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CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter examines existing literature on the impact of technology on the efficiency of accounting practices in organizations, drawing from various scholarly perspectives, findings, and opinions.

2.1 Benefits of Computer Systems in Accounting

Time Efficiency: Manual accounting relies on paper-based processes, which are time-consuming and resource-intensive, particularly for financial institutions. Computerized accounting significantly reduces processing time by automating transactions and calculations (Magdalene, 2010).

Accuracy: Computerized systems minimize human errors in data processing, classification, and reporting, ensuring reliable financial information for decision-making (Magdalene, 2010; Birungi, 2011).

Security: Unlike manual records vulnerable to disasters (e.g., floods, fires), computerized systems offer secure data storage, backup, and restricted access via passwords (Birungi, 2011).

Cost-Effectiveness: While manual accounting may seem cheaper initially, computerized systems enhance efficiency, speed, and decision-making, justifying their long-term value (Van Weele, 2005).

High Output Capacity: Automated systems handle numerous transactions simultaneously with precision, unlike manual methods prone to delays and calculation errors (Magdalene, 2010).

2.2 Various Forms of Computer Systems in Accounting

Electronic Data Interchange (EDI): Developed in the 1980s, EDI enables automated, standardized electronic transactions between organizations, reducing paperwork and improving accuracy (Chaffey, 2012). Its adoption requires collaborative supplier partnerships (Bialy et al., 2006).

Bar Codes and Scanners: These systems enable rapid, error-free data entry, shipment tracking, and inventory management (Bailey, 2006).

E-Catalogs: Web-based catalogs streamline procurement, reduce fraud, and enhance buyer-supplier communication (Farrington et al., 2006; Accenture, 2006).

Smart Cards: Embedded with microchips, they store transactional data and customer information securely (Enslow, 2006).

Satellite Technology: Facilitates real-time tracking of goods in transit, improving logistics accuracy (Deo McObrien & Corbett, 2008).

Image Processing: Uses scanning technology to digitize documents like invoices, enhancing record-keeping and customer service.

Internet: Enhances communication, order tracking, and electronic commerce between businesses (Zsidisin & Papadakis, 2003).

Enterprise Resource Planning (ERP): Integrates core business processes (finance, HR, procurement) into a unified system, improving coordination and efficiency (Boyle, 2004; Davenport, 2002).

2.3 Relationship Between Computer Systems and Accounting Efficiency

Standardization & Error Reduction: Automation ensures consistency, faster error detection, and improved record-keeping (Kotler, 2000).
Process Simplification: Technology streamlines accounting workflows, enhances supplier coordination, and reduces cycle times (Lysons, 2006).
Automation Benefits: Tools like barcode scanners minimize paperwork and improve real-time data exchange (Aberdeen Group, 2005).
Warehousing Improvements: E-receipts and digital tracking optimize inventory management (Carter et al., 2007).
Faster Deliveries & Payments: Electronic systems (e.g., ATMs, credit cards) accelerate transactions and reduce risks (Aberdeen Group, 2005).
Enhanced Monitoring: GPS and internet tools enable real-time shipment tracking (Lysons, 2003).
Improved Communication: ICT replaces traditional methods (fax, mail) with instant, reliable interactions (Nair, 2006).
Reduced Inventory Costs: Just-in-time ordering prevents overstocking and obsolescence (Thomson & Singh, 2001).