Inadequate accounting system of a medium scale distribution firm in Sri Lanka: a case study

Abstract

This study explores the reasons behind the inadequate accounting system of a medium-scale distribution firm in Sri Lanka, where a problematic manual accounting system has been run for many years, and provides recommendations to overcome this issue. Due to the firm's existing accounting system, many problems have arisen: issues in inventory management, delays in preparing financial statements, and errors in the accounting process. This study adopts a qualitative methodology using semi-structured interviews for gathering data. Our findings suggest the main reasons for having an inadequate accounting system in this firm: inherent issues in the manual accounting system, the impact of information technology, lack of knowledge of accounting staff on new technology, obstacles that resist organizational change, the inappropriateness of record keeping, the reluctance of senior management to hire qualified staff, poor job assignment for accounting staff, and the attempt of top management to reduce the number of staff members. This study highlights the importance of a proper accounting system for entities that have not been enforced by the regulatory bodies to record financial information, and this study aids in identifying reasons behind the inadequacy of their accounting systems.