CHAPTER ONE

INTRODUCTION

1.1 BACK GROUND OF THE STUDY

Banking has over the years transformed from the time of ledger

cards and other manual filling systems into a system based such as

computer based technology. Banking System has moved away from a

situation where all activities are manual based such as all transactions

are carried out manually; in modern day banking transactions are

carried out automatically with the support of ATM (Automated Teller

Machine) and other modern technology equipments and this has also

help reduce the numbers of crowds in the bank, and enhance and

support the operation of banking. (Adekange1986:23-25). With

modern day computer technology, Banks now have the ability to

delights its customers with superior services and empower a

knowledgeable workforce to create and make decisions.

1
 Computer technology base Banks now have the ability to seize

opportunities and respond to market changes. They (computerized

banks) now also know how to utilize the best of both people and

technology and bringing together the best of teams of talent. They

(computerized banks), can also provide faster and better services to its

customers which can be done in an instant through the use of

computer technology. The advent of accounting information system

(AIS) in the Nigerian Banking Sector marked the beginning of a new

dispensation in banking and has revolutionized traditional banking

practices and redefined the entire frontiers of banking as well as the

entire work place (Adekange, 1986: 23-25).

Without computers, issues like linkage, universal banking

concepts, automated teller machine (ATM) and other innovations

would have been unthinkable. The application of computers has

improved banking performance; and computers and other information

technology have generally been identified as an important tool in

2
attaining corporate goals of delivery services effectively to customers

which is crucial to the sustainable growth and profitability of the bank

(Brien, 1983:46).

1.2 STATEMENT OF THE PROBLEMS

The banking sector plays a major role in any nation especially a

country like Nigeria and although it has grown in leaps and bounds

over the past decade, the more significant changes would be

attributable to the character rather than size.

It is also known that there is the existence of computer fraud in

the banking system; these problems need to be combated. Many

studies have been undertaken relating accounting information system

(AIS) to customer satisfaction and customer perception, relatively few

have turned the searchlight into the organization or attempted to

discover the perception of banking personnel of information

technology or the impact if any or the changes introduced by AIS on

3
organizational behavior (Donald, 1983: 22-26). Therefore, this study

will examine Accounting information system in the performance of

banking sector in Nigeria.

1.3 . RESEARCH QUESTIONS

With the previously stated problems, this research will attempt to

provide answers the following questions:

1. Is there any significant relationship between accounting

information and corporate profitability in the banking sector in

Nigeria?

2. Is there a relationship between accounting information and

Earnings per share?

1.4 OBJECTIVES OF THE STUDY

The aim of this research is to explain how Accounting

Information System has improved the performance on First Bank of

4
Nigerian Plc (FBN) over recent times and years. The specific

objectives are to:

i. Examine the relationship between accounting information

system and profitability in The banking sector in Nigeria.

ii. Determine the relationship between accounting information

system and Earning per share.

1.5 RESEARCH HYPOTHESIS

This purpose is to put the research objectives into testable terms

since for a problem to exist there must be an uncertainty over

the best alternative for satisfactory attainment. The hypothesis

is as follows:

1) HO: There is no significant relationship between accounting

information and Profitability in the banking sector in Nigeria.

5
2) HO: There is no significant relationship between accounting

information and Earnings per share in the banking sector in

Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

The study will show how modern technology has improved banking

performance in retail commercial banking. It also investigates how

frontline banking personnel has been affected by (Accounting

Information System) AIS such as that performance are now with

greater speed and efficiency.

The project intends to bring awareness about accounting

information and the positive effects on customer’s service delivery in

other to improve the flow of transaction.

1.7 LIMITATION OF THE STUDY

This research study will be aimed at the efficient and effective

impact of accounting information system on the performance of the

6
FBN using Ten year financial statement. The major limitations of this

study will be lack of adequate data to cover more years and also some

of this secondary data may not be too reliable because there is a

general belief that management will only publish financial statements

to favors them .

1.8 DEFINITION OF TERMS

Automated Teller Machine (ATM): It is an automatic machine that

recognizes a card linked with an account number to dispense cash.

Bank: Financial institution where money and other valuable goods

are kept by concerned owners for safe custody.

Cheque: The conditional order in writing by which you instruct your

bank to pay on demand a sum from your current account to a named

person or bearer.

Customers: It refers to individuals who have the capacity to deal with

banks.
7
Computer: Is a data processing device that can perform substantial

computation, including numerous arithmetic or logic operations

without intervention by a human operator during the processing.

Electronic Fund Transfer (EFT): It is the development of banking

and payment systems which transfer funds electronically instead of

using cash or paper documents such as cheque.

E-Banking: It can be defined as automated delivery of new and

traditional banking practices and services directly to customers

through electronic, integrative communications channel.

E-Commerce: which means “Electronic Commerce?” is the buying

and selling of goods and services on the internet, especially the World

Wide Web. This term is also used as interchangeably with E-business.

Global System for Mobile Communication (GSM): This is a digital

cellular phone technology and it is the most popular standard for

mobile phones in the world.

8
Information and Communication Technology (ICT): This is

defined as an umbrella term that includes any communication device

or application, encompassing: cellular phones, computer, network

hardware and software, satellite systems and so on as well as the

various services and applications associated with them, such as

distance learning and video conferencing.

Information Technology (IT): This is that which comprises of

computers, satellite communications, videotext, network, cable

television, software and automated office equipments, electronic mail

(e-mail).

Internet Service Provider (ISP): It refers to a company that sells

access to the internet, allowing computer users to send electronic mail

(e-mail) and browse the World Wide Web (WWW) among other

tasks.

9
M-Banking is also known as ‘Mobile banking’ is a term used for

performing balance checks, payments, account transactions, viewing

recent transactions etc via a mobile device such as a mobile phone.

Online Processing: It enables the users to input data to the computer

receive back result almost instantaneously.

Re-Engineering: Is the fundamental rethinking and redesign of an

entire business system or dramatic improvement in quality, speed and

services.

Technology: Is referred to the scientific study and use of applied

sciences otherwise the application of this to practical tasks in industry.

Services: Is the benefit derived by banks customer as a result of the

over the counter and other transactions.

Tele-communication: Is referred to communication through

technology devices such as radio, cables, television, telephones, fax

machines etc.

V.SAT: very small aperture terminal.

10
REFERENCES

11
Adekange, F.A (1986) “Modern Banking in Nigeria’’ Mac Adams

Publishers, Ogun State, Nigeria.

First Bank of Nigeria Plc (2001- 2007) “WINNING” Newsletter of

the First bank Century II project.

Donald H.S (1983) “Computer Today. McGraw Hill incorporation -

USA.

Brien A.O (1983) “Computer and Information Processing in

business’’. Richard O.Irwin incorporation.

www.firstbank.com

12
 CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION

This chapter helps to review the relevance and important of banking

in Nigeria this will be done by an in-depth review of literature

bordering on: Historical background of banking in Nigeria, Services

provided by commercial banks in Nigeria, Computer revolution ,

Development of Computer, Operation of Computer systems,

Definition of Accounting Information System , Evolving relationship

between bank and Accounting Information System in Nigeria,

Advantages and disadvantages of Accounting Information System in

the banking sector.

13
2.1 HISTORICAL BACKGROUND OF BANKING IN

NIGERIA

Modern banking has its origin in the finance of foreign trade. In the

great medieval trading states of Venice, Genoa and later Florence, a

need arouse to exchange one currency with another and the early

money changes also began the practice of accepting deposits of cash

and valuables for safe keeping

(Adekange, 1986: 62). As these merchants and money changes

prospered, they (merchants) were called upon to provide finance for

the rulers of the land in which they were established and by this they

became involved in financing their own and other countries.

Because the origin of modern banking was in the cities of northern

Italy, some of its vocabularies have Italian roots e.g. the word ‘Bank’

comes from the Italian word ‘ Banco’ meaning a bench. It was at

14
benches that early Italians carried out their functions of money

changing.

In 1892, the first banking institution was established in Nigeria. This

was the African Banking Corporation (ABC). The assets and

liabilities of (ABC) were taken over by the bank of British West

African (BBWA) in 1894. The bank has the credit of being the first

established banking business in Nigeria. The name was then changed

to standard bank of West Africa and then named first bank in 1978. In

1917 the Barclays bank D.C.O came into the Nigerian banking scene,

it was an International bank based in Britain. The name was then

changed to union bank of Nigeria Limited in 1978 (Oluabuchie1985:

106).

The discriminating lending practices of the owners of the foreign

owned banks in West Africa brought about the forming of indigenous

owned banks.

15
In 1931, the Nigerian Merchant Bank was established but failed in

1936, undaunted by these failures; the shareholders of the bank

(Nigeria Merchant Bank) established the first successful indigenous

bank in Nigeria, National Bank of Nigeria Limited on 11th February

1933. The Agbomagbe Bank established in 1945 (Now Wema Bank

since 1969) was also a surviving bank. Other banks established

between the early thirties to fifties failed.

Due to the massive failure of the banks, it was therefore necessary to

control banking industry; the power of central banking was

introduced. The establishment of central bank of Nigeria was on

different view. The nationalist were of the view that a central bank

was needed to perform certain duties such as prevention of bank

failure, while the colonialists were against the view that a central bank

was not needed.

16
Notwithstanding, these conflicting interest, the central bank of Nigeria

was established on the 17th of March and began full operation on the

1st of July, 1959.

2.2 SERVICES OFFERED BY COMMERCIAL BANKS

Basic functions of Bank include;

1. Account Keeping Function

a) Deposit Account

b) Current Account

c) Fixed deposit Account

2. Lending function by way of loan or overdraft to customers

3. Transfer of deposit from one account or withdrawal inform of

cash or electronic

Other services offered by commercial banks include;

17
a. Safe keeping of valuables

b. Extension of credit facilities to customers

c. Management of customer’s investment

d. Letter of introduction

e. Farm development loan

18
 a) Safe Keeping of Valuables

Customers usually keep their life insurance policies, will and

jewellery, certificates of occupancy, deed of conveyance in the strong

room of banks for safe keeping these items are deposited in sealed

boxes or envelopes.

b) Extension of Credits Facilities to Customers

The main function of commercial bank is to give credit facilities to

their credit worthy customers. It is important to note that in most

advanced countries the economy is been run on credit facilities,

through this action production is increased, capital Investment are

expanded and a higher standard of living is achieved.

c) Management of Customer’s Investments

19
Commercial banks help in managing the investments of customer by

providing financial advice to its clients and helping the client’s

business with risk management portfolio.

d) Letter of Introduction

It is the duty of the bank to provide a letter of introduction to its

customers when the need arise, it can be for visa purposes and other

things.

2.3.1 THE COMPUTER REVOLUTION

The most important technological development of the 20 th century is

the development of computer. This development has caused a

computer revolution which rivals the industrial revolution of the 19 th

century. The development of computer is also termed the information,

electronic revolution or second industrial revolution. This revolution

has improved the human brain power computers make possible

necessary activities in modern science, accounting and medicine etc.

20
Computer records in seconds, millions of calculations and record

keeping that would take humans years to complete computers are safe

and are inaccessible to non- users. Computers reduce storage space in

offices and also increase the speed of workers (Capron 1995: 6).

2.3.2 DEVELOPMENT OF COMPUTER

Origin of computing machine

Important advancement of computers were the use of machinery to

perform arithmetic operations and early manual computing devices,

although these were not computers, they were important contributions

to computer development.

The history of computer could be traced back to the age of the

Egyptian civilian. As early as 4000 B.C, people started making

devices that would aid them in their daily work. The first counting

devices invested were the abacus i.e use of pebbles laid out on lined

21
board. The abacus in its present form originated from china and is still

in use as a calculator. (Davison 1988: 24-30)

The calculation machine was invented by Blaize Pascal of France and

was later improved on by Graft Fried Heibnitz of Germany in 1671

which could divide and multiply along with its adding and subtracting

ability. The calculator of Pascal and Heibnitz were not reliable and it

took the contributions of different persons during the next centuries

before practical working data processing machine were developed.

2.3.3 ELECTRO- MECHANICAL PUNCHED CARD

MACHINES

A major development in machine computation was the use of

electromechanical machines for the automatic processing of data

recorded by holes in paper cards. This was developed in France by

Joseph Jacquard during the 18th century to control textile weaving

equipment automatically.

22
These punch cards were used in data processing and the data

processing machine was made by Hollerith in 1884. Mechanical and

electronical improvements in punched cards machine led to their

widespread use for business and government applications in the late

1930’s.

COMPUTER PIONEERS

Charles Babbage was the first person to propose the concept of the

modern computer. The different machine / Analytical engine was

designed to calculate at the rate of 60 calculations per minute. This

was in 1833; it could also follow instructions received from a

program.

However, it wasn’t completed due to lack of fund. Almost a hundred

years passed before the idea outline by Babbage began to develop.

In 1925, a large scale Electro- mechanical analogy was built by Dr.

Vannevar. In 1944, Dr Howard Aiken having the support of

23
developing the 1st large scale electromechanical digital computer

called MARK 1.This used many concepts of Charles Babbage.

ENIAC (Electronic Numerical Integrator and Calculator) was

developed by John Mauchley and Jpresper Ectertjr in 1946 and was

the first operational electronic digital computer. It was large with a

size of 1500 square feet. It weighed over 30 tons and utilizes over

18000 vacuum tubes installed instead of the electromechanical rays of

Mark 1. It was however acts as “stored programme” computer, It

utilizes the digital system. The first stored- programme electronic

computer as the EDSAC (Electronics Delayed Stored Automatic

Computer). It had internal storage of program and represented data in

binary. It was developed under the direction of M.V Willkies at

Cambridge University in 1949.

The Electronic Discrete Variable Automatic Computer (EDVAC)

completed in 1952, were based on the concepts advanced by Dr. John

Van Neumann in 1945. Here, both data and instructions could be

24
represented internally by the binary number system rather than the

decimal system. The compute design formed the concept for the basis

of the present computers.

First Generation Computer

The first generation computers were within the years of 1940 to 1950.

UNIVAC (Universal Automated Computer) was the first

commercially mass- produced computer. It was placed on the market

in 1950 principally for use during the American 1950 census. It was

an intermediate size computer designed for the scientific applications

and business. These computers used vacuum tubes which generated a

hit of heat, it also made use of punch cards and these computers were

very large and occupied a lot of space. (Odiai 2005:21)

Second Generation Computer

These generations of computers were within the years of 1950 to

1964. The vacuum tubes were replaced by transistors and other solid
25
state, semi conductor devices. They produced lesser heat, were less

expensive and smaller in size. These computers were more reliable

than the 1st generation computers. (ODIAI 2005:23)

Third Generation Computer

These generations of computers were within the years of 1964 to

1971. It use simple integrated circuits were first released in 1964,

Examples of successful third generation computers include Boroughs,

Honeywell, PDP minicomputer series , IBM 360 series and ICL 1900

series. The computers produced in late 1960s and early 1970s fall into

this category. Computer speed increased to 1000s 0f microseconds.

ICS (Integrated Circuits), also known as microchips, consists of

complete circuits assembled / integrated on tiny pieces of silicon for

easy connection to external devices. This saw the birth of

minicomputers in addition to the existing mainframes. (Odiai 2005:

24)

26
Fourth Generation Computer

This in the 1970s used large- scale integrated (LSI) circuits, with

thousands of switches on a chip. LSI made it possible to have the

Central Processing Unit of small computers called microcomputer,

completely contained in a single silicon chip. The 1970s also saw the

beginning of computer networks (interconnection of independent

computers over communication line).

The development of computer network has been even more extensive

in the 1980s ranging from small local area networks to world wide

networks. Microcomputer development has also been intense, using

very large – scale integrated (VLSI) circuits, which provide hundreds

of thousands of switches on a chip.

The rapid growth that has occurred in less than half a century hardly

shows signs of abating. Along the way it has spawned a new science

concerned with computer acquisition, organization and processing of

27
data. The field, computer science, ranges from abstract mathematical

theories, which form its foundation, to very concrete techniques for

the development of complex computer- based system. (Adams 1988:

4)

Fifth Generation

There were many predictions that by the end of the last century

computers will have been developed which will be able to converse

with people in human- like manner and which will also be able to

mimic human senses, manual skills and intelligence ( that is think for

itself like man ). Some of these have been achieved and a lot of

breakthrough has been made in this area of research generally called

Artificial Intelligence and robotics. The term fifth generation is often

used to describe such computer systems of the future. Those produced

are yet in the trail stage mostly, there is only very small commercial

usage due to price and reliability in application.

28
2.3.4 MODERN COMPUTER SYSTEM

The basic types of computers are the analogy, digital and hybrid.

Computers are frequently classified by type (Digital, Analogy and

Hybrid) purpose (general purpose, special purpose, business and

scientific purposes) by processor- architecture (Unit- processor and

multi- processor) and the size (micro, mini, small, large and super

computers)

The analogy computer measures physical magnitude such as

electronic voltage and gives out its input in form of electronic signals.

Digital computer receives actual inputs and converts them to binary

equivalent before processing while hybrid computers combine the

features of both analog and digital computers.

A special – purpose computer is designed to process one or more

specific applications while the general purpose computer processes a

wide variety of applications. Scientific computers are designed for

29
high speed processing of numeric data involving complex,

mathematical calculations. Business computers can efficiently process

large volumes and variety of numeric and alphabetic data required by

payroll and other typical business applications.

Micro – computers are general purpose computers which vary in size

from a computer- on –a chip to a small typewriter size unit. They are

used in consumer products and small business computers. They can

also be used for personal finance professional activities and

entertainment. (Donald 1983: 245)

Mini – computers are small general purpose computer which are large

and more powerful than micro computers. They are used for scientific

and large number of business applications small computers are

designed especially for small business firm. Medium sizes computers

are large, faster and it can handle more input/output and storage

devices than small computers. (Blundell 2007: 8)

30
Large computers have faster processing speeds, greater storage

capacity, wider selection of input / output devices and greater

processing devices.

The term super computer describes a small number of extremely large

computer systems. These massive computer systems are extremely

large, fast and advance state- of – the – art for the entire computer

industry.

Most fourth generation computers are multipurpose computers

system; this is because instead of having one CPU with a single

control unit, arithmetic logic unit and primary storage unit, arithmetic

logic unit and primary storage unit are called a uni – processor .The

CPU’s of these computers have several types of processing units.

31
2.3.5 OPERATION OF THE COMPUTER

The computer is a system that accepts inputs and produces output in

an organized process. The computer performs the following basic

functions:

Input

Input devices are machines, which transmit information from the

outside world into the computer memory. In most cases, we first have

to put the information into a form suitable for use by the input device,

e.g. by typing or drawing or pointing with a mouse. The point at

which the external device connects to the CPU is the electronic input

or card. The document from which the information is keyed (typed) is

called source document. Examples of input devices are keyboard,

mouse, magnetic tapes, card readers, disk / tape drives, joystick,

scanner etc

32
Output

Output devices receive information from computer memory and

transmit it to the outside world, either in human – readable from or in

machine- readable form. Example of output devices are printer,

microfilm, plotters and terminals such as the visual display unit

(monitor), card punchers, disk / tape drivers etc. The point at which

the output device is attached to the CPU is the electronic output unit

or card (Egarievwe 2005: 7)

Processing

The main processing component of a computer system is the control

processing units (CPU). It is made up of two components: the control

unit (CU), which directs the activities of other parts of the system unit

and, the Arithmetic Logic unit (ALU) which performs all

calculations (Capron 1995:50)

33
Storage

The storage function of the computer is the primary storage unit and

secondary storage devices such as magnetic disks and tape units.

These devices stores data and program instructions needed for

computer processing.

Control

The control component is the control unit (CU) of the CPU. These

control components interprets the computer program instructions and

transmits directions to the other components of the computer.

34
2.3.6 THE COMPUTER ENVIRONMENT

This can be classified into:

Physical Environment

The computer is made up of delicate components. It should be kept in

a room which is cold; temperature should be between 12% and 20%.

There should be steady supply of electricity because fluctuations

make the computer faulty; stabilizer and uninterrupted power supply

(UPS) should be installed for stable supply of electricity.

Security Environment

The environment installation should be protected from unauthorized

access and destruction by anybody. Unauthorized access can be

checked by the use of passwords and other forms of identification,

while theft can be prevented by anti- burglary measures. Full proof

security can be provided by the use of data scrambling techniques

35
such as cryptography. Security is very important as many frauds are

being committed with the use of computers.

Social Environments

The best personnel and user of the computer is required because of the

high degree of efficiency and concentration required to operate, use or

work with computer. This is in other to reduce human error. At the

installation of the computer, there is constant interaction with a large

number of people who make different users of the computer. Positive

relationships among people and between personnel in a computer

installation help in realizing the objectives for setting it up.

The computer point out errors in programmes as soon as they are

detected and keep on pointing errors until the programme is

completely corrected. To work successfully with the computer, some

degree of tolerance and equanimity is required.

36
2.4 MEANING OF ACCOUNTING INFORMATION SYSTEM

According to Romney (2009) an accounting information system (AIS)

is a system of collection, storage, processing of financial and

accounting data that is used by decision makers. An accounting

information system is generally a computer-based method for tracking

accounting activity in conjunction with information technology

resources. The resulting statistical reports can be used internally by

management or externally by other interested parties including

investors, creditors and tax authorities.

Accounting Information Systems are composed of six main

components:

a. People

b. Procedures and instruction

c. Data

d. Software
37
 e. Information technology infrastructure

f. Internal controls and security measures

Initially, accounting information systems were predominantly

developed in – house as legacy system and such solutions were

difficult to develop and expensive to maintain.

Today, accounting information systems are more commonly sold as

prebuilt software packages from vendors such as Microsoft, sage

group, sap and oracle where it is configured and customized to match

the organization’s business processes. As the need for connectivity

and consolidation between other business systems increased,

accounting information systems were merged with large, more

centralized systems known as enterprise resource planning (ERP).

Before, with separate application to manage different business

functions, organizations had to develop complex interfaces for the

systems to communicate with each other. In ERP a system such as

38
accounting information system is built as a module integrated into a

suite of applications that can include manufacturing, supply chain,

human resources. These modules are integrated together and are able

to access the same data and execute complex business processes. With

the ubiquity of ERP for business, the term accounting information

system has become much less about pure accounting (financial or

managerial) and more about tracking processes across all domains of

business. Romney (2009:40).

A modern accounting information system typically follows a multitier

architecture separating the presentation to the user, application

processing and data management in distinct layers. The presentation

layer manages how the information is displayed to and viewed by

functional users of the system (through mobile devices, web browsers

or client application) the entire system is backed by a centralized

database that stores all the data. This can include transactional data

generated from the core business processes (purchasing, inventory,

39
accounting) or static, master data that is referenced when processing

data (employee and customer account records and configuration

setting) As transaction occur, the data is collected from the business

events and stored into the system’s database where it can be retrieved

and processed into information that is useful for making decisions.

The application layer retrieves the raw data held in the database layer,

processes it based on the configured business logic and passes it onto

the presentation layer to display to the users, For example consider the

accounts payable department when processing an invoice with an

accounting information system, an accounts payable clerk enters the

invoice, provided by a vendor into the system where it is then store in

the data base. When goods from the vendor are received a receipt is

created and also entered into the AIS. Before the account s payable

department pays the vendor, the system’s application processing tier

performs a three way matching where it automatically matches the

amounts on the receipt and the initial purchase order. Once the match

40
is complete, an account payable is sent to manager for approval, from

here a voucher can be created and the vendor can ultimately be paid.

Test hallmarks of reporting as people do not have to look through an

enormous number of transactions for instance, at the end of the month

a financial accountant consolidates all the paid vouchers by running a

receipt on the system. The system’s application layer retrieves the

data from the database and provides a report that particular month

with large corporations that generate large volumes of transactional

data; running reports with even AIS can take days or even weeks.

Romney (2009:45-47)

After the wave of corporate scandals from large companies such as

Tyco International, Enron and WorldCom, major emphasis was put on

enforcing public companies to implement strong internal controls into

their transaction –based systems. This was made into law with the

passenger of the Sarbanes companies which must generate an internal

control report stating who is responsible for an organization’s internal

41
control structure and outlines the overall effectiveness of these

controls.

Since most of the scandals were rooted in the company’s accounting

practices, much of the emphasis of Sarbanes Oxley was put on

computer- based accounting information systems. Today, AIS vendors

tout their governance, risk management and compliance features to

ensure business processes are robust and protected, and the

organization’s assets (including data) are secured.

When AIS is initially implemented or converted from an existing

system, organizations sometimes make the mistake of not considering

each of these six components and treating them equally in the

implementation process. This results in a system being “built three

times” rather than once because the initial system is not designed to

meet the needs of the organisation, the organisation then tries to get

the system to work and ultimately the organisation begins again,

42
following the appropriate process. Following the proven process that

works as follows, results in optimal deployment time, the least

amount of frustration and overall success. Most organisations even

larger ones hire outside consultants either from the software publisher

or consultants who understand the organisation and who to help the

organisation select and implement the ideal configuration, taking all

components into consideration. Certified Public Accountants (CPAs)

with careers dedicated to information systems work with small and

large companies to implement accounting information systems that

follow a proven process. Many of these CPAs also hold a certificate

that is awarded by the American Institute of CPAs – the Certified

Information Technology Professional (CITP). CITPs often serve as co

– project managers with an organization’s project manager

representing the information technology department. In similar

organization, a co – project manager may be an outsourced

43
information technology specialist who manages the implementation of

the information technology infrastructure Romney (2009:47).

The steps necessary to implement a successful accounting

information system are as follows:

a. Detailed Requirements Analysis

b. Systems Design ( Synthesis)

c. Documentation

d. Testing

e. Training

This is prior to data conversation.

a. Data conversation

b. Launch

c. Support

44
2.5 RELATIONSHIP BETWEEN BANKING AND

ACCOUNTING INFORMATION SYSTEM

The usage of computers in the banking industry was first

experimented in 1955 by two (2) banks based in San Francisco and

New York at the introduction of IBM 650 model. By 1960, the

American Bankers Association issued its standard cheque under the

common machine independent research into the system. This deposit

was being processed uniformly by all computerized banks across the

century. The method of magnetic ink characterized them going

through perfection, advanced the process of reading and sorting

cheques. The performance of the banking sector is measured not only

by the number and variety of services provided but also more

significantly by the speed, safety and efficiency with which these

services are provided. One way of enhancing these services is the

application of information technology.

45
Technology in banks now cover almost every phase of banking

operations from the routine operations such as processing of cheque

with electronic data process to the very sophisticated investment and

management information analysis.

Bankers of today are able to manage corporate investment better and

with more assurance of profitability because decision accountability

is braced with more facts and fewer psychic visions.

Banks are now able to apply computers in the banking sector in the

area of fund transfer, that is, the transfer of funds electronically from

one location to another.

The increasing volume, complexity, competitiveness and customer’s

globalization has led to an increase in technological development in

the Nigerian banking industry, which includes the introduction of

computers and other technological devices to cope with increase in

volume of transactions, credits risk management and product

46
development. It is important for us to note that back bone of

accounting g information is the computer; that is why so much

attention is given to it other technological breakthrough we have in

the Banking sector over the past years are the automated teller,

machine commonly known as ATMs, mobile banking, internet

banking, electronic banking and smart cards Romney (2009:60-61).

A whole new range of customer service has been made possible

through the development of information communication technology.

They include the following:

a. Electronic fund transfer

b. Credit card system

c. Reconciliation of paid cheques

d. Investment portfolio valuation

e. The automatic clearing system

f. Accounting and invoicing

47
g. Share registration

h. International business (Woheren, 2000: 20 – 22 )

The following system are being operated at present

1. Signature Verification

This is designed to solve the problem of verifying signatures when

verification is requested for, the specimen is retrieved

automatically from micro – file it is displayed on a monitor and

then refilled.

2 Automated Teller Machines

This is a machine that dispenses cash to a customer. It is linked to a

computer and it consists of a small video terminal and a bank of key

buttons. It involves the bank customer activating the machine by

inserting into a slot, a small plastic card and punching the personal

identification number. The terminal displays a message offering a

48
choice of transactions e.g withdrawals, balance inquiry, transfer of

funds from one account to another, pay bills and you can even

recharge your phone with the machine. The ATM has emerged the

most popular form of electronic banking in Nigeria as almost every

account holder owns an ATM card both savings and current account.

It is important to note that the machine works 24 hours of the day and

seven days in a week and it can be located anywhere. This shows that

banking transaction can take place outside the banking premises at

any time of the day. There are currently about 7000 ATM points in

Nigeria and that is seen to double in the next few years with first bank

having about 600 of it. It has also come as a source of income to

banks with charges for every transaction made. The automated teller

machine has also increase the speed of transaction and efficiency of

banking in the country. It was formally called dispensers and was

introduced into the banking world in 1967, (Woheren, 2000: 20 – 25).

49
3 Smart Cards

The first bank of Nigeria PLC brand of smart is known as the “first

card’’ (www. firstbank .com)

It is an electronic purse into which monetary value can be loaded and

unloaded. It is being introduced into the Nigerian market by First

Bank.

The first card is an alternative to physical cash that is prone to the

danger of theft loss and the problem of volume handling. Security

risks involved in moving cash from the premises of the companies to

branches of banks would be eliminated while bullies services cost will

be saved also. This would in turn improve returns on treasury

operations and enhance time efficient and faster fund movement.

Furthermore, the administrative cost of cash handling and

management would be reduced significantly.

50
Retail banking revolution has begun which is reducing the delay of

long quenches of swift transaction.

51
4. Electronic Fund Transfer (EFT)

This was introduced in FBN PLC (First Bank of Nigeria Plc) in 1996.

It is banking and payment system that transfers fund electronically

from one place to another. With the Western Union Transfer, it’s

possible for someone in any part of the world to send money to their

relatives which they will receive delay. (Woherem, 2000: 25- 26)

5. Mobile Banking

Mobile banking refers to provision of banking and financial services

with the help of mobile telecommunication devices. The scope of the

offered services may include facilities to conduct bank and stock

market transactions, to administer accounts and to access customized

information.

The benefits of mobile banking include checking the account balances

of customers, receiving SMS from the bank on deposit or withdrawal

52
of money from their account in FBN this function is also available to

its savings and current account holders.

These services are provided to the customers in collaboration with the

mobile service operators or commonly called GSM service providers

and banks.

It is important to note that these services were not available until

August 7, 2001 where the then President of Nigeria ‘Olusegun

Obasanjo’ approved the services to go on operation. It was the vision

of the president that led to the backbone of mobile banking in Nigeria

as without mobile phone operators, mobile banking would not be a

reality in Nigeria. The limitation of mobile banking includes:

availability of services to the mobile user like epileptic supply of

services to customers. Out 67% of people that are aware of mobile

banking, only 48% uses it; that shows we have a long way to go in the

area of awareness of electronic banking. (Ovia, 2003: 7 – 8)

53
6. Internet Banking

Online banking involves the use of internet to perform banking

activities. It allows customers to check their account balances of

account holders with just the click of the mouse a banking transaction

are done. The customer needs not to worry about whether a check has

been cleared or a deposit has been made. Through online banking, the

status of the customer account can be accessed at anytime as far he

has access to the internet services, the customer does not have to wait

for the end of the month before he sees his statement. Online banking

gives the ability to pay bills electronically; electronic payments can be

credited the same day or next. The transfer of money from one

account to the other is also another powerful tool of online banking,

another function of internet banking is the transfer of information to

customers through the use of electronic mail commonly called e –

mails.

54
All of the applications mentioned above involve the use of internet;

this is to show that the internet is infrastructure of the current age and

the backbone of electronic banking as shown above.

Electronic banking also involves developing new relationship with

the customers as they will have personal relationship with the bank

involved. Today any bank manager or executive that feels Electronic

banking is not important is being left behind (www.Firstbank.com).

55
7. Software Security of The Data Base in Bank

For electronic banking to be effective the area of security must be

added with all seriousness. The convenience associated with

electronic banking increases the need of security; the core security

areas which must be addressed include confidentiality, integrity and

availability. A key concern is that of privacy. You cannot afford to do

business on the net without addressing privacy issues of your clients.

Security in online banking is typically provided with the use of ID and

password and other security measures must be put in place in other to

avoid fraudsters and other security concerns (www. firstbank .com).

2.6 SAVING ACCOUNT

Banking operations were done manually when FBN was established

in 1894. When savings accounts were being opened, the necessary

forms are complete manually and the necessary documentation is

done, i.e the forms such as signature cards, mandates, ledger cards are
56
filed in the appropriate placed or file cabinet. Payments are made

through the cashier in the cubicle, this is done after the officer must

have confirmed the amount in the account, the customers signature by

comparing signature on withdrawal slip with that on the signature

card after the officer in charge of saving department has approved of

the payment, the slip is passed back to the cashier who then makes

the payment.

The cash is then counted, the entry is made manually into the

cashbook then the voucher is passed to the waste department who

collects the voucher manually and there after hands the voucher over

to the ledger keeper for posting into various ledger accounts. This

process took a long time and the bank workers closed very late. The

book accounts were balanced manually on the 15 th day of the month

and the last date of the month. The balancing of account took a long

time and it could remain unbalanced for as long as two weeks or

57
more, it also took a long time to calculate the interest for each

account.

As a result of the short – coming inherent in the manual banking

system, there was a need for an improvement. The banking system,

was mechanized which was an improvement in the manual system

(www. firstbank .com).

The ledger sheets in mechanized form were loose sheet, unlike the

manual system were they bounded in a book. Entries into the ledger

code and statement were made with the aid of an accounting machine

which posted transactions and also calculated the balance at the same

time in the wasted department, work that was done manually was now

done with the aid of machines. Daily transactions made were recorded

and entries made into the general ledger with the aid of a waste

machine before they were sorted into their various regions.

58
The mechanized system was a little improvement on manual banking

due to the introduction of machines. Despite the slight improvement,

customers were still delayed in long queues, banking hall were always

congested. There was the need for an improved banking system that

would usher in fast and efficient services delivery system.

The era of banking which is the computerized system is different from

the manual and mechanizes system.

In the computerized savings system, the computer does all the work

which was done manually. When a customer wants to open an

account, he fills the necessary documents such as signature cards,

mandate and other relevant documents. The officer checks it in other

to ensure that the documents have been filled correctly. After that he

keys the information such as the name, addresses, occupation etc of

the customer, account is created, he then creates a general ledger

which opens the accounting period containing information such as

59
when the account was opened etc. The signature card is scanned or

photocopied into the computer with the aid of a scanner or

photocopier. The signature and passport picture is copied into the

computer.

When a customer wants to withdraw money, time used in sorting for

customers’ signature card in the file cabinet is eliminated. This is

because information required of the customer is in the computer

before the teller. All the teller/ cashier needs to do is to key in the

necessary request and all information required of the customer is

displayed on the screen. The teller can verify the signature on the

withdrawal slip and his identity card with that on the screen. He can

also compare his picture on the screen to that of the computer. The

time the computer waits to withdraw money is significantly reduced

because the time used in sorting for necessary information of his has

been eliminated.

60
In FBN Plc, IKPOBA HILL branch, each teller has a computer in

front of him and a note counter. All necessary information required of

the customer is gotten from the screen in front of him. He is able to

count money faster and accurately with the aid of the note counter.

The cashier can also update the balance and calculate the interest on

the customer’s account with the aid of the computer i.e the computer

automatically balances the customer’s account.

After closing to the public, no time is spent storing the signature cards

and ledger card and arranging it in the file cabinet as it used to be in

the case with the manual system. Close to twenty savings account are

opened on a daily basis because the process is faster now, customers

are also attended to very fast, queuing time is reduced, customer do

not spend more than five minutes with the cashier in withdrawing

money. So it is rare to find the banking hall congested. The banking

officials are more efficient, friendly and courteous to customers and

are less tired because they are working with better facilities and
61
equipment which reduces stress on them. With the computerized

system, volume of data has reduced and vital documents are not

carried from one place to another which would have led to loss of the

documents. Difficulty in record keeping i.e. filling, storage and

retrieval of records has been eliminated. With the computerized

system customers dissatisfaction has been eliminated. Operations of

banking systems have also been improved. It is important to note that

savings account holders have access to ATM cards and mobile

banking as this has saved the customers from going to the bank a lot

less; therefore, savings the time of both the customer and the banker

as banking transaction can be done at any place or time such as

balance enquiry, withdrawal, funds transfer etc (www.

firstbank .com).

62
 2.7 ADVANTAGES OF ACCOUNTING INFORMATION

SYSTEM IN BANKING

According to Sheila (2006:55), accounting is known as the language

of business, and as such it benefits management in many ways.

Accounting involves recording transactions and compiling them in

reports. An important advantage of accounting information system

over other types of information is that it is based on numbers,

measurable data. It is black and white: you have a profit or you have a

loss--the numbers speak for themselves.

a. Objective

One Advantage of accounting information system is that it is

objective and based on generally accepted accounting principles.

These are rules to be followed in accounting to make reports standard

and comparable. Data entered in an accounting system is verifiable

data, not opinions or wishes. Accounting information is unbiased.

63
b. Reliable

Another advantage of accounting information is that it is reliable. For

example, when you see $40,000 in accounts payable, you owe that

much to others. If you have questions about that, reports can show

you how that number was calculated. Numbers do not come out from

pies-in-the-sky. To make it to an accounting system, data has to make

sense and to have proper documentation to back it up. In a well-run

accounting department, reconciliations are made and procedures are in

place to assure reliability and accuracy of information Sheila

(2006:56).

c. Analysis Tool

Accounting reports can be analyzed to provide management with

financial information that can be used to run a business, plan ahead

and to make changes when business is not going as expected. If sales

of a certain item are flat and not as expected, accounting reports show

64
 this reality and management can make decisions about it--a clear

advantage of accounting information Sheila (2006:56).

d. Integration

AISs offer a system of accounting that is fully integrated. When

recording accounting transactions manually, several entries are

typically required for every transaction. With AIS, when a transaction

is recorded, the computer posts all entries correlating with the

transaction. This saves an accounting clerk time and helps them to

avoid mistakes Sheila (2006:56-57).

e. Speed and Accuracy

An AISs offers a faster way of recording financial information. It

also allows employees to find customers’ information more quickly. If

employees need to locate an invoice total, price or date of a

transaction, a computerized system offers a faster method of

information location. Accuracy is easier to obtain with a computerized

65
 system as well because an accounting clerk enters only one set of

numbers, which is then transferred automatically to several different

areas in the system Sheila (2006:57).

f. Automatic Document Production

A computerized accounting system does the work an accountant once

did with a manual system. Computerized systems can be set to

automatically pay bills and print checks. They can also create

purchase orders, invoices and credit memos. Payroll tasks are also

done automatically. The computer operator sets the system to do these

specific tasks at different times of the month. The computer system

then automatically completes these tasks when they are scheduled

Sheila (2006:58).

g. End – of – Month Activities

This type of system offers end – of - month advantages for businesses.

Adjusting and closing entries are recorded easily on the system. The
66
creations of financial statements are made easy with a computerized

system. All of the company’s financial information is stored in the

system, allowing financial statements to be calculated easily and

quickly. An AIS is also great for aging reports for management.

Aging reports show managers the total amount of money owed to

them in Accounts Receivable as well as the total amount the company

owes in Account Payable, Sheila (2006:59). These aging reports also

show current amounts and past due amounts including how past due

payables or receivables are.

h. Storage and Back – up

AIS systems are great storage devices. It is always recommended with

computers to back - up information stored to avoid the loss of the

information. Regular back – ups of the information should be

scheduled daily, weekly, and monthly or whenever the company

67
determines it needs to be. Computers are convenient place to store

information because it does not take up a lot room and the information

is all conveniently located in one place Sheila (2006:59).

2.8 LIMITATION OF ACCOUNTING INFORMATION ON

BANKING

Despite all the advantages listed above of accounting on banking

operations, there are also some limitations not only to customers and

banks but also the economy as a whole, Davison R. B. (1988:20).

Learning the System

Learning an accounting information system can often be difficult and

time – consuming. Individuals must be trained on a system, and this

can cause a disadvantage to companies in terms of time and

manpower. An accounting information system is made up of many

different components, and almost all systems are computerized.

Because of their complexity, some people may find them hard to use.
68
 It can take weeks or months for a person to understand an accounting

system, and usually the individual still does not understand

completely what the system is capable of. If the employee quits

working at the organization it can take weeks or months, once again,

to train another employee Davison R. B. (1988:22)..

a. Loss of Information

Accounting information systems are usually computerized. Because

of this, there is always a risk of losing information through power

outages or system crashes. When this happens, there is a chance that

all the information in the system could be lost. Companies take

precautions for this problem by backing up their files regularly and

performing standard maintenance on all computer systems. They also

install antivirus software as another precaution. Still, none of these

steps eliminates the potential problem that may occur. Accounting

information system stores a company’s financial information for

69
 years. If a system crash occurs, it causes a major disadvantage to the

company. All or some information is lost and there is a chance it

may never be recovered Davison R. B. (1988:22-24)..

b. Re-Evaluation

Companies often change their way of doing business to keep up with

the latest trends. To keep up in a demanding business world, these

changes may impact an accounting system. An accounting

information system is difficult to set up because every company is

unique in its own way. In order to keep up with changes, accounting

information system must be re -evaluated often. Changes often need

to be made in a system in order to process information efficiently.

This can be a disadvantage to companies because it takes time for the

re-evaluation and it costs money Davison R. B. (1988:24).

70
 REFERENCES

Adekange, F.A (1986) “Modern Banking in Nigeria’’ Mac Adams

Publishers, Ogun State, Nigeria.
Oluabuchie G (1984- 1985) “Towards Modern Computerized Banking
in Nigeria’’. Banking Manual Alfer Communication Ltd
Lagos No 67 pg 106.
H.L Capron (1995) “Essentials of Computing’’
Dovison R.B (1988) “A Guide to the computer’’ Longman University
of West Indies – USA
Tom I. Odiai, Ben C. Orhionkpaiyo, Evelyn B.D Oduntan (2005)
“Introduction to Computer Science and Information
Technology.
J. Mack Adams, Philippe J. Gabrini, Barry L. Kurtz (1988) ‘’An
introduction to Computer Science with Modula -2.
Donald H.S (1983) “Computer Today. McGraw Hill incorporation -
USA.
Barry, G Blundell with Nawaz khan, Aboubarker Lasebae and
Muthana Jabbar (2007) “Computer System and
Networks.
S.U Egarievwe, S.C Chiemeke (Mrs) (2005) “General Introduction to
Computer Science.

71
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 INTRODUCTION

This chapter set out to examine materials, methods and procedures for

data collection and analysis for study under consideration. It attempts

to give an insight into the way and manner this research study was

carried out.

3.2 RESEARCH DESIGN

According to Asika (2008: 27) Research design means the structuring

of investigation aimed at identifying variables and their relationships

to one another. This is used for the purpose of containing data to

enable the researcher test hypotheses or answer researcher through the

various stages of the research.

72
In this study, the case study research design is adopted. A case study

research design examines all variables relating to a particular

phenomenon in order to provide a good understanding of the situation.

In this case, we seek to understand the impact of accounting

information system on the performance of the banking sector in

Nigeria (specifically, First Bank of Nigeria Plc). A case study is

designed rather than prescriptive goals and the researcher is able to

discover and address issues as they arise in the study.

By seeking to understand as much as possible about single group of

subjects, case study specialize in deep data information based on the

particular context that can result in more useful finding. The weakness

lies in the fact that case study has long been stereotyped as weak

sibling in science methods and this is criticized as too subjective. It is

also seen as lacking in precision. Also, results may not be

generalisable and are difficult to replicate rarely offering problem –

solving prescription.

73
In this study, a non probabilistic method was adopted in the choice of

banking to use after considering the availability of their up – to – date

annual reports.

3.3 TYPES AND SOURCES OF DATA

There are two types and sources of data; the primary and secondary

sources.

The primary data refers to the data generated by the researcher in the

course of the research through observation, interview, and

questionnaires e.t.c.

The secondary data on the other hand refers to already existing data

which could be used to support meaningful result. In this research, we

will use secondary data which comprises of the financial statement of

the First Bank of Nigeria Plc.

74
3.4 METHOD OF DATA ANALYSIS

The data will be analyzed by employing the multiple regression

analysis to examine the relationship between the variables included in

the study. A multiple regression analysis is a method for explaining a

phenomena and predicting of future events. In multiple regression

analysis, a sector of predictor variable is used to explain variability of

the criterion variable. The regression function incorporates most of

the important variables that are related to given criterion variable.

Moreover, it enables us to study how one of those variables affects the

criterion variable when all other predictor variables are constant. It

also permits an intimate analysis of the various relationships which is

not possible in the natural setting when all variables are changing

simultaneously.

75
3.5 DATA ANALYSIS TECHNIQUE

Although there is no consensus on the technique that is most suitable

for an econometric model, but parameter estimates obtained by the

Ordinary Least Square (OLS) have some optimal properties and, the

computational procedure is fairly simple as compared with other

techniques. Similarly, the OLS has been used in a wide range of

economic relationships with fairly satisfactory results. Finally, the

OLS is simple to understand.

The few disadvantages of OLS are the problem of auto correlation and

multi- co- linearity. However, where these problems are present, they

can be corrected through the Cochrane- Orcutt Iterative (COI)

method.

3.6 MODEL SPECIFICATION

In the course of this research, the following models were developed to

help us analyze our data: The models are;

76
AIFO=f(ROCE, NPM) ---------------------------- (1)

AIFO=f(DPS, EPS) --------------------------- (2)

Specifying model (1) in econometric form, we have

AIFO= ao + a1ROCE +a2NPM --------------------- (3)

Where:

ao =Intercept term

a1 =Impact on ROCE

a2 = Impact on NPM

ROCE= Return on Capital Employed

NPM= Net Profit Margin.

Specify model (2) in econometric format, we have;

AIFO=a0+ a1DPS + a2EPS ------------------------------------ (4)

Where:
77
ao = Intercept term

a1 = Impact on DPS

a2= Impact on EPS

DPS= Dividend per share

EPS= Earning per shares

3.7 DEFINITION OF VARIABLES

Return on Capital Employed: According to Okwuosa (2005:486)

this indicates the overall profitability of the business. The profit to be

used depends on the definition of the capital employed. It is profit

before tax where capital employed is defined as shareholder funds and

profit before interest and tax where capital employed is defined as

shareholder fund plus long term liabilities.

The higher the percentage the more profitable the enterprise will be

deemed to be.

78
 Profit before Taxation∧Interest
ROCE=
Capital Employed

Net Profit Margin: According to Okwuosa (2005:485) this indicates

the net margin due to the business after taking into account all

revenue expenses. The higher the percentage the more efficient the

enterprises will deem to be in controlling its revenue expenses.

Net profit (before tax )

NPM= X 100%
Sales

Earnings per share: According to Okwuosa (2005:490) this indicates

the amount of net profit after tax (but before taking into account of

extraordinary items) attributable to each share in issue and ranking for

dividend during the period.

Profit after Tax before extraordinary items less Preference Dividend

EPS=
No . of ordinary shares∈issue∧Ranking for dividend

Dividend per share: According to Okwuosa (2005:490): this

indicates the dividend and retention policy of the company when used

in conjunction with EPS.

79
 Total Dividend less Preference dividend
DPS = No . of ordinary shares ∈issue∧ranking for dividend

Accruals: According to Millichamp; this is an amount set aside

for a specific liability such as where the expenditure has been incurred

in the period but for which no invoice has been received.

80
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND

INTERPRETATION

4.1 INTRODUCTION

The purpose of this research work is to analyze the impact of

accounting information on the performance of banking sector in

Nigeria, using First Bank of Nigeria plc as our case study. This

chapter of the research work presents the data obtained, analysis

carried out on the data and the interpretation of result obtained during

the regression analysis to produce relevant and reliable information

which forms the basis for which conclusions would be drawn and

recommendations made.

A longitudinal survey of First Bank plc from 2001 to 2010 was taken.

The variables to be tested were computed from the various years’

financial statements.

81
4.2 DEFINITION OF VARIABLES

Return on Capital Employed: According to Okwuosa (2005:486) :

This indicates the overall profitability of the business. The profit to be

used depends on the definition of the capital employed. It is profit

before tax where capital employed is defined as shareholder funds and

profit before interest and tax where capital employed is defined as

shareholder fund plus long term liabilities.

The higher the percentage the more profitable the enterprise will be

deemed to be.

ROCE = Profit before Taxation and Interest / Capital Employed

Net Profit Margin: According to Okwuosa (2005:485) : This

indicates the net margin due to the business after taking into account

all revenue expenses. The higher the percentage the more efficient the

enterprises will deemed to be in controlling its revenue expenses.

82
 Net profit (before tax )
NPM= x 100%
Sales

Earnings per share: According to Okwuosa (2005:490) : This

indicates the amount of net profit after tax (but before taking into

account of extraordinary items) attributable to each share in issue and

ranking for dividend during the period.

Profit after tax before extraordinary item less Preference Dividend

EPS = No . of ordinary shares∈issue∧Ranking for Dividend

Dividend per share: According to Okwuosa (2005:490): This

indicates the dividend and retention policy of the company when used

in conjunction with EPS.

Total Dividend less Preference dividend

DPS = No . of ordinary shares ∈issue∧ranking for dividend

4.3 DATA PRESENTATION

Under this section, the data obtained from the various financial

statements are presented in a tabular form as shown below;

83
Table 4.1: COMPUTATION OF VARIABLES FROM FIRST BANK

PLC

YEAR ACCRUALS ROCE NPM EPS (K) DPS (K)

(#’M) (%) (%)
2001 43,222 293.3 21.3 288 221
2002 4,680 367.6 36.5 235 130
2003 5,668 132.1 28.5 430 150
2004 5,479 127.7 28.9 399 155
2005 2,826 128.8 29.4 335 160
2006 3,787 104.3 25.5 333 100
2007 58,773 134.9 27.9 156 100
2008 58,773 124.8 29.1 233 0
2009 4,482 603.1 4.4 0 4
2010 4,014 124.5 16.2 83 0
Source: Computed from First Bank plc Financial Statements 2001 –

2010.

84
From the computed variables shown in the table above, it was

observed that the highest figure of accruals was in 2007 and 2008

with a figure of #58,773,000,000 while the lowest figure was in 2005

with a figure of #2,826,000,000.

On the figure of Return on Capital Employed (ROCE) computed, it

was observed that the highest figure for ROCE was in the year 2009

with a ROCE of 603.1%. This was followed by 367.6% which came

up in the year 2002. The lowest figure for ROCE was in 2006 with a

ROCE of about 104.3% followed by that of 2010 which was 124.5%.

On the figure of Net Profit Margin (NPM) computed, it was observed

that the highest figure for NPM came up in 2002 with a figure of

36.5%. This was followed by 29.4% which came up in the year 2005.

The lowest figure for NPM came up in the year 2009 with a figure of

4.4%. This was followed by 16.2% which came up in the year 2010.

85
On the figures of Earnings Per Share (EPS) computed, it was

observed that the highest figure for EPS came up in 2003 with an EPS

of 430k. This was followed by 399k which came up in 2004. The

lowest figure for EPS in the years under review came up in 2009 with

a nil figure for EPS. This is followed with an EPS of 83k which came

up in 2010.

On the figures of Dividend per Share (DPS) computed, it was

observed that the highest DPS came up in the year 2001 with a DPS

of 221k. This is followed by 160k which came up in the year 2005.

The lowest figures for EPS came up in the year 2008 with a nil DPS

followed by 4k which came up in the year 2009.

4.4 DATA ANALYSIS AND INTERPRETATION

In this section, the data computed above was analyzed using the

regression tool with the e-view software. The result of the analysis is

presented in two stages based on the models developed in the

86
previous chapter. The model (3) will be analyzed first followed by the

model (4).

For the purpose of clarity, the model (3) is re-presented below:

AIFO = a 0 + a 1ROCE + a 2NPM. ………………….. (3)

The data was analyzed using e-view and the result is shown below:

Table 4.2: E-view regression result

Dependent Variable: AIFO

Included observations: 10

Variable Coefficient Std. Error t-Statistic Prob.

C 23273.25 13496.77 1.724357 0.1283

ROCE -3476.551 5169.688 -0.672488 0.5228

NPM 1417.874 1260.115 1.125194 0.2976

R-squared 0.177492 Mean dependent var 19170.40

Adjusted R-squared -0.057511 S.D. dependent var 24138.96

S.E. of regression 24823.39 Akaike info criterion 23.32028

Sum squared resid 4.31E+09 Schwarz criterion 23.41106

Log likelihood -113.6014 F-statistic 0.755276

Durbin-Watson stat 1.141798 Prob(F-statistic) 0.504651

87
Source: e-view output.

We can re-write the regression equation as:

AIFO = 23273.25 – 3476.551ROCE +1417.874NPM

T-Ratio= (1.724357) (-0.672488) (1.125194)

R – Squared = 0.177492 F – Stat = 0.755376

D W Stat. = 1.141798.

From the result presented above, we can see that autonomous

Accounting Information (AIFO) is positive when all other variables

are held constant.

Consequently, a unit change in AIFO will result into a negative

change of about 3476.551 units in ROCE less the autonomous

component and all variables held constant.

88
 A unit change in AIFO will result in a positive change of about

1417.874 units in NPM less the autonomous component and all other

variables held constant.

Using the T- ratio to test for their statistical significant, we find that

none of the variables are statistically significant. This is due to the fact

their observed T- values are either negative or far less than the ‘rule of

thumb’ of 2.

From the R- squared of 0.177492, the regression co-efficient indicate

that about 18% of the changes in the dependent variable is explained

by the changes in the independent variables.

The F- value of 0.755376 indicates that the parameter estimate cannot

be dismissed at 5% level of significance.

The D.W statistic of 1.141798 indicates the presence of auto –

correlation since it is not up to the rule of Thumb of 2. This can be

corrected with the use of the Cochrane-orcutt iterative method.

89
The result of the Cochrane-orcutt iterative method is given below;

Table 4.3: Cochrane-Orcutt Iterative Method.

Dependent Variable: AIFO

Sample(adjusted): 6 10
Convergence achieved after 8 iterations
Variable Coefficient Std. Error t-Statistic Prob.

C -72149.98 37864.34 -1.905487 0.3077

ROCE 77.19631 63.55581 1.214622 0.4385

NPM 3310.267 1210.084 2.735568 0.2231
AR(5) -0.474422 0.268201 -1.768905 0.3276

R-squared 0.934284 Mean dependent var 25965.80

Adjusted R-squared 0.737138 S.D. dependent var 29949.79

S.E. of regression 15355.28 Akaike info criterion 22.10687

Sum squared resid 2.36E+08 Schwarz criterion 21.79442

Log likelihood -51.26717 F-statistic 4.739033

Durbin-Watson stat 1.963263 Prob(F-statistic) 0.322785

Inverted AR Roots .70 -.51i .70+.51i -.27+.82i -.27 -.82i

-.86

Source: e-view output.

AIFO = -72149.98 + 77.19631ROCE + 3310.267NPM

T-Ratio = (-1.905487) (1.214622) (2.735568)

90
R – Square = 0.934284, R-Square Adjusted = 0.737138

D W Stat = 1.963263 F- stat = 4.739033

From the Cochrane-orcutt iterative method presented above, we can

see that autonomous Accounting Information (AIFO) is negative

when all other variables are held constant.

Consequently, a unit change in AIFO will result into a positive change

of about 77.19631 units in ROCE less the autonomous component and

all variables held constant.

A unit change in AIFO will result in a positive change of about

3310.276 units in NPM less the autonomous component and all other

variables held constant.

Using the T- ratio to test for their statistical significant, we find that

only NPM is statistically significant. This is due to the fact it’s

observed T- value is more than the rule of thumb of 2. All other

91
variables are statistically insignificant because their T-values are

either negative or far less than the ‘rule of thumb’ of 2.

From the R- squared of 0.934284, the regression co-efficient indicate

that about 93% of the changes in the dependent variable is explained

by the changes in the independent variables.

The D.W statistic of 1.9632 indicates the absence of auto – correlation

since it is in the neighborhood of the rule of Thumb of 2

TEST OF HYPOTHESIS ONE

The hypothesis will be tested by considering the f - tabulated and f-

calculated values.

DECISION RULE: Reject the null hypothesis if the f-calculated is

greater than the f –critical (table value) at 5% level of significance.

DECISION: A comparative analysis of both the f - calculated value

of 4.739033and and f- tabulated of 0.323 shows that the f- calculated

92
is higher than the f-tabulated. We therefore reject the null hypothesis

and accept the alternate hypothesis which means that there is a

significant relationship between accounting information and

profitability.

In analyzing model (4), the model is represented for the purpose of

clarity;

AIFO = a 0 + a 1EPS + a 2DPS ………………………… (4)

The data was analyzed using e-view and the result is shown below:

Table 4.4: E – View Regression Result

Dependent Variable: AIFO

Included observations: 10
Variable Coefficient Std. Error t-Statistic Prob.
C 25299.77 18452.98 1.371040 0.2127
EPS -36.17568 94.54212 -0.382641 0.7133
DPS 28.29033 167.9387 0.168456 0.8710
R-squared 0.023737 Mean dependent var 19170.40
Adjusted R-squared -0.255195 S.D. dependent var 24138.96
S.E. of regression 27044.21 Akaike info criterion 23.49166
Sum squared resid 5.12E+09 Schwarz criterion 23.58243

93
Log likelihood -114.4583 F-statistic 0.085100
Durbin-Watson stat 1.537758 Prob(F-statistic) 0.919356

Source: e-view output.

We can re-write the regression equation as:

AIFO = 25299.77 – 36.17568EPS + 28.29033DPS

T-Ratio= (1.371040) (-0.382641) (0.168456)

R – Squared = 0.023737 F – Stat = 0.085100

D W Stat. = 1.537758

From the result presented above, we can see that autonomous

Accounting Information (AIFO) is a positive 25299.77 when all other

variables are held constant.

Consequently, a unit change in AIFO will result into a negative

change of about 36.17568 units in EPS less the autonomous

component and all variables held constant.

94
 A unit change in AIFO will result in a positive change of about

28.29033 units in DPS less the autonomous component and all other

variables held constant.

Using the T- ratio to test for their statistical significant, we find that

none of the variables are statistically significant. This is due to the fact

their observed T- values are either negative or far less than the ‘rule of

thumb’ of 2.

From the R- squared of 0.023737, the regression co-efficient indicate

that about 2.4% of the changes in the dependent variable is explained

by the changes in the independent variables.

The F- value of 0.085100 indicates that the parameter estimate cannot

be dismissed at 5% level of significance.

The D.W statistic of 1.537758 indicates the presence of auto –

correlation since it is not in the neighborhood of the rule of Thumb of

95
2. This can be corrected with the use of the Cochrane-orcutt iterative

method.

The result of the Cochrane-orcutt iterative method is given below;

Table 4.5: Cochrane-orcutt iterative Method

Dependent Variable: AIFO

Sample(adjusted): 1905 1910
Convergence achieved after 7 iterations
Variable Coefficient Std. Error t-Statistic Prob.
C -49591.29 14758.59 -3.360164 0.0783
EPS 164.6104 67.34294 2.444360 0.1344
DPS 135.1461 88.43787 1.528147 0.2661
AR(4) -2.076905 0.606370 -3.425146 0.0757
R-squared 0.860995 Mean dependent var 22109.17
Adjusted R-squared 0.652486 S.D. dependent var 28404.82
S.E. of regression 16744.72 Akaike info criterion 22.52427
Sum squared resid 5.61E+08 Schwarz criterion 22.38545
Log likelihood -63.57282 F-statistic 4.129307
Durbin-Watson stat 1.875554 Prob(F-statistic) 0.201085
Inverted AR Roots .85+.85i .85+.85i -.85 -.85i -.85 -.85i
Estimated AR process is nonstationary

Source: E-View output

AIFO = -49591.29 +164.6104EPS + 135.1461DPS

96
T-Ratio= (-3.360164) (2.444360) (1.528147)

R – Squared = 0.860995 F – Stat = 4.129307

D W Stat. = 1.875554

From the result presented above, we can see that autonomous

Accounting Information (AIFO) is a negative 49591.29 when all other

variables are held constant.

Consequently, a unit change in AIFO will result into a positive change

of about 164.6104 units in EPS less the autonomous component and

all variables held constant.

A unit change in AIFO will result in a positive change of about

135.1461 units in DPS less the autonomous component and all other

variables held constant.

Using the T- ratio to test for their statistical significant, we find that

only EPS variable is statistically significant because it’s observed t-

97
value is more than the rule of thumb of 2. The other variables are

statistically insignificant. This is due to the fact their observed T-

values are either negative or far less than the ‘rule of thumb’ of 2.

From the R- squared of 0.860995, the regression co-efficient indicate

that about 86% of the changes in the dependent variable is explained

by the changes in the independent variables.

The D.W statistic of 1.875554 indicates the absence of auto –

correlation since the value is in the neighborhood of the rule of

Thumb of 2

TEST OF HYPOTHESIS TWO

The hypothesis will be tested by considering the f - tabulated and f-

calculated values.

DECISION RULE: Reject the null hypothesis if the f-calculated is

greater than the f –critical (table value) at 5% level of significance.

98
DECISION: A comparative analysis of both the f - calculated value

of 4.129307 and f- tabulated of 0.201085 shows that the f- calculated

is higher than the f-tabulated. We therefore reject the null hypothesis

and accept the alternate hypothesis which means that there is a

significant relationship between accounting information and Earnings

per Share.

99
 CHAPTER FIVE

SUMMARY OF FINDINGS CONCLUSION AND

RECOMMENDATIONS

5.1 INTRODUCTION

This chapter will make attempt to present the summary of findings of

the entire study, draw conclusion on the subject matter under study

and proffer the necessary recommendations.

This study provides an in-depth analysis of the impact of accounting

information on the performance of the Banking sector in Nigeria with

a particular focus on First Bank Nigeria Plc. In embarking on this

research therefore, an attempt was made in the first chapter to present

issues at stake as regards the impact of accounting information on the

performance of the banking sector in Nigeria. The chapter reflected

the introductory background, statement of the problem, objective,

100
scope, significance and limitations of the study. In this chapter our

hypotheses were also formulated.

For easy comprehension of the basic argument arising from the

researcher’s findings, the next chapter was committed to the review of

past relevant related studies. This helped as a way of examining the

statement of relationships among variables under investigation and

also provides the research basic foundation, greater insights and ideas

on the phenomena involved in the research study. Information’s were

gotten from textbooks, journals, internet e.t.c

The methodology of the research which provides the necessary

framework for possible replication of the study was treated in chapter

three. This includes research design, research population/sample size

and method of data analysis.

The fourth chapter was all about the data analysis and interpretation.

The secondary data’s obtained from the financial statements of First

101
Bank Plc were presented in tables for easy understanding, our null

hypotheses which was stated in chapter one were tested using

regression analysis with the e-view and they were interpreted.

In this concluding chapter, findings are summarized based on the

summary of the findings, while recommendations are based on all of

the above.

5.2 SUMMARY OF FINDINGS

The findings obtained from this study can be summarized as follows:

1. There is a significant positive relationship between Accounting

information and profitability as represented by ROCE.

2. There is a positive significant relationship between Accounting

Information and Net Profit Margin.

3. There is a positive relationship between Accounting

Information and Earnings per Share.

102
4. There is a positive relationship between Accounting

Information and Dividend per Share.

5.3 CONCLUSION

This study was embarked on in order to determine the impact of

accounting information on the performance of the Banking sector

in Nigeria with a particular focus on First Bank plc. We obtained

data spanning 2001 to 2010 and computed various variables to

enable adequate analysis to be carried out. From the result of the

analysis, we discovered that accounting information has a positive

relationship with ROCE and EPS and also with NPM and DPS.

We can therefore conclude that accounting information is very

vital for in enhancing the returns on capital employed and

shareholders decisions.

103
5.4 RECOMMENDATIONS

From the findings in this study, we recommend that;

1. Managers of Banks should enhance the quality of their

financial reports by avoiding different tendency towards

manipulating their financial records.

2. Managers of Banks should invest in their accounting

information system. This will enhance good service delivery

and further increase the returns of the banks.

3. Shareholders and investors should have a forum apart from the

annual general meeting where they can discuss their stake and

investment in their organizations.

4. Government regulatory agencies should be strengthened to

carry out their functions properly towards these banks and any

104
 bank found wanting should have their management staff

sanctioned.

5.5 RECOMMENDATION FOR FURTHER STUDIES

We want to recommend that further research be carried out in this

subject area with larger sample size or longer period of time to either

validate the findings of this research or provide a platform for further

research.

105
 BIBLIOGRAPHY

A.H Millichamp and J.R Taylor(2008) “Auditing’’ NINTH

EDITION.

Adekange, F.A (1986) “Modern Banking in Nigeria’’ Mac Adams

Publishers, Ogun State, Nigeria.

Barry, G Blundell with Nawaz khan, Aboubarker Lasebae and

Muthana Jabbar (2007) “Computer System and
Networks.

Berin A.O (1983) “Computer and Information Processing in

business’’. Richard O.Irwin incorporation.

Bidemi Osunbiyi and Shola H.Adeosun ( 2005) “Communication

Research Methods.

Donald H.S (1983) “Computer Today. McGraw Hill incorporation -

USA.

Donwa (1991) “Computerization of Customer Services in Nigeria

Banks’’ A note journal of institute of Chartered
Accountants of Nigeria Vol xxiv.

106
Dovison R.B (1988) “A Guide to the computer’’ Longman University
of West Indies – USA

First Bank of Nigeria Plc (2001- 2007) “WINNING” Newsletter of

the First bank Century II project.

First Bank of Nigeria Plc (2001-2010) “Financial Statement’’.

Foluso O (1995) “Introduction to Banking”. Evans Brothers

Publishers, Lagos, Nigeria.

Froomkin J.N (1972) “ Automation’’ International Encycloped of

Social Science Macmillian and Tee Press Vol 1 480-482.

H.L Capron (1995) “Essentials of Computing’’.

J. Mack Adams, Philippe J. Gabrini, Barry L. Kurtz (1988) ‘’An

introduction to Computer Science with Modula -2.

Nnamdi Asika (1991) “Research Methodology in the behavioural

science.

Oluabuchie G (1984- 1985) “Towards Modern Computerized Banking

in Nigeria’’. Banking Manual Alfer Communication Ltd
Lagos No 67 pg 106.

107
Romney, Marshall Band Paul John Steinbart (2009) “Accounting
Information System’’. Upper Saddle River N, Pearson
Prentice Hall.

S.U Egarievwe, S.C Chiemeke (Mrs) (2005) “General Introduction to

Computer Science.

Tom I. Odiai, Ben C. Orhionkpaiyo, Evelyn B.D Oduntan (2005)

“Introduction to Computer Science and Information
Technology.

108
 APPENDIX I

COMPUTATION OF VARIABLES FROM FIRST BANK PLC

YEAR ACCRUALS ROCE NPM (%) EPS (K) DPS (K)

(#’M) (%)

2001 43,222 293.3 21.3 288 221

2002 4,680 367.6 36.5 235 130

2003 5,668 132.1 28.5 430 150

2004 5,479 127.7 28.9 399 155

2005 2,826 128.8 29.4 335 160

2006 3,787 104.3 25.5 333 100

2007 58,773 134.9 27.9 156 100

2008 58,773 124.8 29.1 233 0

2009 4,482 603.1 4.4 0 4

2010 4,014 124.5 16.2 83 0

Source: Computed from First Bank plc Financial Statements 2001 –

2010
109
 APPENDIX II

E – VIEW REGRESSION RESULT

Dependent Variable: AIFO

Method: Least Squares

Date: 05/22/12 Time: 23:21

Sample: 1 10

Included observations: 10

Variable Coefficient Std. Error t-Statistic Prob.

C 23273.25 13496.77 1.724357 0.1283

ROCE -3476.551 5169.688 -0.672488 0.5228

NPM 1417.874 1260.115 1.125194 0.2976

R-squared 0.177492 Mean dependent var 19170.40

Adjusted R-squared -0.057511 S.D. dependent var 24138.96

S.E. of regression 24823.39 Akaike info criterion 23.32028

Sum squared resid 4.31E+09 Schwarz criterion 23.41106

Log likelihood -113.6014 F-statistic 0.755276

Durbin-Watson stat 1.141798 Prob(F-statistic) 0.504651

Dependent Variable: AIFO

110
Method: Least Squares

Date: 05/22/12 Time: 23:33

Sample: 1 10

Included observations: 10

Variable Coefficient Std. Error t-Statistic Prob.

C 25299.77 18452.98 1.371040 0.2127

EPS -36.17568 94.54212 -0.382641 0.7133

DPS 28.29033 167.9387 0.168456 0.8710

R-squared 0.023737 Mean dependent var 19170.40

Adjusted R-squared -0.255195 S.D. dependent var 24138.96

S.E. of regression 27044.21 Akaike info criterion 23.49166

Sum squared resid 5.12E+09 Schwarz criterion 23.58243

Log likelihood -114.4583 F-statistic 0.085100

Durbin-Watson stat 1.537758 Prob(F-statistic) 0.919356

111
 APPENDIX 1I1

COCHRANE-ORCUTT ITERATIVE METHOD OUTPUT

Dependent Variable: AIFO

Method: Least Squares
Date: 05/29/12 Time: 04:20
Sample(adjusted): 6 10
Included observations: 5 after adjusting endpoints
Convergence achieved after 8 iterations
Variable Coefficient Std. Error t-Statistic Prob.
C -72149.98 37864.34 -1.905487 0.3077
ROCE 77.19631 63.55581 1.214622 0.4385
NPM 3310.267 1210.084 2.735568 0.2231
AR(5) -0.474422 0.268201 -1.768905 0.3276
R-squared 0.934284 Mean dependent var 25965.80
Adjusted R-squared 0.737138 S.D. dependent var 29949.79
S.E. of regression 15355.28 Akaike info criterion 22.10687
Sum squared resid 2.36E+08 Schwarz criterion 21.79442
Log likelihood -51.26717 F-statistic 4.739033
Durbin-Watson stat 1.963263 Prob(F-statistic) 0.322785
Inverted AR Roots .70 -.51i .70+.51i -.27+.82i -.27 -.82i
-.86

112
Dependent Variable: AIFO

Method: Least Squares

Date: 05/29/12 Time: 04:38

Sample(adjusted): 1905 1910

Included observations: 6 after adjusting endpoints

Convergence achieved after 7 iterations

Variable Coefficient Std. Error t-Statistic Prob.

C -49591.29 14758.59 -3.360164 0.0783

EPS 164.6104 67.34294 2.444360 0.1344

DPS 135.1461 88.43787 1.528147 0.2661

AR(4) -2.076905 0.606370 -3.425146 0.0757

R-squared 0.860995 Mean dependent var 22109.17

Adjusted R-squared 0.652486 S.D. dependent var 28404.82

S.E. of regression 16744.72 Akaike info criterion 22.52427

Sum squared resid 5.61E+08 Schwarz criterion 22.38545

Log likelihood -63.57282 F-statistic 4.129307

Durbin-Watson stat 1.875554 Prob(F-statistic) 0.201085

Inverted AR Roots .85+.85i .85+.85i -.85 -.85i -.85 -.85i

Estimated AR process is nonstationary

113
 DEPARTMENT OF ACCOUNTING

UNIVERSITY OF BENIN,BENIN CITY

PROJECT EVALUATION SHEET

Name of Candidate…………………………………………………………

Matriculation Number………………………………………………………

Points Distribution Score

(1) subject Definition and justification: 10

(Problem, objective Relevance, Scope and limitation) 10

(2) Literature Review and methodology: 15

(Literature Review and procedure for data Collection) 15

(3) Proof of Hypothesis(if any) and Analysis:

(a) Data collection of field work 5

(b) Arrangement 5

(c) Analytical technique used 10

(d) Findings 5

25

(4) Style and Presentation:

(a) Language 5

(b) Arrangement 5

(c) Reference/Bibliography 5

114
 15

(5) Conclusion and Recommendation:

(a) Relevance and Conclusion to findings 5

(b) Relevance of Deduction to policy 5

10

(6) Oral Defense 25

25

Total for report 100

……………………………………………..……………………

GRADE……………………………………..…………………..

Project Supervisor………………………. . Date…..……………

Head of Department……………………… Date………..………

External Examiner……………………….... Date……….………

115