AA015 TOPIC 1

FINANCIAL ACCOUNTING
AA015

KOLEJ MATRIKULASI
NEGERI SEMBILAN
SESSION 2020/2021

TOPIC 1

INTRODUCTION TO
ACCOUNTING

Learning Objectives

1.1 Definition of accounting
1.2 Users of accounting information
1.3 Differences between bookkeeping and accounting

1.4 Categories of accounting
1.5 Forms of business entities
1.6 Types of business activities

1.7 Components of financial statements 3
1.8 Professional accounting bodies in Malaysia

1.1 Definition of Accounting

Process of :

1) Identifying

2) Recording

3) Classifying

4) Summarizing

5) Reporting

6) Interpreting

7) Communicating

 financial information to external and internal

users.

 The results of business or economic

transactions to users in order for them to make a

better decisions. 4

1.2 Users of Accounting Information

Internal Users Directors of companies
External Users Managers

Internal auditors

Investors
Creditors
Government Agencies

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1.2 Users of Accounting Information

Management Internal Users

Internal Making routine decisions and controlling
auditor operations.

Workers Confirmed the management system and
the financial system of a company
comply with accounting standards.

Identify and evaluate business
performance for salary and bonus.

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1.2 Users of Accounting Information

Investors External Users

Creditors  To know the company’s
(Suppliers & profitability and the amount of
bankers) dividends paid out to shareholders.

 To decide whether to buy more
shares or dispose the shares they
have.

Assess the ability of the business to
repay the loan.

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1.2 Users of Accounting Information

Lembaga External Users
Hasil Dalam  To determine the amount of tax to be
Negeri
collected by them.

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1.3 Differences Between Bookkeeping
and Accounting

Bookkeeping Accounting

Definition  Bookkeeping is a Accounting is an

part of accounting. information system.

 Process of Process of

recording, classifying recording,

and summarizing all classifying,

the transaction. summarizing,

reporting, analyzing

and interpreting the

financial condition

and performance of

a business.

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1.3 Differences Between Bookkeeping and
Accounting

Scope Bookkeeping Accounting
The process
Person in involved is Accounting is more
charge preliminary work in extensive and
the accounting. thorough work
beyond
Accounting Clerk bookkeeping.

Accountant

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1.4 Categories of Accounting
Financial Accounting Managerial Accounting

Financial accounting is Managerial accounting

the field of accounting provides economic and

that provides financial for internal

economic and financial users.

for external users. Providing information as

Prepares reports to required by the

external users in management for

compliance with decision making

accounting standards

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1.5 Forms of Business Entities

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1.5 Forms of Business Entities

Differences Sole Partnership Company
Proprietorship
1. Number of owner 2 – 20 2 – unlimited
2. Capital source 1 Partners Shareholders
3. Life of Proprietor Limited
Indefinite
organization Limited
4. Liabilities Unlimited Limited
Unlimited
5. Laws of Partnership Act Companies Act
Regulation Businesses Act 1961 1965
1956
6. Distribution of Among partners Allocated
profits/losses Wholly owned by according to
proprietor shares of capital/
equity ratio

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1.6 Types of Business Activities

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1.6 Types of Business Activities

Manufacturing Merchandising

Provide services Change basic Purchase
rather than inputs into inventories from
products to other businesses
customers. products that are
sold to individual (such as
Example : MAS, manufacturers)
Maraliner, Keretapi customers. and resell the
Example: inventories to
Tanah Melayu. Gardenia, Intel
individual
customers.
Example: Giant,
Tesco, Econsave.

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1.7 Components of Financial
Statements

The components of financial statements as
stated in FRS 1 are as follows :
 a statement of comprehensive income for the period.
 a statement of financial position as at the end of the period.
 a statement of changes in equity for the period.
 a statement of cash flows for the period.

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1.7 Components of Financial
Statements

(1) Statement of Comprehensive Income
 Reports the financial performance of an entity over a

specific accounting period.
 Contains information on revenues and expenses including the net

profit or loss of the business entity.
 There are several formats in reporting the revenue and expenses

depending on the nature of business run by the entity.

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Statement of Comprehensive Income for Service
Companies.

Syarikat Dobi Cuci Berseri

Statement of Comprehensive Income

For the year ended 31st December 2015

RM

Revenues:

Laundry fees 140,000

(-) Expenses:

Rental expenses (40,000)

Utilities expenses (20,000) (60,000)

Net profit 80,000 18

Statement of Comprehensive Income for
Merchandise Companies.

Rahayu Baju Kurung Enterprise

Statement of Comprehensive Income

For the year ended 30 December 2015

RM RM

Sales 100,000

(-) Cost of good sold (60,000)

Gross profit 40,000

(-) Operating expenses :

Depreciation expenses 3,000

Salaries expenses 10,000 (13,000)

Net Profit 27,000

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1.7 Components of Financial
Statements

(2) A Statement of Changes in Equity
 Reports how the owner’s equity has changed over the reporting period.
 It reports how opening capital has increased through net income, and

how it decreased through net losses and drawings.

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A Statement Of Changes In Equity

Rahayu Baju Kurung Enterprise
Statement of Changes in Equity

For the year ended 31 December 2015

Opening Capital (1 Jan. 2015) 40,000
Net Profit 27,000
(-) Drawings (10,000)
Closing Capital 57,000

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1.7 Components of Financial
Statements

(3) A Statement of Financial Position
 Also known as the balance sheet reports the financial position of a

business entity.
 It contains of three main components

(1) Assets
(2) Liabilities
(3) Owner’s equity

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A Statement of Financial Position

Rahayu Baju Kurung

A Statement of Financial Position

as at 31 December 2015

RM RM RM

ASSETS 61,600
6,200
Non current assets : 67,800

Motor Vehicle 64,600 57,000

(-) Accumulated depreciation (3,000) 10,800
67,800
Current assets :

Inventory

TOTAL ASSETS

EQUITY AND LIABILITIES

Equity

Opening capital 40,000

+ Net profit 27,000

- Drawings (10,000)

Closing capital

Non current liabilities

Long term borrowings 5,000

Current liabilities :

Account Payables 5,800

Total liabilities

TOTAL EQUITY AND LIABILITIES 23

A Statement Of Cash Flows

A Statement Of Cash Flows
 Also known as cash flow statement, presents the movement in cash

flows over the period.
 It show the in-flow and out-flow of cash of an organisation according to

three main activities which are operating, investing and financing.

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- See more at: http://accounting-simplified.com/financial/statements/cash-flow-statement.html#sthash.oLcqgqTN.dpuf

A Statement Of Cash Flows

Rahayu Baju Kurung Enterprise
Statement of Cash Flows

for the year ended 31 December 2015

Cash flow from operating activities RM RM
Cash receipts from customers 25,000
Cash payment to suppliers (8,000) 12,000
Cash payment for expenses (5,000)
Net cash flow from operating activities : (13,000)
Cash flow from investing activities (13,000)
Purchase of land and building 3,000
Net cash flow used for investing activities 6,000 2,000
Cash flow from financing activities (3,000)
Owner investment 500
Drawings 2,50025
Net cash flow from financing activities
Net cash inflow
Add opening cash balance - 1 Jan 2015
Closing cash – 31 Dec 2015

1.8 Professional Accounting
Bodies in Malaysia

Malaysian Accounting Malaysian Institute of
Standards Board Accountants
(MASB) (MIA)

Malaysian Institute of
Certified Public Accountants

(MICPA)

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Malaysian Accounting Standards Board
(MASB)

Established under the Financial Reporting Act 1997
The main functions and authority :
1) Issue new accounting standards [Financial

Reporting Standards (FRS)
2) Review, revise or adopt existing accounting

standards.
3) Issue statements of principles for financial

reporting.
4) Sponsor or undertake development of possible

accounting standards.
5) Develop a conceptual framework for the purpose

of evaluating proposed accounting standards.
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Malaysian Institute of Accountants (MIA)

Established under the Accountants Act (1967)
The main functions of MIA are to:
1) Determine the qualifications for members.
2) Provide training and continuing professional

education to existing and potential
practitioners.
3) Control the accounting practice in Malaysia.

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Malaysian Institute of Certified Public
Accountants (MICPA)

The Malaysian Institute of Certified Public Accountants
(MICPA) was formed as a professional body in 1958.
The main functions of MICPA are to :
1) Advance the theory and practice of accountancy in all

its aspects.
2) Recruit, educate, train and assess a body of members

skilled in these areas.
3) Maintain high standards of practice and professional

conduct by all its members.
4) Develop the accounting profession.

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