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THE EFFECT OF COMPUTER IN ACCOUNTING INFORMATION PROCESSING IN NIGERIA COMMERCIAL BANKS

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CHAPTER ONE

INTRODUCTION

Financial accounting can be defined as the process of collecting, recording, presently and analyzing and interpreting financial information for the users of financial statement [Robert, O. Igben 2007]

Accounting is the language of modern business, a tool for business decision making. It is used by people associated with business, whether they are managers, owners, investors, bankers, lawyers, and accountant. It provides financial information to people inside and outside the organization who need and are authorized to have such information. A system like a computer in the most general sense of the word is a group of interrelated components that processed inputs into outputs to meet some objectives.

An accounting information system is a group of components that processes raw data into financial information to meet the purpose of these internal and external users, however, when we talk of accounting information system we invariably refer to computer assisted techniques in accounting [Warren, 1997].

The objective of financial information is to provide useful information for making economic decision. The process of recording, aggregating and summarizing the effects of historical transactions in financial statements under a specified set of rules constitutes the bulk of financial accounting. Organizations such as commercial banks need the accounting information in carrying out their operations and transaction. Fortunately, the electronic computer as an electronic device for storing and analyzing information fed into it, for calculate or for controlling machinery automatically could be used to perform commercial banking products and operations and also aids managerial decision makers in planning and controlling of various business activities [Warren, Reeve, Fess, 1997].

  • BACKGROUND OF THE STUDY

          Accounting information poses certain qualities necessary to satisfy user’s need. Two basic qualities for general purpose accounting reports supplied to external user are:

  • Relevance
  • Reliability

 

It is important to realize that for the information to be of any use to management or external users, it has to be targeted at a specific decision. It is in this sense that the information may said to be relevant or pertinent to the decision. Relevance of accounting information is judged in relation to the user’s situation. Also, accounting information signifies faithfulness, constancy and trustworthiness. As stated by Mandadur R. and Maurice H in their book Accounting Information System [1976] page 9, one way of ensuring reliability in accounting information is to ensure adherence to accounting principles. Also R. W. Hilton and S. J. Swearing in perception of initial uncertainty as a detriment of information value [pg. 109-119] stipulated that ‘the value of any accounting information depends on its accuracy and its ability to reduce uncertainty”.

Accounting information is useful in all types of organizations especially the banking industry where the survival and growth of such organization depends to a large extent, on supplying effective accounting information to internal and external users. The size of an organization determines the appropriate volume and complexity of accounting information for managerial decisions in such areas as purchasing, protection, hiring, borrowing and investment. The computer was initially introduced into most corporate organizations to satisfy the efficiency concerns of processing vast amounts of accounting transaction data at the operational control level. It has proved so effective in the role that virtually no sizable organization can survive competitive pressures without using this tool called the computer. Throughout the 1970’s computer technology limited the production of accounting information to predetermined formats. The introduction of micro computers in the early 1980’s brought about rapid rise in the computer at all levels of management and contributed to the development of a new class of programs aimed specifically at meeting the needs of strategic management. Donald H. Sanders in his book “Computer in Society” assets that “that scope of today’s accounting information system is influenced by the rapid growth of information processing technology and increased complexity of business in general.

Thus, the accounting information of the foreseeable future must establish and maintain the capability for complex manipulation of vast volume of financial and non-financial data with higher speed and greater accuracy.

The enhanced power of data handing in a complex environment has altered the character of accounting system. The accounting system of the past was a little more than book-keeping which relied on electronic devices of limited capability and required a great deal of human involvement as almost every step of the process. Such an accounting information system was not able to cope with the dynamic challenged of business complexities. Its products were unable to satisfy user’s needs for planning and controlling information. The primary concern of the accounting information system was to manipulate historical data, satisfy audit needs, produce after that fact financial statement and provide preformatted reports for managerial use.

Today’s accounting information system deals with future events as well as historical data. It must produce projected financial statements as well as historical ones. It must support unanticipated managerial needs for financial information for decision making, in addition to satisfying the needs of auditors. It must develop new and efficient controls, reporting techniques and audits trials in response to the trends towards increasing public access to accounting data reports. For instance, consider the monthly statements provided to bank customers. These must incorporate detailed information about numbers transaction [ranging from cash and cheques deposit, interest charge, tax charges and withdrawal] performed in a variety of ways from a number of locations. A bank cannot survive today without providing this level of services, yet the capability to do so did not exist a few year ago.

However, the advent of the computer has some of its attendant problems. These are training of personnel and finance costs.

In conclusion, the computer contributes to increased output, by increasing efficiency and its ability to perform predetermined tasks, faster and more accurately.

  • HISTORICAL BACKGROUND OF UNION BANK OF NIGERIA PLC [R.C. 6262]

          Union Bank is not a new name in the Nigerian banking sector as it is one of the “big five” in the Nigeria banking industry. Union Bank of Nigeria Plc as popularly known was formally known as Barclays Bank DCO [Dominon Colonial and Overseas]. The bank which commenced operations in Nigeria in 1917 was incorporated as a private limited liability company in Nigeria in 1969, it was later converted to a public company in 1970. The bank shares are quoted in the Nigerian Stock Exchange.

The company is engaged in commercial banking, in the year 2000 the bank changed its accounting year end from 30 September to 31 March and consequently the financial statement cover a period of eighteen months ended 31 March 2001. Union Bank of Nigeria Plc stands out as big, strong and reliable bank, according to its [2001] Annual Report and account its mission statement to be the foremost financial institution with the most satisfied customers” is an insight on how important their customers are. As at 31st March 2001, the bank had 2 foreign offices in London and South Africa, and a total of 297 branched as a group and 282 branched as a company. According to its 2007 annual report and the total branches increased to 306 and 293 as group and company respectively.

As per staff and management strength, Union

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