Accounting Information System and Firm Profitability

This report examines the relationship between Accounting Information Systems (AIS) and firm profitability. It begins with an abstract summarizing the study's purpose: to investigate the impact of AIS on company profitability. The report highlights the role of accounting in recording financial transactions and generating financial statements, then discusses how AIS improves data processing and the quality of financial data. The literature review covers AIS, its relationship with financial performance and performance management, qualities of a good AIS, profitability, and decision-making. The methodology section describes the qualitative research approach, data collection methods, and analysis plan, including interview analysis and thematic analysis. The findings indicate a direct and positive impact of AIS on profitability, supporting the research objectives. The report concludes with recommendations and suggestions for future research, emphasizing the importance of AIS in enhancing business performance and decision-making. The study underscores the increasing significance of AIS in modern business environments and its role in improving financial outcomes.

Running head: RESEARCH METHOD
The relationship between the role of Accounting Information Systems and firm profitability
Name of the Student:
Name of the University:
Author’s Note:

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Abstract
The current paper has the purpose of creating knowledge of the impact of accounting information
system on the profitability of the companies. The background of the paper cites that accounting
is the process of recording all the transactions in the monetary values and thereafter determining
the profit and loss of a business. The development of information technology has led to the
construction of accounting information system and this process has improved the data processing
method as well recording of all the transactions. The accounting information system thereby
assists in the construction of quality and error free financial statements that can be used for
further use. It is seen that the objectives of the research has addressed the aspects that would be
answered with the support of the results. The literature review explains the aspects and the
elements that are linked to this topic and this is helpful in creating an idea with the help of which
further analysis in the current time period can be done. The methodology has explained the kind
of data that is used and it is seen data with the help of interview has been collected. The analysis
that has been done explains that accounting information system has a direct and positive impact
on the profitability of the companies and therefore most of the companies have been making use
of this software in order to enhance their performance and profitability from the market. The
outcome has been able to answer the objectives and therefore it is seen that the results attained
are justified.
Key Words
Accounting, Accounting Information System, Profit, Financial Statement, Quality, Error Free,
Data Recording, Data Processing.

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Table of Contents
Chapter 1: Introduction....................................................................................................................5
1.1 Background of the Study.......................................................................................................7
1.2 Problem Statement...............................................................................................................10
1.3 Research Aims and Objectives............................................................................................11
1.4 Research Question...............................................................................................................12
1.5 Research Significance..........................................................................................................12
1.6 Research Hypothesis............................................................................................................13
1.7 Definition of the key terms..................................................................................................13
Chapter 2: Literature Review.........................................................................................................15
2.1 Introduction..........................................................................................................................15
2.2 Accounting Information System..........................................................................................15
2.3 Accounting Information System and Financial Performance..............................................20
2.4 Accounting Information System and Performance Management........................................22
2.5 Qualities of Good Accounting Information System............................................................24
2.6 Profitability and decision making........................................................................................25
2.7 Relationship between accounting information system and profitability.............................26
2.8 Effects of Accounting Information System on Profitability................................................28
2.9Summary of the literature.....................................................................................................29
Chapter 3: Research Methodology................................................................................................30

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3.1 Introduction..........................................................................................................................30
3.2 Justification of the selection of the methodology................................................................30
3.3 Research Philosophy............................................................................................................31
3.4 Research Approach..............................................................................................................31
3.5 Research Design..................................................................................................................32
3.6 Qualitative Data...................................................................................................................33
3.7 Kind of Data Used...............................................................................................................33
3.8 Process of data collection....................................................................................................34
3.9 Data Analysis Plan...............................................................................................................34
3.10 Ethical Consideration.........................................................................................................34
Chapter 4: Data Analysis and Discussion......................................................................................35
4.1 Introduction..........................................................................................................................35
4.2 Interview Analysis...............................................................................................................35
4.3 Discussion............................................................................................................................43
4.4 Thematic Analysis...............................................................................................................44
4.4.1 Effects of Accounting Information on Profitability......................................................44
4.5 Summary of the results........................................................................................................45
Chapter 5: Conclusion, Recommendation and Future Work.........................................................46
5.1 Conclusion...........................................................................................................................46
5.2 Addressing the objectives....................................................................................................47

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5.3 Recommendation.................................................................................................................49
5.4 Future Work.........................................................................................................................49
Reference List................................................................................................................................51
Bibliography..................................................................................................................................60
Appendix........................................................................................................................................67
Interview Questions...................................................................................................................67

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Chapter 1: Introduction
All the companies that are looking to attain their strategic aims and objectives is an
efficient and effectual one in order to attain the key objective of any firm. This is known to be
the development and the profitability and thereby able to optimise the market value and enhance
the revenue of the owners and the several other processes. This may lead to enhanced
performance and enhancement in their profits within the age that is featured by the technological
advancement and competition. This assists in gaining knowledge in order to have an
understanding with the help of which better decision making process with the help of effective
data could be utilised (Libby 2017).
The attractiveness towards this process has a precise effect on the financial performance
of the firms in addition to the rise in the interest in the participation of the professional
accountants in the different phases of the development is in accordance to the accounting
information system. It is done for the ones who have been participating from the effect of a clear
and positive on the success in relation to the performance of the system (Chenhall and Moers
2015). This assists the managers to undertake decisions and construct strategies and the
assessment and that the contemporary firms cannot sustain their activities without the availability
of the accounting information systems and distinctively computerise them. This has been the
role in enhancing the significance of these processes within the business enterprise.
Conversely, it is seen that the companies need to pay for their financial expenses and the
efforts towards a huge amount of investment. This is done in order to establish a computerised
accounting process, the computers are in need of software and hardware and even need skilled
personnel, which satisfies the companies to attain these systems. The attainment of these systems

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are done by sacrificing other resources in order to have an effect on the usage of the accounting
information process and the computerised financial performance and attain them simultaneously.
This assists the companies to gather investment opportunities for the utilisation of these
resources and thereby attain return based investments other than the investments within these
systems (Pérez-Méndez and Machado-Cabezas 2015).
In the current time period, there are several accounting techniques and tools that are
available to the companies, which they can make use of in order to improve their financial
activities. Accounting Information System (AIS) is one much model that is utilised by most of
the business enterprise in order to preserve, process acquire and announce the finance related
data. This process can be used by various owners like the advisers, tax agents, business
researchers and accountants and in some cases even by the managers of the firms.
Fundamentally, this can assist in the method of facilitating the process of undertaking decisions
within the business enterprise and can be customised in accordance to the demands of the
business environment, framework of the business and the actions that are undertaken within a
company. Christensen, Nikolaev and Wittenberg‐Moerman (2016) explains the fact that the
essential factor that is related to the study associates to the assessment of the impact accounting
information system in accordance to the extent of profitability of the companies as a whole.
Accounting provides essential business data in accordance to the transactions in terms of
pecuniary because of the fact that accounting is a way of classifying, assessing and acquiring
along with communicating the requisite information for the purpose of undertaking business
decisions. Otley (2016) explained that accounting information system is an essential part of the
information process of an organization that can be helpful in the deliverance of the processed
information. Significantly, this data that has been processed assists the companies in collecting

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the key information that is required in order to attain the business decisions and therefore has an
impact on the profitability of the organization.
1.1 Background of the Study
The development of the international economic scenario has been due to the development
in the information technology, swift alterations in the process of production and enhancement of
the sophistication of the customers, extensive level of market competition and skimming
operations. These aspects have brought about unethical aspects among the manufacturers in
order to stay in line with the complex and the unpredictable dynamics of the business. This has
brought to the face the significant function of accounting data in the business and the economic
disclosure effectively accordance to the efficiency of the management (Cassar, Ittner and
Cavalluzzo 2015).
Galy and Sauceda (2014) addressed that accounting addresses the business language as
has the aim of recording all the transactions of a company or any other bodies that can be explain
in monetary values. Grounded on the existing concept, accounting is looked upon to be the
scheme and the process of classifying, gathering, summarising and communicating the data that
are fiscal in nature that is vital in order to undertake economic decisions.
The performance of accounting for a number of years has enhanced right from the system
of single entry to the double entry system. The key goal of the accounting process has been to
provide the financial information that is inclusive of the sales, purchases, income and the costs of
the firm but the current modern accounting world, maintenance is helpful in several ways
(Seethamraju 2015). In the past, accounting was done in order to have knowledge about the loss
and the profit of the companies but in the current time period this process is even helpful in
enhancing the level of profitability of the company with the help of accounting information

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process. The companies include transactions which manufacture production for effective
evaluation of the business performance and the accounting information system is a deliverance
process for the purpose of accounting.
Accounting Information System (AIS) is one of the technique, which when established in
the area of Information and Technology process were constructed in order to assist in the control
and the management of the topics that are similar to the economic and the financial aspect of the
companies. However, the drastic development in the technology has created the possibility of
using and creating accounting data from the strategic perspective (Dwivedi et al. 2015).
Accounting Information System (AIS) as a section of the information process of a
company are looked upon to assist in the process of making decisions within any company. This
needs to be customised in accordance to the environment of the company, their need of tasks and
the framework that is utilised by them. An accounting information system is regarded to be a
framework that is utilised by the companies in order to gather, preserve, manage, retrieve and
process and document their financial information so that this can be exploited by the advisers,
business researchers, accountants and other skilled personnel.
Furthermore, skilled and experienced accountants function along with the accounting
information system in order to make sure that the enhanced level of preciseness and in the
financial transactions of the organization and the process of maintaining records are maintained.
The financial information is available easily for the ones who legitimately are in need of
accessing it, by keeping all the information same and secured and this indirectly has a
development on the performance and the productivity of any company (Marti, Rovira‐Val and
Drescher 2015).

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In addition, the management of several companies that are operational in United
Kingdom are heavily dependent on the data that is created from the accounting data system that
has been used by the firm (Hribar, Kravet and Wilson 2014). Furthermore, the report quality are
essential to come up with appropriate investment and a conventional process of recording,
documenting and summarising the financial reports of the companies, which creates decisions
that are less optimal in nature. The investments that are made in effective and reliable accounting
process have become an essential issue for the managers as it may lead to effective management
and the assessment of the performance of the companies.
Accounting information system is a process in most, if may not be all, managerial
decisions related to finance for numerous companies (Peters et al. 2016). In the economies that
are developed, these decisions have worth of billions of dollars every year. In certain instances,
the decisions are lack the quality. In the same manner, if several researches can enhance the
process of decision making with the help of enhanced data and this will be beneficial for the
community.
The accounting information system is regarded to be one of the most essential processes
for any companies. Lawson et al. (2015) explained that its objectives have been necessarily
providing information to the managers numerous levels. This information assists them in
discharging their accountabilities in an efficient and effective way in the aspect of making plans
control of the resources, assessment of the performance and undertaking the process of making
decisions. Accounting information systems are regarded to be the tools, which when
implemented in the area of information and technology systems, which have been constructed in
order to assist the management and the supervision of the topics that are associated to the
economic and the financial aspect of the companies (Nallareddy and Ogneva 2016). But the

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rapid and the advance development in the technology has created the possibility of creating and
making use of the accounting information from the strategic perspective.
The essential intention of the accounting information system in a firm is to provide
information in relation to the losses and the profits and the financial scenario of the business and
to their owners. This data is essential for the investors, suppliers, bankers and other financial
organizations. But the most significance of accounting data is associated to the individuals within
an organization (Peterson, Schmardebeck and Wilks 2015). It is known that every decision is
associated to a number of substitutes. Accounting information therefore assist the users to make
decisions in accordance to their course of actions.
The economy of United Kingdom is a developed one and therefore the use of accounting
information system is an extensive one, which has led to the development in the performance of
the companies (Grabinskia, Kedziora and Krasodomska 2014). The accounting information
system that has been used by the companies needs to assess the growth and the profitability of
the company and therefore assessment of the profitability is essential in order to have an
understanding of how the companies are able to develop their operational activities.
1.2 Problem Statement
In the current time period, most of the companies have been continuing to enhance the
expenses on the information system and the budget that is associated to the system has been
increasing. Furthermore, the economic scenario and the extent of competition generate pressures
regarding the information costs. In general, the information system is prepared by utilising
information technology in order to assist a person in performing their tasks (Fullerton et al.
2014). Hence, most of the companies ponder on improving the information system in order to
assist the process of decision making system, interactions, management of the knowledge and

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other as well. The significant part of the information system that is essential for the purpose of
undertaking decisions within a firm is known to the accounting information system.
Additionally, the human and global life has been altered from the age of information to
the age of knowledge and this knowledge has been ascertained to be the most valuable asset. In
fact, knowledge is not impersonal and therefore is not existent within a book or any software
program. Mithas and Rust (2016) had a belief that knowledge is always present in an individual.
Accounting information system is a technique that has unbiased nature for efficient management.
Ineffective accounting information system endangers the effectiveness of the management,
which makes the managers inefficient especially in the financial aspect of the organization
(Bertomeu, Darrough and Xue 2017). Therefore, this research has been undertaken in order to
provide extensive data in accordance to have knowledge of the profitability that is gained by the
banks with the help of the utilisation of accounting information system.
1.3 Research Aims and Objectives
In accordance to this research, the objectives of the thesis determine the aspects and the
elements with the help of which overall analysis in accordance to this topic can move forward.
The aims and the objectives of the paper has been explained as follows:
 Assess the nature of relationship among the accounting information system and the extent
of profit of the business enterprise
 Assess the features of accounting information system
 Determine the key influences of the accounting information process on the firm’s
profitability