data was

obtained from bank records, documents, written literature on corporate social

responsibility, newspapers, magazines, journals and prior reports.

3.10 Val"iables

3.10.1 Independent Variable

In this research, the independent variable was computerized accounting.

3.10.2 Dependent Variable

The dependent variable was financial performance given the fact that this IS

influenced by the efficiency of computerized accounting.

20

3.11 Data Collection Procedures

The letter of introduction was got from Head of Department from the university

seeking permission to conduct the study after being directed by the supervisor to do so.

This letter was then presented to the heads of departments at Centenary bank seeking

permission to conduct the study. The researcher upon the permission collected data and

finally analyzed and presented the findings. The researcher together with the

interviewees designed a research program.

3.11 Data Analysis and presentation and Ethical consideration.

3.11.1 Data analysis

Qualitative data was analyzed in the field as it is being collected (verbatim

repOiiing) while quantitative techniques were used to analyze data by using computer

programs like Microsoft Excel and Microsoft Word. Also under qualitative analysis,

thematic analysis was used and in quantitative data analysis; graphs, tables and pie

chatis were used for data analysis and presentations of findings.

3.11.2 Ethical considerations.

In the course of this research, the principle of anonymity was highly respected

and the researcher tried his best to help keep the confidentiality nature of the

respondents. All the authors whose ideas were used were fully acknowledged through

citations and referencing.

3.12 Limitations and delimitations of the study

This study demanded a lot of researcher's cash, time and effort. The researcher

had to forego pleasure and spend quality time in libraries and yet, all those resources

are scarce. However, the researcher followed the drafted timetable to finish his research

successfully.

The researcher in some instances was considered as a spy, a person who could

expose their dirty linen, or a government tax agent looking for information that could

incriminate or be used as a basis for increasing taxes, or even gathering information for

competitors. This was however solved by availing them with a letter of introduction

21

from the University and also assuring them that the information provided was

confidential.

Some respondents refused to cooperate with the researcher because of age

differences or fear that their answers would reveal their ignorance and or stupidity.

Others asked for money for beer or two before they would part with any data.

Assistance was obtained from different group like friends, and relatives the study will

be finished successfully.

22

CHAPTER FOUR

4.0 INTERPRETATION OF THE FINDINGS. This chapter covers the analysis of the data collected from Centenary bank respondents.

The researcher collected the data from the total number of 29 respondents. The

respondents included the Employees from the IT Department, the tellers and customers.

Table 1: A table showing the gender of the respondents . .

Gender Males Females

No of respondents 18 9

Graph 1. A Pie chart showing Gender of Respondents.

Formula used on all pie charts;

Number of respondents 0 ---------X 360

total number

• Females

Table 2: A table showing the age bracket of the respondents.

Age bracket 20-29 30-39 40-49 Above 49

No of respondents 6 12 7 2

23

Graph 2 A Bar Graph Showing Age Bracket Of The Respondents

A BAR GRAPH SHOWING AGE BRACKET OF THE RESPONDENTS

14

1:2 12 z w Q

10 z u.o Oa. 0~ zc:: 8

6

4

2

0

20-29 30-39 40-49 49+

AGE BRACKET

Table 3 for marital status of the respondents.

Marital status A B c No. of respondents 4 20 3

Key

A. Single

B. Married

C. Divorced

24

Graph 3 A Graph Showing Marital Status Of The Respondents

25 ~------------------------------------------

20 +----------

"- ~ 15 +---------------Ow o:O wZ "'0 2 ~ '----------------:::> ~ 10 .,_ zo:

01--

SINGLE MARRIED MARITAL STAUS

Table 4:The level of education of respondents

Education A

level

No. of 5

respondents

Source. Primary data.

KEY

A. Diploma

B. Degree

C. Masters

D. Others Specify

B c

12 2

DIVORCED

D

8

From the table above, it can be noted that, out of the 27 respondents, 5 had diplomas, 8

with degrees and 2 with Masters, of the other 8 had 4 certificates, 3 were Students and I

had a masters.

25

Graph 4 Pie Chart Showing Level Of Education

PIE CHART SHOWING LEVEL OF EDUCATION

DIPLOMA

• DEGREE

MASTERS

OTHERES

Table 5 A table showing the number of years that employees have served at Centenary Bank.

Number of Below 5 5-10 10-15 15 years and

years above

No. of 3 3 2 1

respondents

Source. Primmy data.

The table above shows that out of 9 respondents, 3 have worked with Centenary for less

than 5years, 3 for 5 to 10 years and 2 respondents worked with the bank for the period

between 10-15years and 1 for more than 15 years.

26

Graph 5 A Graphs Showing The Number Of Years Employee Respondents Has Served At Centenary Bank Ish aka Branch.

i ----------3.5 -.---------------------------

3

2.5 23 = " "" 2 = 0 c. "' 1::: 1.5 .... 0 0 z 1

0.5

0

Below 5 Years 5-10years 10-15 years above 15

No of years

Table 6 Position occupied by respondents in the Bank.

Position No of respondents

Head ofiT Department I

Tellers 5

Data officers in IT Department 3

Customers 18

Total 27

Source. Primary data.

From the table above, it can be seen that the respondents consisted of one Head of

Department, 5 tellers, 3 Data officers and 18 customers.

Response on quality of financial reports as a 1·esult of computerized accounting.

I. No more fraud and money laundering due to use of this system

I disagreed.

2. rate the Understandability of the computerized accounting system

27

!agreed

3. The cost of installing computerized accounting system is very high

I was not sure

4. The security of finances has risen to a sophisticated level

5 agreed

5. There has been reduced operational costs

6 strongly agreed

6. There is Increased reliability on financial reports

9 agreed.

7. Data loss has been prevented hence quality financial reports

4 strongly agreed.

Table 7 Response on quality of financial reports as a result of computerized accounting.

Responses.

A

SA

D

SD

N

Total

Source: przmary data

Key

A. Agree

SA. Strongly agree

D Disagree

SD Strongly disagrees.

N Not sure

No of respondents Percentage

16 59.3%

9 33.3%

0 0%

0 0%

2 7.4%

27 100%

28

From the table above, it can be noted that out of 27 respondents, 59.3% agreed that

computerized accounting improves the quality of financial repotis produced, 33.3%

strongly agreed while 7.4% were not sure.

Graph 6 A pie chart showing responses on quality of financial reports as a result of computerized accounting at centenary bank lshaka Branch.

• agree

• strongly agree

• not sure

Effectiveness of the Human capacity for computerized Accounting at Centenary

Bank

Explained in detail below are the details of how respondents responded to different

questions under human capacity for computerized accounting.

1. Computerized accounting systems speed up transactions.

8 respondents strongly agreed,

2. Centenary bank has cut down costs due to this system.

4 respondents agreed.

3. Computerized systems help in completion of complex tasks

7 agreed

4. The banks work is done efficiently due to the use of this system.

1 agreed

5. Internet fraud and hacking are a gone case due to the use of this system.

4 agreed.

6. System and server failure.

29

2 were not sure

7. There are high levels of efficiency.

I strongly agreed.

Table 8 Response on the effectiveness of the Human capacity for computerized Accounting at Centenary Bank.

Responses. No of respondents Percentage

A !5 55.6%

SA 10 37%

D I 3.7%

SD 0 0%

N I 3.7%

TOTAL 27 100%

Source. Pnmary data

Key

A. Agree

SA. Strongly agree

D Disagree

SD Strongly disagrees.

N Not sure

From the table 55.6% agreed that Human capacity helps on computerized systems and

37% of respondents strongly agreed 3.7% disagreed 3.7% were not sure.

30

Graph 7 Effectiveness Of Human Capacity For Computerised Accounting

EFFECTIVENESS OF HUMAN CAPACITY FOR COMPUTERISED ACCOUNTING

• AGREE

• STRONGLY AGREE

• DISAGREE

• NOT SURE

Response on how the organizations structure influences computerized accounting.

1. Computerized Accounting Unit is of great impot1ance in the institution

3 strongly agreed

2. There are sufficient resources to fund the existing structure

1 disagreed

3. Roles and Functions of the unit are well executed.

1 was not sure

4. Comparability and Consistency are reflected within the operation

15 were not sure

5. Relevance and materiality are key and first hand in the depat1ment

3 agreed

6. The organization structure has a high level of reliability

2 agreed.

31

Table 9 Response on how the organizations structure influences computerized accounting.

Responses.

A

SA

D

SD

N

TOTAL

Source: primary data

Key

A. Agree

SA. Strongly agree

D Disagree

SD Strongly disagrees.

N Not sure

No of respondents Percentage

5 18.5%

3 11.1%

2 7.4%

0 0

17 62.9%

27 100%

From the table above, it can be noted that out of 27 respondents, 18.5% agreed that

organizations structure and influences computerized accounting.! 1.1% strongly agreed

while 7.4% disagreed while 62.9% were not sure.

32

Graph 8 Response on how the organizations structm·e influences computerized accounting.

Response on how the organizations structure influences computerized accounting.

• Agree

• Strongly agree

• Disagree

• Not sure

4.1 INTERPRETATION OF DATA FROM INTERVIEW.

When asked on the rate of producing data, both the IT Department and tellers said that

computerized accounting increases the speed of repot1ing by using computerized

accounting as compared to manual systems. The head of the IT department however

said that the speed of rep011ing needs committed staff to ensure that data is always

updated all the time.

In response to the costs of computerized accounting as compared to manual systems,

the head of the IT depa11ment said that costs reduce as the companies computerize the

systems. He gave an example of employing many people to handle different tasks yet

computer can handle the work which could be handled by about 10 people. He said that

manual costs increases operational costs.

When respondents were asked whether computerized accounting has an effect on

profits, the Tellers said that computerized accounting has helped them to be up to data

33

all the time, and that the system helps them to forecast and compute financial ratios

which are helpful in profit making.

In response to how the bank can safeguard from fraud as a result of computerized

accounting, the head of the IT department said that they have controls in place to

prevent fraud from being committed further when asked the controls put in place, she

said that different checks like segregation of duties have been put in place to ensure

correctness of a transaction.

34

CHAPTER FIVE

5.0 DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 INTRODUCTION This chapter summarizes findings, conclusion and recommendations. The mam

intention of in the study was stated in chapter one to investigate the effect of

computerized accounting on financial Performance at Centenary bank. Some of the

outcomes were presented in chapter four. In this chapter the researcher interprets the

results and findings and discusses the objectives of the research, the researcher

furthermore gives recommendations and conclusions on each.

5.2 DISCUSSION OF FINDINGS. The results of the study as presented in chapter four are discussed in this section. The

respondents mainly included the people who have at least attained diploma level. This

can be evidenced from table I. This shows that most of employees at Centenary in IT

depattment and accounts are generally educated. The researcher tried to interview only

personnel with accounting knowledge. These were selected on the grounds that they

possess the knowledge required for the study. Among these respondents included, the

Head of IT department and accounts team as evidenced on table 2.

The researcher also interview customers since they are the end users of the system and

being stakeholders therefore provide the best information.

HUMAN CAPACITY FOR COMPUTERIZED A SYSTEMS ON FINANCIAL

PERFORMANCE

Generally, on the effect of Human Capacity on computerized accounting system. Most

of the respondents were of the view that it should be used alongside manual systems.

This is as a result of a big number of respondents consisting of 55.6% and 37%

respectively who supported the argument. In relation to Kimunya et el (2005) argued in

their research most organizations move through a progression of accounting systems by

first beginning with manual systems, then to computerized spread sheets based tools

then to computerized system.

35

Computerised accounting affects profits making at Centenary bank. This was reached

upon through an interview with financial manager of Ishaka branch. He sighted some

areas where computerised accounting assists in profit making like aiding in forecasting,

and accounting financial ratios. This contributes to earlier studies by basic college of

accounting where the reports showed that Banks use computerized accounting to gain

competitive advantage.

In conclusion, it is one thing to be noted that human capacity largely influences

computerized accounting systems, the systems cannot operate themselves and need

human beings to put in data but such data should be fed consciously and carefully. This

therefore gives credence to the call for need to train the personnel so as to maximize

profits.

QUALITY FINANCIAL REPORTS WITH THE USE OF COMPUTERIZED

ACCOUNTING ON FINANCIAL PERFORMANCE.

The possibility of making errors as a result of computerized accounting is generally

low. This is evidenced from the table where the biggest percentage of respondents 25

respondents said that the quality of financial reports increases due to use of

computerized accounting system.

The quality of financial reports as a result of computerized accounting is generally

high. This was evidenced in the table where by a big portion of 59.3% and 33.3% that

supported the argument that quality is very high and or high respectively. In connection

to De Thomas' research in 1985 that was carried in S.tvffis, it was revealed that the

quality of financial reports is high.

In conclusion it is worth noting that quality financial reports are as a result of the use of

computerized accounting systems but if there is one thing to reckon over and over, it is

the fact that there is need to keep the standard high as already set. This can only be

possible by eliminating all forms of data loss and routine training of the personnel that

man these systems to ensure efficiency.

36

ORGANIZATION STRUCTURE FOR COMPUTERIZED ACCOUNTING

SYSTEM AND ITS IMPACT ON FINANCIAL PERFORMANCE.

The speed of reporting increases with the rate at which financial reports are produced.

Though commitment of staff must be guaranteed as one of the Tellers commented

through an interview through an interview. Related to thi_s is a study by Dug! as in 2001

who said that a computerised accounting system is faster and efficient in processing of

information. Another research by the basic college of accounting found out that

computerized accounting found out that computer is more efficient in processing data.

There is cost reduction as a result of computerized accounting. This is affiliated to the

cost reduction as was highlighted through an interview with the Head of IT department

In conclusion Every transaction (event that change the financial resources or

obligations of the bank must be recognized, classified and documented; in addition

there must be corresponding accounts identified and changed. The transactions shou ld

be recorded in appropriate journals (with transaction data, affected accounts' titles,

debit and credit of each affected account and explanation specified in the journal

record. This in turn helps inform of data backup.

5. 3 CONCLUSION The computerized accounting system has proved to be effective in providing

information regarding the financial position of an entity in a timely and efficient

manner in Centenary Bank, accounting information system serves the purpose of

furnishing information about the entity's economic resources, claims against those

resources, owner's equity and changes in the resources and claims. Accounting

software enables timely and faster generation of financial reports. This helps managers

to easily identify and solve problems instantly and take evidence-based decisions within

various departments of the Bank. Computerized accounting system also enables data to

be available instantly and be made available to different users in different locations at

the same time meaning that transactions can be done at anytime. Among the many

benefits of computerized accounting systems is high speed and mobility of reporting,

reliability, no routine work, increased accuracy, internal control system of increased

37

productivity, easy back up and restoration of records; the disadvantages include:

extremely high costs on developing, introducing and using the system, special trainings

for personnel, increased personnel costs, dependence on machines etc.

5.4 RECOMMENDATIONS. During the study, several inefficiencies were identified that could handicap the smooth running of the entire financial system of the Centenary Bank. These include poor accounting information system maintenance, inadequate on- job training for tellers and finance staff and weak internal audit. Hence, the study recommends the following:

QUALITY FINANCIAL REPORTS WITH THE USE OF COMPUTERIZED

ACCOUNTING ON FINANCIAL PERFORMANCE.

The Bank should ensure routine system maintenance programs in order to get rid of

shortfalls such as viruses and fraud among others that may affect the system operations.

This should be done so that the system can operate to the expectation of management

and other end users.

The bank also needs to employ full time staff with adequate knowledge on installation

and maintenance of computerized accounting systems. The purpose and effect of this is

that data loss is prevented and quality is assured. Consequently even the cost of

installation for this system becomes cheaper since there will be readily available

manpower for purposes of maintenance and installation.

ORGANIZATION STRUCTURE FOR COMPUTERIZED ACCOUNTING

SYSTEM AND ITS IMPACT ON FINANCIAL PERFORMANCE.

It is also important that the employees handling transactions are trained so as to

improve on the accuracy and speed in posting. With increased improvements and

versions of accounting packages, finance and accounting staff need constant and

continuous training by the authorized dealers of the packages so that they remain well

equipped with the knowledge and experience of the package.

In addition to the training, it is important to constantly appraise the staff to check which

staff is failing the system as regards to reporting unbiased financial information. The

Bank needs more internal audit reviews to appraise and check the strength of the

38

instituted controls within the system. The computerized accounting system is prone to

fraud in cases where physical cash is involved.

HUMAN CAPACITY FOR COMPUTERIZED A SYSTEMS ON FINANCIAL

PERFORMANCE

Quarterly Internal and yearly external audit reviews should be carried out. Without

internal audit reviews, there may arise cases of teaming and lading fraud that may pass

unnoticed. It is therefore important that external auditors come in once in a while to do

audit. This in turn ensures that the there are high levels of transparency, the bank's

work is done efficiently and the cost of operation is cut down hence profit

maximization.

39

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44

Others

specify ... .... ....... . ................ . ................. . ............................................. .

4. What is your age bracket?

A)20-29 D B)30 - 39 D C)40-49 D D) above 49 years D

5. For how long have you served in Centenary bank?

A)Less than 5 yearsD B) 5-10 years D C)I0-15 years D D) 15 years & above D

6. What position do you hold in Centenary bank?

A. Lower level manager

B. Middle manager

C. Senior manager

7. Others specify

1. ............................................... .... ..... ................ .. ..... .... ......... ... .

2 ................. . ..... . ..... . .... .. . .... .... . ......... . ......... . .............................. .

3 ...... .. .............. . ... .. .. ..... .. ... . . .... ...... . .... . .. ... .. .... ....... ........ .... ..... .. . .

SECTION B: THE BENEFITS OF COMPUTERIZED ACCOUNTING

SYSTEMS.

8. Please indicate the extent to which you agree or disagree with the following

statements.

Scale:

Agree (A)= 1,

strongly agree (SA) = 2,

Disagree (D) = 3,

strongly disagree (SD) =4,

Not sure (N) = 5.

46

The following are some of the benefits of computerized accounting to Centenary bank

NO Human Capacity For Computerized A Systems

1. Computerized accounting systems speeds up transactions 1 2 3 4 5

2. Centenary bank has Cut down costs due to this system 1 2 3 4 5

3. Computerized systems held in completion of complex tasks 1 2 3 4 5

4. The banks work is done efficiently due to the use of this system 1 2 3 4 5

5. Internet fraud and hacking are a gone case due to use of this system 1 2 3 4 5

6. System and server failure I 2 3 4 5

7. There are High levels of efficiency 1 2 3 4 5

Quality Financial Reports

I. rate the Understandability of the computerized accounting system I 2 3 4 5

2. No more fraud and money laundering due to use of this system I 2 3 4 5

3. The cost of installing computerized accounting system is very high I 2 3 4 5

4. The security of finances has risen to a sophiscated level 1 2 3 4 5

5. Data loss has been prevented hence quality financial reports 1 2 3 4 5

6. There has been reduced operational costs 1 2 3 4 5

7. There is Increased reliability on financial reports 1 2 3 4 5

Organization structure for Computerized accounting system.

1. Computerized Accounting Unit is of great importance in the 1 2 3 4 5 institution

2. Roles and Functions of the unit are well executed. I 2 3 4 5

3. There are sufficient resources to fund the existing structure I 2 3 4 5

4. The organization structure has a high level of reliability 1 2 3 4 5

5. Comparability and Consistency are reflected within the operation I 2 3 4 5

6. Relevance and materiality are key and first hand in the department I 2 3 4 5

THANK YOU VERY MUCH FOR YOU RESPONSE

47

KAMPALA INTERNATIONAL UNIVERSITY

Ggaba Road, Kansanga• PO BOX 20000 Kampala, Uganda Tel: +256 777 295 599, Fax: +256 (0) 41 - 501 974

E-mail: mugumetm@gmail.com, • Website: http://www.kiu. ac.ug

COLLEGE OF ECONOMICS AND MANAGEMENT DEPARTMENT OF ACCOUNTING AND FINANCE

October, 8TH 2018

To whom it may concern

Dear Sir/Madam,

RE: INTRODUCTORY LETTER FOR AMANIGARUHANGA BENJAMIN REG NO 1153-05014-00638

This is to introduce to you the above named student, who is a bonafide student of Kampala International University pursuing a Bachelor's Degree in Business Administration, Third year Second semester.

The purpose of this letter is to request you avail him with all the necessary assistance regarding his research.

Topic:- COMPUTERISED ACCONTING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS

CASE STUDY: - CENTENARY BANK ISHAKA BRANCH

Any information shared with him from your organization shall be treated with utmost confidentiality.

., 'j

tur ref: Ref: KIU-AF I 5246

our ref:

'ate:08th October 2018

Head of Department Accounting and Finance Kampala International University

Dear Sir I Madam,

Centenary Bank

RE: AMANIGARUHANGA BENJAMIN REG. NO. 1153-05014-00638

With reference to the letter dated 8th October 2018, for the above

mentioned student requesting for assistance in our institution for

his research 1n Computerized Accounting and Financial

Performance of Commercial Banks.

We hereby confirm that Amanigaruhanga Benjamin has been

availed with opportunity to do his research with Centenary Rural

Development Bank.

Centenary Bank: Head Office - Mapeera House Plot 44-46 Kampala Road and Plot 2 Burton Street. P.O . Box 1892 K•mpala. UGANDA. Call C entre: 0800 200555.Te1:+256 (0)41 346856, 251276/7. Fax: +256 (0)41 251273 email: info@cente n:arybank.co.ug. website: www.cente n:arybank.co.ug

Ugandans· Prof. john Ddumb> Ssentamu (Chatrmon). Mr. Fabian Ka<o (Managtng Dtrector). Dr. S1mon M.S. Kagugube (Execuuve Dtrector). Mr. Henry Kibtrige. Mr. Andrew Obol. Dr. Peter Ngateg•ze. Mt. Rev. Dr Cypmn K. Lwanga. Mt. Rev. Paul Bakyenga

Ke nyon· Mr Klmathi Mutua Duul1. Mr Jacco Minnaar.