CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Gilbert, (2011) indicated that businesses are run with shareholders’ capital, long term and short term borrowing whether it is a small or medium enterprise and its performance is mainly measured in terms of profitability. He further reports that business contains exchange of goods and services which generates information for better analysis of business performance which is pivotal to profitability. Due to the nature and peculiarity of the Small and Medium-scaled Enterprises (SMEs), a well-organized, coordinated and operating accounting system will be difficult to maintain or run not forgetting that the most valuable resource an organization has is information which is generated from day-to-day operation of the business (Adebayo, Idowu , Yusuf , & Bolarinwa, 2013). Gilbert, (2011) further proclaimed that it is worthy of note at this juncture that the information derived from the daily transaction needs to be carefully collected or gathered, recorded or stored, processed and analyzed in order to produce meaningful output of decision making. It has been recognized that appropriate accounting information is important for a successful management of any business entity whether large or small (European Commission, 2008).
Accounting information system (AIS) is vital to all organizations Curtis (1995), Wilkinson, Cerullo, Raval and Wong-On-Wong (2000). Curtis, (1995) further elaborated that accounting information system provides a mechanism for proper recording of transactions most especially financial transaction, storage and re-production of information relating to financial flows and positions at a given period of time. It is also a “tool which when incorporated into the field of Information and Technology systems (IT), were designed to help in the management and control of topics related to firms` economic financial area” (Grande, Estanbanez & Colomnia, 2011). The SMEs in a competing business environment may not be able to strive for long time without proper management of its expenditure, cash-flows and also providing information for monitoring and control (Mitchell, Reid & Smith, 2000). This will aid effective budgeting, proper analysis of cost and decision making. However, as mentioned earlier that by Gilbert, (2011), businesses are run with shareholders’ capital, long term and short term borrowing which should be adequately accounted for and with the accounting system mechanism created, organize a schedule of loan re-payment that will adversely affect the growth and expansion of the SMEs in the long-run as borrowing for expansion and continual existence is inevitable.