CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

Accounting system has been recognized in most countries of the world as a means of meeting economic growth. For a business to survive, grow and achieve prestige, it must have a dynamic purposeful and efficient accounting system. For centuries, accounting had been generally confined to the financial record keeping functions of the accountant. Olumba (2009), stated that the economy has changed such that competition has become intense and there is a great change in consumers taste due to technological developments in the business world. The role of an accountant has gradually changed from that of the mere recorder of transactions to that of the member providing relevant information to the decision making team. Accounting is now regarded as an information system and forms integral part of management information system. As an information system, it collects data and communicates economic information about a business enterprise or other entity to a wide variety of persons whose decisions and actions are related to the activity.

          According to Hussy (2009) accounting system is defined as “the system designed to record the accounting transactions and events of a business and account for them in a way that complies with its policies and procedures. The basic elements of the accounting system are concerned with collecting, recording, evaluation, and reporting transactions and events”. An accounting system is an orderly, efficient scheme for providing accurate financial information and controls. Regulatory requirements and internal administration policies are key considerations in the design of an effective accounting system. Thus accounting systems show the books, records, voucher, and files and related supporting data resulting from the application of the accounting process. It involves the design of documents and transactions flow through an organization. The uniqueness of small scale businesses call for careful consideration in the design of accounting systems. Small scale businesses are a vast majority of businesses found in variety of primary and intermediate production of the economy. These establishments have tremendous impact on the state and well being of the nation in employment generation, as sources of national outputs and revenues, providing feedstock for large corporations. They may lack the sophistication to apply the detailed accounting processes, yet the value of accounting systems to these businesses is quite profound (Olatunji, 2013).

          The purpose of accounting systems is to provide an orderly method for gathering and organizing information about the various business transactions so that it may be used as an aid to management in operating the business, (Copeland and Dascher, 2008).

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