Semiconductor Optoelectronics, Vol. 42 No.

1 (2023), 371-378
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IMPACT OF ACCOUNTING SOFTWARE ON MICRO, SMALL AND MEDIUM

ENTERPRISES: A STUDY WITH SPECIAL REFERENCE TO OTTAPALAM
MUNICIPALITY

Anitha K M
Ph.D. Scholar, Department of Commerce, AJK College of Arts and Science, Coimbatore.

Dr. Dinesh Kumar G R

Assistant Professor and Hod, Department of B. Com (Pa), AJK College Of Arts and Science,
Coimbatore.

ABSTRACT
The study discusses the effects of using software on MSMEs’ performance. The main
objectives of the study are: to establish the effect of quick books accounting systems on
financial performance, to assess the effects of software accounting systems on decision-
making, to establish the effect of software accounting systems on financial reporting, and to
establish the effects of tally accounting systems on MSMEs’. A descriptive survey research
design was used in this study to allow researchers to gather information, summarize, present,
and interpret for clarification. The study populations were all the 1000 MSMEs’ in ottapalam
municipality. To find out the required strata in the geographical locations a stratified random
sampling technique was used for the study. The Primary data was collected through
questionnaires and selected a sample of 100 respondents by using the drop-and-pick-later
method personally by the researcher. Grounded on the findings the study recommends that the
operation should have a strategic master plan from which the account systems are phased in
line with the organizational fiscal capability and enforced in line with the strategic plan for
the successful performance of the MSMEs. Further, the operation to increase further staff to
ground the insufficiency of the accounting staff. The study established that the planning of
account processes was in MSMEs. Still, this process was substantially done by the operation
and advisers with the discussion of some elderly staff which left out other staff and
stakeholders. The study recommends that the operation of the SMEs make this process
inclusive by wide slices both perpendicular and vertical of their staff and all crucial
stakeholders. Further, the study established that even though the MSMEs implemented
computerized accounting systems; the inter-departments never had their strategic plans except
for some departments only. The study recommends that all the MSMEs should develop and
implement their accounting systems in line with the organization’s strategic plans which will
enhance the achievement of the organizational goals. The study also revealed that repliers
describe the perpetration process as poor because the systems are in no way reviewed. The
study recommends that the MSMEs should review their level and departments’ level to ensure
the success of the implementation process.

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Keywords: Accounting software, Book-keeping, MSMEs, Accounting Information Systems,

and Business Performance.

INTRODUCTION
Business Accounting is the language of business. Accounting language is used to
communicate business information on various business activities, viz. financing, investing, and
operating activities; etc. to the users of this information. In the past, accounting was limited to
the preparation of financial statements only but now its scope has been widened to include
other activities, such as tax accounting, cost accounting, management accounting, social
accounting, green accounting, forensic accounting, etc. Accounting has also an influence on
business planning and forecasting through the analysis of the financial statement. Proper
accounting practices lead to the progress and prosperity of business. But most of the small
business firms, engaged in trading activities, do not give proper attention to accounting for their
business transactions. They usually concentrate more on selling and buying activities of their
products and are not serious about maintaining proper books and accounts. In Sole
proprietorships and Partnership firms, a substantial portion of the goods is sold generally on
credit, which leads to an increase in the volume of investment in stocks and debtors.
For every business, the financial information of the business activities must be kept up-
to-date and monitored by the organization. Companies need to keep pace with constant changes
in information technology to maintain highly accurate and up-to-date accounting, statutory
records, and inventory. Due to the complexity of the accounting system’s increasing
vulnerability to errors and the swelling volume of accounting transactions, a system that could
process and store accounting data with increased speed, and vast storage and processing
capacity was necessitated. To satisfy the increasing demand for up-to-date and accurate
information, accounting software, integration of accounting, and information technology was
introduced to the world. An accounting information system (AIS) is a tool that was
incorporated into the field of Information and Technology systems as it is essential for business
entities. This has created a competitive market. Thus, entities need to improve their systems to
match their information needs for better decision-making. Therefore, a proper and accurate
record of these activities effectively generates the required accounting information.
Computerization of financial accounting systems has posed challenges to the accounting
profession as accountants now face several problems, especially when doing accounting and
Accounting of companies in the electronic environment.
STATEMENT OF THE PROBLEM
From the literature reviewed, many studies have been conducted on the impact of
computerized accounting systems on the efficiency, effectiveness, and performance of
accounting functions. However, there is little research conducted on the impact of
computerized accounting systems on the business performance of micro, small and medium
enterprises in ottapalam. Therefore, this study aims to fill in that knowledge gap.
OBJECTIVES OF THE STUDY
The major purpose of this study is to assess the impact of using accounting software systems
on the business performance of small and medium-scale business concerns. The specific
objectives therefore are:
(1) To establish the effect of quick books accounting systems on financial performance.

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REFERENCE TO OTTAPALAM MUNICIPALITY

(2) To assess the effects of software accounting systems on decision-making.

(3) To establish the effect of software accounting systems on financial reporting and to
establish the effects of tally accounting systems on MSMEs’.
HYPOTHESES OF THE STUDY
H0: There is no significant positive impact of Software Efficiency on Business Performance
H1: There is a significant positive impact of Software Efficiency on Business Performance
RESEARCH METHODOLOGY
Research Design: The study uses a Descriptive research design.
Source of Data: The study is based on primary data collected from MSMEs.
Sampling Unit: The sampling units are MSMEs from Ottapalam Municipality.
Sampling Technique: Stratified random sampling technique.
Sample Size: 100 respondents.
Data Collection Technique: A questionnaire was developed with the help of a literature
review.
REVIEW OF LITERATURE
Ali, Omar, and Baker (2016) investigated the effect of an Accounting Information System
(AIS) on organizational performance and the moderating effect of organizational culture in the
relationship between AIS success factors and organizational performance in the Jordanian
banking sector. The study used four types of AIS success factors as the determinants of
performance namely service quality; information quality, data quality, and system quality. Data
were collected with a structured questionnaire survey and analyzed with the PLS-SEM
technique. The findings revealed that service quality, information quality, and system quality
are the significant AIS success factors for increasing organizational performance. This study
also evidenced that organizational culture helps increase performance by interacting with
information quality, data quality, and system quality. It can be inferred from this study that
organizations involved in banking sectors can increase their performance by adopting and
implementing AIS success factors along with practicing favorable organizational culture.
Therefore, firms should cultivate a favorable environment so that employees feel happy which
motivates them to work more devotedly with the organizations.
Ismail and King (2005) focused on measuring the alignment of accounting information
systems (AIS) requirements with AIS capacity and then investigating whether this AIS
alignment is linked to firm performance. The study was conducted using a mail questionnaire
on nineteen accounting information characteristics, data from 310 Small and Medium Sized
Enterprises (MSMEs) firms in Malaysia were collected and analyzed using principal
component analysis and varimax rotation with Kaiser normalization. The results indicated that
a significant proportion of Malaysian MSMEs had achieved high AIS alignment.
Ismail and King (2014) researched the factors that affect the use of accounting information
systems in factories and small and medium-sized Malaysian manufacturing firms with a sample
consisting of 214 companies that have accounting systems. The study also found out that the
information systems of accounting work smoothly as they connect information from the top
and bottom that help workers in companies to achieve their goals, in addition using these
systems will enable companies to give accurate information to the relevant government
agencies.
Davis, Bagozzi, and Warshaw, (1989) Decomposed Theory of Planned Behavior (DTPB) was

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formulated through a combination of both the Technology Acceptance Model (TAM) and the
Theory of Planned Behavior (TPB) (Ajzen, 1988) which was intended for providing a better
understanding of behavioral intention by concentrating on the factors that are likely to impact
systems use. TAM is an information systems theory that models how users come to accept and
use technology. The model suggests that when users are presented with a new technology,
several factors influence their decision about how and when they will use it, notably including
Perceived Usefulness (PU) and Perceived Ease-Of-Use (PEOU). Davis (1989) asserted that
PEOU and PU influence in a significant way the attitude of an individual through two main
mechanisms namely self-efficacy and instrumentality/facilitating.
LIMITATIONS OF THE STUDY
1. Sample size used for the study is small.
2. Changes from time to time with the advancement in technology.
ANALYSIS AND INTERPRETATION
An appropriately designed questionnaire was used to collect the primary data for the study. The
data for 100 respondents was organized systematically in tables and graphs and then subjected
to analysis using appropriate statistical tools.
FORMS OF BUSINESS
TABLE SHOWING FORMS OF BUSINESS
Form of Business Frequency Percentage
Sole proprietor 70 70
Partnership 22 22
Cooperative 3 3
Public Company 5 5
Total 100 100
Source: Primary Data
INTERPRETATION: Most of the business firms selected is sole proprietors i.e., 70, 22
Partnerships, 3 Cooperative, and 5 Public companies.
CLASSIFICATION OF BUSINESS
GRAPH SHOWING CLASSIFICATION OF BUSINESS
MICRO
11%

SMALL
25%

MEDIUM
64%

Source: Primary Data

INTERPRETATION: The results show that most of the businesses were a medium form of
business at 64% while 25% were classified as small businesses and 11% were classified as
micro business enterprises.
DURATION OF RUNNING THE BUSINESS
DIAGRAM SHOWING DURATION OF RUNNING BUSINESS

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REFERENCE TO OTTAPALAM MUNICIPALITY

Source: Primary Data

Interpretation: The study found that most of the businesses had been running for 6-10 years
at 57%, followed by the businesses which had been in operation for 2-5 years at 28% while the
least were those who had been running their businesses for less than 1 years at 15%.
LEVEL OF AWARENESS ON COMPUTERIZED ACCOUNTING SYSTEM
The accounting systems are presented in the table where the respondents were asked to indicate
their level of awareness of those accounting systems. The findings were presented as given
below.
TABLE: LEVEL OF AWARENESS OF COMPUTERIZED ACCOUNTING
SYSTEMS
Accounti Aware Partially aware Not aware Total
ng
Systems
QuickBooks 122 (65%) 64 (35%) 0 187(100%)
Sage 80 (43%) 75 17 (9%) 187(100%)
(40%)
Pastel 64 (34%) 95 (51%) 28 (15%) 187(100%)
Tally 165 (88%) 22 (12%) 0 187(100%)
Source: Primary Data
INTERPRETATION: The study found that most of the respondents were very much aware
of the QuickBooks accounting systems at 65% while 35% indicated that they had partial
awareness. For sage 43% of the respondents indicated that they were aware while 40%
indicated that they were partially aware and another 9% were not aware at all. At the same
time, 51% of the respondents indicated that they were partially aware of the pastel accounting
system and another 34% were fully aware of it with 15% indicating that they were not aware.
But the most common method of accounting was the tally system where 88% of the respondents
indicated that they were very much aware of it while 12% said that they were partially aware
of it.
WORK EXPERIENCE
DIAGRAM SHOWING WORK EXPERIENCE

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Source: Primary Data

INTERPRETATION: Out of 100 respondents, the findings show that most of the respondents
had over seven years of experience in their businesses 55% while 23% had between 5-6 years
of experience followed by 12% who had between 0-2 years of experience while the least were
those with 3-4 years of experience at 10%.
TESTING OF HYPOTHESES
Hypothesis testing for the five independent variables based on the significant value from
regression analysis was conducted using the SPSS tool. A coefficient summarizes the
parameters of the regression model. The standardized beta coefficients show the impact of each
independent variable on the dependent variable (Business Performance).
TABLE: COEFFICIENT
Model Unstandardize Standardized t Sig. Collinearity
d Coefficients Coefficients Statistics
B Error Beta Toleranc VIF
Std. e
(Constant) .405 .319 1.270 .208
Accuracy .055 .075 .066 .739 .462 .509 1.96
5
Reliability .112 .102 .118 1.101 .275 .348 2.87
5
Efficiency .428 .096 .460 4.441 .000 .373 2.67
7
Ease of use .361 .102 .365 3.547 .001 378 2.64
3
Data Quality -.090 .091 -.087 -.983 .329 .516 1.93
7
The hypothesis of the study is there is a significant positive impact of Software Efficiency on
Business Performance. The Beta Coefficient is .46. The significant calculated p-value is less
than 0.05. So the hypothesis is accepted. The beta coefficient of 0.460 indicates that Software
Efficiency has a 46.0% positive impact on business performance.
FINDINGS
The study found that most of the respondents were a medium form of business while were
classified as small business enterprises. The study found that most of the businesses had been
running for 6-10 years, followed by the businesses which had been in operation for 2-5 years
while the least were those who had been running their businesses for less than 1 year. The study
found that most of the respondents were very much aware of the QuickBooks accounting

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REFERENCE TO OTTAPALAM MUNICIPALITY

systems while indicating that they had partial awareness. The Sage of the respondents indicated
that they were aware while others indicated that they were partially aware and another 9% were
not aware at all. At the same time, one respondent indicated that they were partially aware of
the pastel accounting system and another was fully aware of it with others indicated that they
were not aware. But the most common method of accounting was the tally system where most
of the respondents indicated that they were very much aware of it while others said that they
were partially aware of it. The findings show that most of the respondents had over seven years
of experience in their businesses while having between 5-6 years of experience followed by
those who had between 0-2 years of experience while the least were those with 3-4 years of
experience. The study found that most of the accounting work was being done using accounting
computer software while were of said that they don’t use all the software.
SUGGESTIONS
Based on the findings the study recommends that the management should have a strategic
master plan from which the accounting systems are phased in line with the organizational
financial ability and implemented in line with the strategic plan for the successful performance
of the MSMEs. Further, the management to increase more staff to bridge the deficiency of the
accounting staff. The MSMEs should establish amicable ways to control political interference
and put in more permanent governance structures to be sought with clear roles and authority
among the management of the MSMEs. The study established that the planning of accounting
processes existed in the MSMEs. However, this process was mainly done by the management
and consultants with the consultation of some senior staff which left out other staff and
stakeholders. The study recommends that the management of the MSMEs make this process
inclusive by wide sampling both vertical and horizontal of their staff and all key stakeholders.
Further, the study established that even though the MSMEs implemented computerized
accounting systems; the inter-departments never had their strategic plans except for some
departments only. The study recommends that all the MSMEs should develop and implement
their accounting systems in line with the organization’s strategic plans which will enhance the
achievement of the organizational goals. The study also revealed that respondents describe the
implementation process as poor because the systems are never reviewed. The study
recommends that the MSMEs should review their level and departments’ level to ensure the
success of the implementation process.
CONCLUSION
From the value, the independent variables explain a significant of the variability of the
dependent variable i.e., the performance of MSMEs. The table shows that the independent
variables statistically significantly predict the dependent variable. The researcher, therefore,
concluded that QuickBooks, sage, pastel, and tally accounting systems strongly affect the
performance of MSMEs in ottapalam municipality. This means that Software accounting
systems affect the performance of the MSMEs.
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