AA015 - CHAPTER 1

Program Matrikulasi Satu Tahun Perakaunan

TOPIC 1
INTRODUCTION TO

ACCOUNTING

CONTENTS

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

1.4 Branches of Accounting
1.5 Types of Business Ownerships
1.6 Types of business Activities
1.7 Types of financial statements
1.8 Professional accounting bodies in Malaysia
1.4 Potential career in Accounting

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1.1 Definition of Accounting

ØProcess of :
1) Identifying
2) Recording
3) Classifying
4) Summarising
5) Reporting
6) Interpreting
7) Communicating

Ø The results of business or economic
transactions to users in order for them to make a
better decisions.

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

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

ØAssess the ability of the business to
repay the loan.

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1.2 Users of Accounting Information

Inland External Users
Revenue
Board Ø To determine the amount of tax to be
(LHDN) collected by them.

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1.3 Differences Between Bookkeeping
and Accounting

Definition Bookkeeping Accounting

Ø Bookkeeping is a ØAccounting is an
part of accounting. information system.

Ø Process of ØProcess of
recording, in recording,
chronological order, classifying,
the daily summarizing,
transactions of a reporting, analyzing
business entity. 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 Branches of Accounting

Financial accounting is the Managerial accounting
field of accounting that provides provides economic and
economic and financial for financial for internal users.
external users.

Cost Accounting is costs Auditing

incurred in carrying out an

activity or accomplishing a

purpose are collected, classified,

and recorded. Then summarized

and analyzed to arrive at a

selling price, or to determine

where savings are possible.

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1.4 Branches of Accounting

Financial Accounting Management Accounting

Financial accounting is the Managerial accounting
field of accounting that provides economic and
provides economic and financial for internal users.
financial for external users.

Cost Accountingall costs Auditing

incurred in carrying out
an activity or
accomplishing a purpose
are collected, classified,
and recorded

Public Sector Accounting Taxation
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1.5 Forms of Business Ownerships

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1.5 Forms of Business Ownerships

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

ØProvide ØChange basic ØPurchase
inventories from
services rather inputs into other businesses
(such as
than products to products that are manufacturers)
and resell the
customers. sold to individual inventories to
individual
customers. customers.
ØExample: Giant,
ØExample : MAS, Tesco, Econsave.

Maraliner, ØExample:

Keretapi Tanah Gardenia, Intel

Melayu.

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1.7 Types of Financial Statements

The components of financial statements as
stated in MFRS 101 are as follows :
Ø a statement of comprehensive income /

Profit or Loss for the period.
Ø a statement of Owner’s Equity for the

period.
Ø a statement of financial position as at the

end of the period.
Ø a statement of cash flows for the period.

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1.7 Components of Financial
Statements

(1) Statement of Comprehensive Income
Ø Reports the financial performance of an entity

over a specific accounting period.
Ø Contains information on revenues and

expenses including the net profit or loss of the
business entity.
Ø 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

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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
Ø Reports how the owner’s equity has changed

over the reporting period.
Ø 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
Ø Also known as the balance sheet reports the

financial position of a business entity.
Ø 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 RM RM
A Statement of Financial Position
61,600
as at 31 December 2015 6,200
RM
67,800
ASSETS : 64,600
Non current assets : (3,000) 57,000
Motor Vehicle
(-) Accumulated depreciation 40,000 5,000 10,800
Current assets : 27,000 5,800 67,800
Inventory (10,000)

TOTAL ASSETS 23
EQUITY AND LIABILITIES
Equity
Opening capital
+ Net profit
- Drawings
Closing capital
Non current liabilities
Long term borrowings
Current liabilities :
Account Payables
Total liabilities

TOTAL EQUITY AND LIABILITIES

A Statement Of Cash Flows

A Statement Of Cash Flows
Ø Also known as cash flow statement, presents the

movement in cash flows over the period.
Ø 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
(8,000) 12,000
Cash payment to suppliers (5,000)
Cash payment for expenses (13,000)
(13,000)
Net cash flow from operating activities : 3,000
6,000 2,000
Cash flow from investing activities (3,000)
Purchase of land and building 500
2,500
Net cash flow used for investing activities
Cash flow from financing activities

Owner investment

Drawings
Net cash flow from financing activities

Net cash inflow
Add opening cash balance - 1 Jan 2015

Closing cash – 31 Dec 2015

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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)

ØEstablished under the Financial Reporting Act 1997
ØThe 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)

ØEstablished under the Accountants Act (1967)
ØThe 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)

ØThe Malaysian Institute of Certified Public
Accountants (MICPA) was formed as a professional
body in 1958.
ØThe 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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1.9 Potential Career in Accounting

Public Accounting Private Accounting

Careers in auditing, taxation Careers in industry working
and management consulting in cost accounting ,
serving the general public
budgeting , accounting
Governmental Accounting information systems and

Careers with the IRS, the FBI, taxation
the SEC, public colleges and
universities, and in state and Forensic Accounting

local government Uses accounting, auditing
and investigative skills to
conduct investigations into

theft and fraud

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