CHAPTER TWO 2.0LITERATURE REVIEW 2.1 IntroductionLiterature review is a vital component of a study. Aliterature review surveys scholarly articles, books, dissertations, conferenceproceedings and other resources which are relevant to a particular issue, areaof research, or theory and provides context for a dissertation by identifyingpast research. The essence of the literature review section of this study is toidentify gaps in current knowledge, to avoid reinventingthe wheel by discovering the research already conducted on a topic sets thebackground on what has been explored on a topic so far, to increase the breadthof knowledge in the area of research, to help the researcher identify seminalworks in your area, allows to providethe intellectual context for your work and position your research with other,related research , to provide the researcher with opposing viewpoints and alsothe researcher to discover research methods which may be applicable to yourwork.
This section pays critical attention to the concept of accountinginformation system, the effectiveness of accounting information as a tool fordecision making and the interconnectedness or the relationship betweenaccounting information and strategic decision making respectively. 2.2 The conceptof an accounting information systemAn accountinginformation system (AIS) conceptually involves the collection, storage andprocessing of financial and accounting data used byinternal users to report information to investors, creditors and taxauthorities. An accounting information system has been briefly explained by variousscholars as a computer-based method for tracking accounting activity inconjunction with information technology resources. Accounting, as a termalso involves a closed-system recording (which is the collection of procedures,methods, techniques, legal regulations, rules and experts), includes theidentification, tracking, measuring, recording, processing, storing,systemizing, valuing, controlling and publishing of the phenomena influencingthe property, financial and profit status of the enterprise, ensuring theconditions of continuous, undisturbed activity. Accountinghelps in constructing a crucial and a formidable source of information whichcontributes to organizational development. This assertion is evident in theworks of Hall as he aptly points out that as a key source of informationabout an entity’s financial position and performance, accounting can helpmanagers to develop knowledge about the organization in several ways.
(Hall,2010) In thisregulated, closed system the accounting information system records the economicevents influencing the enterprise, then processes them according to the demandsand conveys them to the persons or units responsible for decisions. Inaddition, the system greatly contributes to preparing different reports,financial statements, working out an expense management system and compilingcontrolling reports. The accounting system includes two main activitiesaccording to Schehl’s categories concerning the activities of the enterprise(Schehl 1994): processing information and supplying information. According to the above categories, the dual purpose of the accounting information system can be defined: on one hand to fulfill the registrative, accounting and reporting duties; on the other hand to provide information at the highest possible level for the manager’s decision-making activity (Schehl 1994). This dual function defines the contents of the sub-system, its tasks and its connections. The characteristic sub-systems of the accounting information system are the following in practice (Schehl 1994): Ledger and current account sub-system Financial sub-system Sub-system of labour and wage accounting Sub-system of investment Sub-system of invoice and sales Sub-system of stockpiling.
Accounting information system generally follows due structural proceduresto arrive at logical conclusions as Boockhodt (1999) aptly points out as ‘comprisingof data gathering, processing, categorizing and reporting financial events withthe aim of providing relevant information for the purpose of score keeping,attention directing and decision making’. In generating accounting informationsystem, there is always a system of planning, organization, directing andpresentation of data in order to ensure effective coordination in producing anefficient and a tangible outcome. Four qualitative characteristicshave been developed by The Framework for the Preparation and Presentation ofFinancial Statements to determine the essence of information provided by annualaccounts : (IFRS, 2010) Intelligibility The understandingand effective coordination of information contained in the synthesis documentsenable users to have a credible and a comprehensive knowledge of business andaccounting concepts; RelevanceIt basically hasto do with the capacity of information to essentially influence decision-makingprocess. Relevant information help users evaluate and make a comparativeanalysis between the past, present or future events, to confirm or correcttheir future assessments. It also helps in establishing correlation as well. Reliability informationThe informationmust be devoid of errors and must also be objective in its analysis andfindings, providing essential information for users in the decision-makingprocess.
Comparability It involves theability of information to be compared over a period of time or in space andrelative to other desired goals or objectives. The main desired goal of anaccounting information system (AIS), a pre-eminently user-oriented system, isthe collection and recording of data and information regarding events that havean economic impact upon organizations and the maintenance, processing andcommunication of information to internal and external stakeholders. Hubber (1990), support this assertion by arguing that integration of accounting information leadsto coordination in organisation, which in turn, increases the quality of thedecision.2.3 The Usefulnessof Accounting Information SystemAccountinginformation system is very critical to an organizational development Good cooperationA major attribute of good cooperation is supportand team work. Good cooperation involves common needs and wants, understanding,maturity and empathy. Cooperation in an organization entails the process ofgroups of organisms workingor acting together for common or mutual benefit or for the benefit of the organizationas well, as opposed to working in competition selfish benefit. Thereis the need for effective understanding among the consumers in order to ensurea smooth operation of their production, in order to ensure the free flow andthe timely recording and keeping of materials and most importantly avoidingduplication of information collection and shortcomings.
To meet the needs of multi-users Meeting the needsof multi-users of accounting information is very crucial to a sustainablegrowth and advancement of a company. As stated in Vol. 2 of an article on ‘Usefulnessof Accounting Information System in Emerging Economy’ published by theInternational Journal of Economics and Finance, any activities according to thevalue chain management should be the value-added process, and account is ameasure means of the value of economic activity, therefore, any economicactivity through the accounting information system can be measured andreflected.
To control afterwards, and control in advance and in concurrent Accounting informationsystem has the critical role of supervision and control of the economicactivities of the company. The traditional manual account and of the computeraccounting system for “accounting” can only do inspection afterwards,the mistakes means that by that time the harm will have already been done. The Concept ofDecision making 2.4 The effectivenessof accounting information as a tool for decision makingAccording toFlynn (1992), the effectiveness of accounting information systems can bereceived providing management information to assist concerned decisions.
ByCorner (1989) the effectiveness of AIS can be assessed as added value ofbenefits. Gelinas (1990) considers the effectiveness of AIS as a measure ofsuccess to meet the established goals. The essence ofaccounting information in decision making has been clearly stipulated by Alexandra-Daniela(2012) by highlighting the following key functions: It helps managers to have an in-depth knowledge about what happened in the past and which is the present situation of the organization. This helps to establish a correlation between the past and the present and provides a fertile ground to make future predictions. It makes visible those events that are not perceptible by daily activities. It involves an in-depth analysis of hidden data or information that of greater importance to the development of the institution or company.
It provides a quantitative overview of the company.Accountinginformation basically involves quantitative data analysis, descriptivestatistics, accounting, data presentations and record keeping. Accounting information is very much important for decisionmaking as it provides a quantitative data which is crucial for planning,controlling and evaluating organizational performance. It helps managers prepare for future events and to make relevant decisions as well. Company’s findings on accounting information must be beneficial fordecision making, financial accounting information must be unbiased, essential,reliable and must provide effective future predictions or directions as well.Also managers must be objective and realistic in providing accountinginformation and must also be optimistic in its implementation as wellirrespective of the outcome of their findings REFERENCEBÁNYAI, F.
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