CHAPTER 1

INTRODUCTION AND BACKGROUND OF THE STUDY

INTRODUCTION

Various inventions and advancement in technology greatly

affects our daily tasks. It serves as a medium that makes life
easier. Individual, household and even different organizations
gained benefits from technological advancement. Through
technology, individual and household consumers are able to make
their tasks in a more convenient and fastest manner. For example,
the invention of the telephone by Alexander Graham Bell creates a
quicker mode to communicate. From a traditional telephone, people
come up with the idea of building a more convenient medium to
communicate – and that is our mobile phones. Technological
evolution, on the other hand, not just helps individuals and
households, but firms, too. Technological evolution changes the
way businessmen or firms in developing their accounting
practices, starting from its traditional approach to a current
system.

Traditional accounting practices used to focus on

bookkeeping and financial reporting, and the preparation and
presentation of financial statements as a final purpose. These
financial information were given to users, both internal and
external, to gain a fair view of the company. To support the
financial reports, manual collection of documents, processing of
data and operations, posting of journal entries, as well as the
consolidation and final reporting operations are needed. However,
manually establishing this process requires a lot of time and
effort. Due to advancements in technology, computers were
invented and were used in the accounting process. This accounting
process is known as Accounting Information System. But, what is
this Accounting Information System?

Accounting Information System is a widely known system for

accounting practices. According to Investopedia, Accounting
Information System is a structure that a business uses to
collect, store, manage, process, retrieve and report its
financial data so that it can be used by accountants,
consultants, business analysts, managers, chief financial
officers (CFOs), auditors, regulators and tax agencies.
Accountants are using this system in-depth to ensure the highest
level accuracy of the company’s financial transactions and
recordkeeping, as well as ensuring it’s availability to those who
needs it – the external and internal users.

According to AccountingEdu.org, AIS has mainly three

functions. The first one is that AIS provides an efficient and
effective collection and storage of data concerning an
organization’s financial activities, including getting the
transaction data from source documents, recording the
transactions in journals, and posting data from journals to
ledgers. The second function is that it supplies information
useful in making decisions which includes producing managerial
reports and financial statements. The last function is that AIS
make sure controls are in place to accurately record and process
data.

The accounting systems may be seen as aiming to support

businesses in collecting, understanding and analyzing the
financial data. (Chytilova et al., 2011) In fact, AIS has been
widely used since then. According to Phillips (2012), the
evolution of software accounting generation is subdivided into
three major categories – that was during the 90’s era, 00’s era,
and 2010-present. The 90’s era is marked by the apparition of
the first accounting software programs under which is known as
the Windows Age. During this era, applications can be used but it
only supports basic accounting practices and operations. The 00’s
era, there are applications of concepts which developed a system
that allows a complex accounting operations and data processing
from the basic accounting operations. Known as the Mobile
Accounting Era, 2010 is when the year the accounting system has
come into mobile phones. Mobile accounting and financial
applications are created to support financial processing and
reporting.

In the early 1920’s, after Accenture, a global management

consulting and professional services firm that provides strategy,
consulting, digital, technology and operations services, make an
agreement which was signed by British Petroleum, a British
multinational oil and gas company – the accounting started
changing its meaning within companies, turning it from the
traditional way of bookkeeping function to a management strategic
and supporting-function. The technological evolution during has
gave birth to Enterprise Resource Planning or ERP which was used
to incorporate and connect various organizational functions such
as accounting, asset management, operations, procurement, human
resources, etc. Ustasuleyman and Percin (2010) defines ERP as a
software packages enabling the integration of business processes
throughout an organization. Salmeron and Lopez (2010), on the
other hand defines it as a single software system allowing
complete information flow from all functional areas in companies
by means of a single database, and accessible through a unified
interface and communication channel.
 AIS has been beneficial to various organizations – national
or international. AIS allows a business to run smoothly on a day-
to-day basis or hinders its operation if the system is poorly
designed. An AIS is a very essential tool when a business is in
trouble, the data in its AIS can be used to uncover the story of
what went wrong. All the rapid development in AIS brings along a
series of challenges that all organizations should be aware of
and address when considering keeping up with the progress and
ensuring the reliability and fairness of reported information at
the same time. Technology proved once again responsive to the
market’s demand, and thus accounting software easily customizable
for each client’s particularities regarding the activity profile,
accounting practices and chart of accounts, were built as for
supporting the automation of accounting process.

STATEMENT OF THE PROBLEM

This research is concerned in identifying the value of an

Accounting Information System in an organization. It sought to
answer the following questions:

1. Is their AIS provides quality information in terms of:

1.1 accounting information; and
1.2 cash inflows and outflows?

2. Is their AIS provides information which are:

2.1 credible;
2.2 accurate; and
2.3 efficient?

3. How does it affects the organization in terms of:

3.1 future economic benefits; and
 3.2 profitability?

SCOPE AND DELIMITATION

The scope of this study is to conduct a research regarding

the analysis of accounting information system of Marikina
Government. The Marikina Government officials are the
participants both male and female on the research. The study
delimited the researchers on gathering data from local
literature. Lack on prior local related study about empirical
analysis of accounting information system is the researcher’s
hindrance to this study. The researchers had not found a local
study that can support this research. Local researchers may not
been conducting a research regarding accounting information
system. Most of it is foreign studies. In this research, the
related studies of it are more on foreign studies that supported
the study that the researchers are trying to conduct. It focuses
on finding information and supporting research that could give
enough data regarding on accounting information system.
Effectiveness of the accounting information system in Marikina
government are the researchers focus on this study.

SIGNIFICANCE OF THE STUDY

The results of this research were significant to the

following individual/ sectors:

City Government of Marikina. This research will help the City

Government of Marikina to make an effective economic budgeting in
Marikina City.
Future Businessmen. This research will benefit them in knowing
the cash out flows and in flows of their business. For them to
have knowledge if their business can still operate.

Future Researchers. They may use this study as their references

to their future research in regards to the effectiveness of
Accounting Information System.

CHAPTER 2
 REVIEW OF RELATED LITERATURE

Today, a significant number of companies use

information technology to deliver information and services
to their customers. Systems serve people in their day-to-day
activities by granting access to a wide range of information that
interests them. People can also access significant information in
systems (Del Rosario, Del Rosario, Nieva, Tan, & Tangkeko, 2016).
The ongoing revolution in information technology has had a
significant influence on accounting information system (AIS).
Accounting Information are conceptualized as a set of components
that collect accounting data, store it for future uses, and
process it for end users. Furthermore, AIS is considered as the
computer-based 42 systems that process financial information.
The systems support decision tasks in the context of organization
and regulation of financial activities (Diavastis et al., 2016).

The success of organizations depends on their ability

to respond to changes in the market environment they are
operating. In this way, managers strive to ensure that their
organizations successfully adapt to such changes. Accounting
information systems have been recognized as an effective tool for
achieving not only internal changes but also external
organizational changes. As such, many organizations, but
particularly banks, are left with no other option but to invest
in the latest technology such as Accounting Information Systems
(AIS) to satisfy the needs of their customers and compete
favorably. Information systems are generally designed and
implemented to enhance organizational impacts. . Successful
implementations of AIS in organizations have impacted positively
the methods of data collection, processing, and dissemination of
the information to the intended user(s) (Dameri et al., 2013).
Moreover, AIS are believed not just to improve the effectiveness
and efficiency of business processes and reduce cost but also to
provide reliable real-time data on demand, facilitating global
knowledge and new reporting tools, as well as the integration and
collaboration between areas of risk and business operations
(Bruno et al., 2015).

It has been discovered that lots of small and medium

scale enterprises shut down before they can achieve their goals a
result of poor management arising from inadequate weak and
undependable accounting and financial information. (Olatunji
2000; Safiriyu, 2012). Controls may have to depend on the close
involvement of the owners in the management of the business and
to extent of their integrity. This calls for an adaptation of
accounting systems to need of these businesses (Abeygunasekera
and Fonseka, 2013). Internal control in small and medium scale
enterprises may not be as detailed as those of large companies
but it should comprehensively cater to the needs of the
enterprises and users of its reports such that it provides
reasonable assurance of truth and fairness (Mbroh, 2013).

AIS is important in decision making because the quality

of the information given by financial reports will affect
the decision making of the company. Stakeholders of the
company need the high-quality information for the success of the
company. High quality accounting information needs to fulfill
four principal qualitative characteristics: comprehensibility,
relevance, reliability, and compatibility (Spătărelu & Petec,
2015). AIS helps the stakeholders in decision making process
with internal controls, enhances the quality of the financial
reports, and facilitates the financial transactions of the
company (Mndzebele, 2013). Thus, AIS should generate reliable
and relevant output for the company. Furthermore, AIS adoption
is recommended because it can improve the firm-level performance
of a business (Tang, 2015). According to Paul Mwaura who did a
study about the relationship between financial performance of
NGOs and financial accountability in Kenya. The study found out
that the NGOs that applied financial standards in ensuring
accountability of finances in the organizations boosted Donor
support which resulted in improved performance.

The rapid changes in technology and the dynamic nature

of the business environment, as well as increasing demand from
customers, have transformed the activities of making business at
both the technical level and strategic level of the organization
(Damera, Garilli, & Ricciardi, 2013). The nature of the company
would affect the usage of the computerized accounting information
system (Wang & Huynh, 2013). According to a recent study “The
Effect of Computerized Accounting Systems on Audit Risk
Management in Public Enterprises” the study reflected that only
36% of the institutions reported that they had a regular program
or equivalent in place while another 24% were in the process of
implementation of the computerized system. More than 40% of the
participating institutions lacked computerized audit
implementation plan. (Otieno and Oima, 2013)

Today’s AIS provide an enabling environment, which

supports bank information exchange, integrates the flow of
information (internal and external), and provides links to the
supply chain platform. This greatly enhances the relationship
between bank and users. Thus, the conclusion can be made that the
use of AIS has enhanced the computing power and standardization
of organizational activities and, thus, leads to the provision of
more accurate and timely information to the various users in
organizations (Rodriguez & Spraakman, 2012).

CHAPTER 3
 CONCLUSION

REFERENCES:


PAMANTASAN NG LUNGSOD NG MARIKINA

 BACHELOR OF SCIENCE IN ACCOUNTANCY

Pamantasan ng Lungsod ng Marikina

Rainbow St., corner Sierra Madre St., SSS Village,

Concepcion Dos, Marikina City

AN EMPIRICAL ANALYSIS OF THE ACCOUNTING INFORMATION

SYSTEM IN AN ORGANIZATION

In partial fulfillment

of requirements for the subject

PUSPOSIVE COMMUNICATION

BROZAS, LENDSAY BELMIS

MUTYA, PRINCESS MAY LETADA

NAADAT, PIOLO BRUCE

NICAR, ANALIZA MAE IMPERIAL

PADUA, CHERIVIC OCLARIT

SUAYBAGUIO, JOAN TUMAMPOS

MARCH 2019