ASSESEMENT OF ACCOUNTING INFORMATION SYSTEM IN

COLLECTION OF VAT (IN CASE OF SAMARA LOGIA REVENUE

AUTHORITY OFFICE)

ETHIO LENS COLLEGE

DEPARTMENT OF ACCOUNTING AND FINANCE

A RESEARCH PAPER SUBMITTED TO THE DEPARTMENT OF

ACCOUNTING AND FINANCE IN PARTIAL FULFULMENT FOR THE
REQUIRMENT OF BACHELOR (BA) DEGREE IN ACCOUNTING AND
FINANCE

PREPARED BY: WERKIE GOITOM

ID NO: 278

ADVISOR NAME:

Oct, 2023
MEKELLE, ETHIOPIA

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 Introduction

1.1. Back ground of The Study

Accounting information system is a system of collecting, storing and processing financial
accounting data that is used by decision makers. Accounting information system is generally a
computer-based method for tracking accounting activity in conjunction with information
technology resource. The resulting statistical report can be used internally by management or
externally by other interested parties including investors, creditors and tax authorities. The
benefit of AIS can be specified in increasing customer satisfaction, minimize in efficiency,
satisfying timely financial information using computerized systems. Also, AIS has a greater role
in adding on products produced or provided service, assessing proper functioning of primary
activities data collection, storage and processing, tax planning collection, safe guarding assets of
the organization (Brecht and Martin, 2008).
Accounting is the service function that seeks to provide the users with quantitative information.
On the other hand, AIS is an information system that is designed to make the accomplishment of
accounting functions possible AIS processes data and transactions to provide users with the
information they need to plan, control and operate their businesses, Regard less of the type.
Accounting information system is designed to collect, enter, process, store and report data and
information (Romney et al, 2009).
The modernization of tax administrations is one or the major components of tax reform which
includes computerization of operation, though application of different VAT collection systems,
software networks, computers etc. with different alternative of application that needs
improvement, updating advancement in the system. Also, since different tax collection systems
software, infrastructures applied. This might need to consultancy service from manufacturers or
specialized personnel, training of worker, creating awareness updating the system, etc.
(Hollander, 2010).
Generally, AIS supports activity that assist the proper functioning of primary activities by
providing primary accurate and relevant information for decision making. Though the practice of

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AIS is inevitable on the operation of an organization, it has not been given much more emphasis
1by entities or organizations especially the practice it has on VAT collection.

1.2. Statement of the Problem

Accounting information system subsystems process financial transaction and non-financial
transactions that directly affect the processing of financial transactions. AIS applications are
distinguished from other information systems application by the legal and professional
obligations they impose on organization accountants. The proper discharge of these
responsibilities requires a precise understanding of the objective and functions of AIS (James A
Hall, 2009).
Accounting information system of the past focused on the recording, summarizing and
validating of data about business financial transactions. These functions were performed for the
various groups within the organizations that there was concerned about the respective decision
associated with tax compliance issues (Hollander et al, 2010). The need to integrate these diverse
systems led to the accountant appreciation of shared data base that provide a cohesive picture of
the organization information and reducing data conflicts (Moscove, 2007).
(Elsa Negash, 2005) studied on the practice of accounting information system in VAT
collection in Mekelle. According to their finding; there is a problem that the authority did not
create adequate awareness on the applications of AIS for VAT payers and not much realized the
awareness creations of purposes and benefits of AIS. There were problems that most of the time
the office software maintenance is done by other outside technician and this affect the AIS of the
authority in VAT collection.
(Dagem Alemu, 2007) studied on accounting information system practice in VAT collection in
Samara branch office His finding identified problems that there is a gap between what
accounting information system is and what should be. It did not confirm with other accounting
standards and did not cover all financial information that the company needs to have.
Active VAT registered customers of the samara logia revenue and custom office usually blocks
or fails to pay their VAT at the expected time.
Therefore, the focus of this study is aimed at assessing the practice of accounting information
system in the collection of value added tax in case of Samara-Logia revenue and customs
Authority office.

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 1.3. Research Questions

1 .What factors determine AIS practice in VAT collection?

2. How the offices AIS program operate in relation with the collection process?
3. How to practice AIS in the office to generate higher government revenue?
4. What is the approach of VAT payers and employees on AIS practice?
1.4. Objective of the Study

1.4.1 General objective of the study

The general objective of the study is to assess the AIS practice in the collection of VAT in case
of SRCO Samara branch office.
1.4.2 Specific objectives of the study
In light of the general objective, the specific objectives of the study are as follows:
 To identify factors that affects AIS practice in VAT collection.
 To obtain the way how the offices AIS program operates in relation with the
collection process.
 To know AIS practice in the office to generate higher government revenue.
 To identify the approach of VAT payers and employees on AIS practice.

1.5. Significance of the Study

The significance of the study is:
 Facilitating the decision making process of the branch office.
 Help in updating new technology or advanced AIS application.
 Serving as an input or reference for detail study.
 Creating awareness among those stakeholders.
 It would assist the management in identifying and get possible solution for their
problems.

1.6. Scope of the Study

There are many factors affecting SRCO’s efficiency and effectiveness in achieving its goal and
objective. The study undertaken to assess only the practice of AIS in the collection of VAT not
any other factor. It would also focus on the SRCO Samara branch only not any other branch
offices of the authority.

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1.7. Limitation of the Study
The limitation of the study was be include time and cost resource, back of experience of the
researcher, inaccurate information by the respondents (respondent’s bias) and problem of
management of the branch office was the limitations to affect the outcome of the research.
There is also a limitation that secondary sources on AIS practice are not sufficiently
available.

1.8. Organization of the paper

The general content of this research was contains four chapters. Chapter one was have
presented the introduction part which contains, background of the study, background of the
organization, statement of the problem, research question, objectives of the study, research
methodology, significance of the study, and scope and limitation of the study. Chapter two
also present the review of the literature part of the study. Chapter three contains data
presentation and analysis. Finally, the last chapter, chapter four was forward conclusions and
recommendations.

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 RESEARCH METHDOLOGY

3.1 Background of the Organization

Introduction
Afar region is one of the regional state of Ethiopia that exist in north eastern of Ethiopia and
homeland of Afar peoples. Samara city administration was capital city of Afar regional state and
been planned and built to replace Asaita. It is a town on the Awash assab highway in north
eastern Ethiopia.it has having around 580 km distance from Addis Ababa which are capital city
of Ethiopia.
The Samara Logia Revenue and Custom Authority (SRCO) is the body responsible for collecting
revenue from customs duties and domestic tax. In addition to raising revenue, the SRCO is
responsible to protect the society from adverse effects of smuggling. It seizes and takes legal
action on the people and vehicles involved in the act of smuggling while it facilitates the
legitimate movement of goods and people across the border. The SRCO traces its origin to July
7, 2008 as a result of the merger of the Ministry of Revenues, the samara Customs Authority and
the Federal Inland Revenues in to one giant organization.

3.2. Research Design

Research design is the arrangement of conditions for collection and analysis of data in a manner
that aims to combine relevance to the research purpose with economy in procedure (Claire selltiz
et al, 1962). There are three types of research design namely explanatory, exploratory and
descriptive. Descriptive research studies are those studies which are concerned with describing
the characteristics of a particular individual or a group. Studies concerned with describing the
characteristics of a particular individual or a group. Studies concerned with specific predictions
with narration of facts and characteristics concerning individuals, group or situations are all
examples of descriptive research design. (C. R. Kothari, 2006).Therefore, the research design
researcher was select for the study undertaken is descriptive because it ensures the minimization
of bias and maximization of reliability of the evidence collected.

3.3. Research Approaches

There are three types of research approaches namely, quantitative, qualitative, and mixed
methods research approach (Leedy and Ormord, 2005). Research methodology is a way to
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systematically solve the research problem. It might be understood as a science of studying how
research is done scientifically (C. R. Kothari, 1990). The research methodology researcher was
select selected for this study is more of quantitative. The reason why researcher was use the
mixed research method is that Researcher use comparative analysis using percentage and
generates data that can be expressed in terms of quantity and then analysis should be described in
qualitative terms.

3.4. Target Population

The researcher was focus on the total population of Samara revenue and custom authority
Samara branch office which comprises a total of 1201 that include 191 management and
employees and 1010 active VAT registered customers of the branch office.

3.5. Source and method of data collection

The data was be collected from primary data sources. Data collection from the selected
population was through questioner and interview (open ended questions) for the primary source.
While collecting data through questionnaires Likert scale is used to measure the response of
respondents.

3.6 Sampling technique

The researcher was use non-probability sampling techniques which is convenience sampling
technique. The reason behind to researcher to select this technique is that since all respondents
cannot be avail at the organization during data collection, collecting data from those who avail is
possible.

3.7 Sample Size

The sample size understudy was select only some portion of the management and employees of
the authority and some portion of active customers of the authority. Since this would help us to
manage the research easily. Mainly simple random sampling technique the researcher to select
from tax payers and employees use formula to minimize the number of taxpayers. By using
Yamane (1967) formula, the researcher was be put the following sample size of tax payers.
N= N/1+N (e)2
n=1201/1+1201(0.1)2

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 n=1201/1+1201(0.01)
n=92
Where N- total population
n- Sample size
e- Level of error
=10%
From 1201 taxpayers the researcher selects 92 sample sizes.
Finally the reason why the researcher applied simple random sampling mainly is that it is simple
to use and the respondent are equally important for the study under taken.

3.8. Data Presentation and Analysis

After the data have been collected, the researcher was turns to the task of analyzing them. The
analysis of data requires a number of closely related operations such as establishment of
categories, the application of these categories to raw data through tabulation, coding and then
drawing statistical inference. The unwieldy data should necessarily be condensed in to a few
manageable group and tables for further analysis. Thus, researcher should classify the raw data
into some purposeful and useable categories. Tabulation is a part of the technical procedure
when in the classified data is put in the form of tables. Analysis work after tabulation is generally
based on the computation of various percentage, coefficients, etc. by applying various well
defined statistical formulas (C.R. Kothari, 1990).
Therefore, the study was be analyzed by using descriptive data analysis using percentage and
related techniques. Also the method of data presentation was using tables.

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 SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary
Based on the analysis and interpretation made on (chapter 4), the practice of AIS in the
collection of VAT is summarized as follows.

 The authority registered VAT payers properly. AIS have very important role in VAT
collection. Most of the employees have no higher understanding about AIS. Lack of
skilled employees affects the AIS practice of the authority. The offices software
maintenance was done by outside technicians. The offices do not organized trainings and
seminars. Lack of incentive is a problem to practice AIS in VAT collection. The
authorities do not create adequate awareness about AIS. The authorities have not a
standardize measure for employees performance. Most VAT payers have not good
attitude towards AIS practice. VAT payers have improvement in tax collection. Limited
knowledge of VAT payers affects AIS practice. VAT payers got timely answer to their
complain

5.2 Conclusion

AIS is one of the most important functions of an organization for measuring and evaluating the
effectiveness and efficiency of its financial activities. The main concern for this paper is to assess
those factors that hinder the AIS practice of SRCO office in VAT collection. On the basis of the
data obtained from primary source through (interview and questioner), the present work made an
attempt to study the practice of AIS in the collection. On the basis of the data obtained from
primary source through (interview and questionnaire), the present work made an attempt to study
the practice of AIS in the collection of VAT in case of SRCO office. In addition the system of
information management and planning, network infrastructure management, custom procedure
codes, standard integrated government tax administration system (SIGTAS), office maintenance
system, model type of declaration, extended procedure code (EPC), practice (application) of AIS
in collecting tax and necessary material they were thoroughly investigated for any problem seen.

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Furthermore possible solutions they were made for the efficient, effective application (practice)
of AIS in the collection of tax by the SRCO office. Finally major conclusions were drawn as
follows:

 AIS is essential for long-run success by providing reliable accounting

information to users, simplify the record keeping process and provide
relevant information for decision making. AIS played a great role in
facilitating VAT collection process to increase government revenue from
VAT.
 The SRCO registered VAT payers following the rules and regulations set out
by government. The authority provided timely answer for the VAT payers, if
they rise complain about VAT. As a result, VAT payers achieved maximum
revenue collection improvement after they have been registered for VAT.
 The authority did not create adequate awareness on the application of AIS to
VAT payers and employees. It did not update the skill of its employees.
SRCO was also not much realized the awareness creation of purposes and
benefits of AIS.
 The employee in SRCO has not higher understanding of what accounting
and what AIS in practice is to collect VAT. There are factors that hinder AIS
practice or implementation in VAT collection in case of SRCO. Among
these the most common factors are lack of skilled man power, lack of
technological advancement in the country, limited availability of resource
and lack of awareness of VAT payers about AIS.
 The offices system software maintenance is done by other outside technician
rather than the offices IT department. This negatively affects the AIS
practice in VAT collection process.
 The authority did not have a standardized measure to see the performance
new employees about AIS.
 The organization did not use advanced AIS application for VAT collection.
 SRCO did not have a well standardized motivational factor to employees in
the form of incentive and rewards to improve their commitment about AIS
practice.

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Recommendations
This part contains some significant possible solution of the researcher. Based
on the study conducted the following necessary points are recommended as a
solution for AIS practice (application) problem in SRCO.
 The authority should create adequate awareness to the society (VAT payers
and employees) about AIS practice in VAT collection. The organization
should also hire those highly skilled, flexible and experienced employees
and should use advanced AIS application to effectively implement in VAT
collection process.
 Regarding the office maintenance it should be done by the computer or IT
department rather than outside technician.
 The organization should have a standardized major employee’s professional
performance in AIS practice, especially for new employees.
 The authority is advised to have a well standardized motivational factor such
as rewards and incentives to improve employee’s commitment in practice of
AIS for VAT collection.
 Finally, different trainings and seminars should be organized and given by
the authority to the society for the practice of AIS in the collection of VAT
is going to be grasped and capture by all interested entities.

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