BUSINESS ACCOUNTING FOR NON-ACCOUNTING STUDENTS

FIRST EDITION

For Non-Accounting Students

For Non-Accounting Students

POLYTECHNIC EDITION

AUTHORS:
NURHAFIZAH HAMIDON
SHARIDA ZAINA SHAFIE
YUSNIZAH SELAMAT

For Non-Accounting Students

POLYTECHNIC EDITION

No parts of this publication may be reproduced,
stored in a retrieval system, or transmitted

in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise

without the prior permission of publisher.

Perpustakaan Negara Malaysia
Mode of Access: Internet
eISBN: 978-967-2860-16-7

Published in Malaysia by:
Politeknik Sultan Idris Shah
Sg. Lang, 45100 Sungai Air Tawar

Selangor Darul Ehsan

Tel. No.: 03-32806200
Fax No.: 03-32806400
https://psis.mypolycc.edu.my

Writers:
Nurhafizah | Sharida Zaina | Yusnizah

This Business Accounting book is designed primarily for
Non-Accounting students which caters for Polytechnic
students.

The topics in this book are written based on the syllabus
of Business Accounting Polytechnic. The content enable
students to understand the fundamental accounting
concepts required for the subject.

This first edition book explain the process of classifying,
recording, summarizing of business transactions.
Students will be taught every steps of accounting cycle
until double entries principles and balancing off.
Examples are given to illustrate the application of the
concepts and principles in order to enhance the
understanding of the topics.

It is hoped that students can benefit this book and help
students to increase their understanding in accounting
and achieve excellent result.

Nurhafizah Hamidon
Sharida Zaina Shafie
Yusnizah Selamat

Business Accounting (First Edition) is designed to
enables students to develop knowledge in the
operational aspects of accounting system and
procedures.

Students can comply with the accounting techniques to
maintain accounting record in preparation of financial
statements. Students can also apply in accounting cycle
related to principles and practice of accounting.

This book (first edition) comprises four (4) topics,
starting from introduction to accounting, accounting
classification and accounting equation, accounting
process and books of accounts, and double entries
principles and balancing off. It also provide exercises to
do after each chapter.

Table Of

Contents

1

1.0 Introduction to Accounting

1. Define accounting and bookkeeping 43
2. Users of accounting information
3. Roles of an accountant
4. Types of accounting field
5. Approved accounting standards in Malaysia
6. Functions of regulatory bodies in Malaysia
7. Accounting concepts

2.0 Accounting Classification and Accounting Equation

2.1 Accounting classification and accounting equation
2.2 Definition of assets, owner’s equity and liabilities
2.3 Definition of revenues and expenses

2.4 Definition of inventory (finished goods)

2.5 Effects of transaction on the accounting equation

74

3.0 Accounting Process and Books of Accounts

1. Accounting process
2. Sources documents
3. Journals
4. Ledgers

126

4.0 Double Entries Principles and Balancing Off

1. Double entries principles for assets, liabilities, and capital
2. Double entries principles for expenses and revenues
3. Double entries principles for inventories
4. Trade discount and cash discount
5. Balancing off the accounts

INTRODUCTION
TO ACCOUNTING

At the end of this topic, students should be able
to:

1.1 Define accounting and bookkeeping
1.2 Users of accounting information
1.3 Roles of accountant
1.4 Types of accounting field
1.5 Approved accounting standards in Malaysia
1.6 Functions of regulatory bodies in Malaysia
1.7 Accounting concepts

1

ACCOUNTING
AND

BOOKKEEPING

Definition

Accounting Bookkeeping

• Process of • Process of
classifying, classifying,
recording and recording and
summarizing summarizing
business business
transactions in
monetary units and transaction.
interpreting the
financial data of a
business

• The results then be
analyzed and
reported to
interested users of
the information.

2

ACCOUNTING
AND

BOOKKEEPING

Decision
making
purpose

Makes Provides
reporting to permanent
records for
investors
easy all
transactions

Makes The Helps in
business importance determining
planning
easy and the
profitability of
attain the business

Preventing Tax
fraudulent assessment
practices purposes

3

ACCOUNTING
AND

BOOKKEEPING

The differences

Accounting Bookkeeping

• Complete • Bookkeeping only
accounting process
• Basic accounting
• Involve technical understanding
and advance
accounting • Non-accountants
procedures (training and
experience)
• Performed by
certified • Simple accounting
professionals tasks to financial
accountants department

• Responsible to give
information to
various departments
(users)

4

USERS OF
ACCOUNTING
INFORMATION

INTERNAL
USERS

Business owner

Management
Employees

5

USERS OF
ACCOUNTING
INFORMATION

EXTERNAL
USERS

Payables/ Bankers Current and
potential investors

Government Consumers

6

ROLES OF
ACCOUNTANT

Professional

Monitoring Provide
accounting reliable
financial
process information

Accounting
Profession

Financial Advice
task management

7

ROLES OF
ACCOUNTANT

Check cash &
banking

transactions

Prepare and Update status of
monitor accrued &

accounting prepayments
entries
Roles Manage
Prepare payment
budget Prepare reconciliation
S&P
8
reports

TYPES OF
ACCOUNTING

FIELD

Financial
Accounting

Taxation Cost
Accounting

Auditing Management
Accounting

9

TYPES OF
ACCOUNTING

FIELD
Financial
accounting

WHAT?

Keeps track of a company’s financial transactions

WHY?

Prepare financial reports that provide information about a
firm’s performance to external parties

HOW?

Using standardized guidelines, the transactions are
recorded, summarized & presented in a financial report

10

TYPES OF
ACCOUNTING

FIELD

Cost accounting

WHAT?

Capture a company’s total cost of production by
assessing the variable cost of production, as well as

the fixed costs involved

WHY?

As a budget preparation & profitability analysis (useful
for managers)

HOW?

Job costing, process costing, standard costing,
activity-based costing etc.

11

TYPES OF
ACCOUNTING

FIELD

Management
accounting

WHAT?

Provision of financial and non-financial decision
making information to managers

WHY?

Used in short-term & long term decisions involving
the financial health of a company

HOW?

Margin analysis, constraint analysis, capital
budgeting, inventory valuation and product costing,

etc.

12

TYPES OF
ACCOUNTING

FIELD

Auditing

WHAT?

Performing procedures in order to obtain audit
evidence about the amounts and disclosures in the

financial statements

WHY?

To ascertain the accuracy of financial statements
provided by the organization

HOW?

Internal auditing
External auditing
Inland revenue service

13

TYPES OF
ACCOUNTING

FIELD

Taxation

WHAT?

A structure of accounting methods focused on taxes
rather than the appearance of public financial
statements

WHY?

To raise revenue for government expenditure

HOW?

Collection of taxes through individual/ company’s
income tax. The information gain through accounting

information that provided by the company

14

APPROVED
ACCOUNTING
STANDARDS IN

MALAYSIA

Malaysian Financial Reports
Standard (MFRS)

Malaysia Public Entity
Financial Reports Standards

(MPERS)

15

MFRS

WHAT? WHO?
Common set of
principles, standards, Malaysian Accounting
and procedures that Standards Board (MASB)
define the basis of
financial accounting Entities Other Than
policies and practices Private Entities

WHEN? WHY?

1 JANUARY 2012 Ensure the financial
statements from multiple

companies are
comparable.

Make Financial
Statements credible and

economic decision
(accurate & consistent

information)

16

MPERS

WHAT? WHO?

A self-contained Standard Malaysian Accounting
that is applicable only to Standards Board (MASB)
private entities.
The accounting Private Entities
requirements of the MPERS (Companies act 1965)
are word-for-word the IFRS
for SMEs (International WHY?
Financial Reporting
Standards for Small and Bring opportunities to the
Medium-sized Entities) business as it is adoption
issued by the IASB except of international standard
for the requirements on that has been designed
Property Development
Activities (Section to fits the local needs
34 Specialised Activities). and the customization to
the Malaysian business
WHEN?
environment could
1 JANUARY 2016 ensure comparability of

the locals with the
international business.

17

REGULATORY
BODIES IN
MALAYSIA

• Malaysian Institute of
Accountants (MIA)

• Malaysian Accounting Standards
Board(MASB)

• The Companies Commission of
Malaysia

• Inland Revenue Board (LHDN)

18

MALAYSIAN

INSTITUTE OF

ACCOUNTANT

SECTION 6 ACCOUNTANTS ACT 1967

• To determine the qualifications of persons for
admission as members;

• To provide for the training and education by the
Institute or any other body, of persons practicing
or intending to practice the profession of
accountancy;

• To approve the MIA Qualifying
Examination(QE) and to regulate and supervise
the conduct of that Examination;

• To regulate the practice of the profession of
accountancy in Malaysia;

• To promote, in any manner it thinks fit, the interest
of the profession of accountancy in Malaysia;

• To render pecuniary or other assistance to
members or their dependents as it thinks fit with a
view to protecting or promoting the welfare of
members; and

• Generally to do such acts as it thinks fit for the
purpose of achieving any of the aforesaid
objectives.
https://www.mia.org.my/

19

MASB

• The MASB's primary role is to develop
accounting and financial reporting standards.

• Precludes the MASB or its staff from giving
advice to any individuals or corporations or
individual cases nor to act as an arbitrator
regarding any issue.

• Resolution of matters concerning the
application of the accounting standards should
be addressed and discussed with the
respective independent accountants, or
auditors.
www.masb.org.my

20

THE COMPANIES

COMMISSION OF

MALAYSIA

SECTION 17 ACT 614 COMPANIES COMMISSION
OF MALAYSIA ACT 2001

• To ensure that the provisions of this Act and
the laws specified in the First Schedule are
administered, enforced, given effect to, carried
out and complied with;

• To act as agent of the Government and to
provide services in administering, collecting and
enforcing payment of prescribed fees or any
other charges under the laws specified in the
First Schedule;

• To regulate matters relating to corporations,
companies and businesses in relation to the
laws specified in the First Schedule;

• To encourage and promote proper conduct
amongst directors, secretaries, managers and
other officers of a corporation, and self-
regulation by corporations, companies,
businesses, industry groups and professional
bodies in the corporate sector in order to
ensure that all corporate and business activities
are conducted in accordance with established
norms of good corporate governance;

21

THE COMPANIES

COMMISSION OF
MALAYSIA

CONT…

• To enhance and promote the supply of
corporate information under any laws specified
in the First Schedule and to create and develop
a facility whereby any corporate information
received by, or filed or lodged with, the
Commission may be analyzed and supplied to
the public;

• To carry out research and commission
studies on any matter relating to corporate and
business activities;

• To advise the Minister generally on matters
relating to corporations, companies and
businesses in relation to the laws specified in
the First Schedule; and

• To carry out all such activities and do all
such things as are necessary or advantageous
and proper for the administration of the
Commission, or for such other purpose as may
be directed by the Ministers.
www.ssm.com.my

22

ACCOUNTING
CONCEPTS

• Accounting Principles
• Accounting Assumptions
• Accounting Concepts

23

ACCOUNTING
PRINCIPLES

Historical cost

Accounting
Principles

Objectivity Matching

24

HISTORICAL CONCEPT

• All ASSETS and LIABILITIES of a business –
recorded at their historical cost

• HISTORICAL COST – Cost when obtaining the
asset/liability

• Where to get HISTORICAL COST?
ORIGINAL source document

25

MATCHING CONCEPT

• EXPENSES incurred by a business be charged
in the income statement in the same
ACCOUNTING PERIOD as REVENUE related
is EARNED.

• WHY?
Ensure all aspects of business expenses
recorded at the same time as the business
revenue is earned.

26

OBJECTIVITY CONCEPT

• Requires a BUSINESS FINANCIAL RECORD
to be prepared based on VERIFIABLE
evidence details obtained from SOURCE
DOCUMENTS related.

• WHY?
AVOID entries based on personal view or
perceptions as it is INACCURATE &
UNRELIABLE.

27

ACCOUNTING
ASSUMPTIONS

Consistency

Going Accruals
concern

Accounting
Principles

Money Periodicity
measurement

Business
entity

28

CONSISTENCY CONCEPT

• Requires a BUSINESS keep using the same
specific ACCOUNTING METHOD that has
been used. (I.E CASH/ACCRUAL?)

• AVOID changing method unless had to.
• WHY?

ENSURE that the FINANCIAL STATEMENTS
prepared in multiple periods can be reliably
compared.

29

ACCRUALS CONCEPT

• Requires a to RECOGNIZE REVENUES
based on the cash received into business.

• Also RECOGNIZE EXPENSES when issued a
payment

• WHY?
Revenues recognized when earned –
Expenses recognized when assets consume

30

GOING CONCERN CONCEPT

• Assumed that accounting is prepares as
BUSINESS WILL CONTINUE to OPERATE
FOR AN INDEFINITE TIME.

• It (accounting) should be done carefully to avoid
risking business operational activities.

• WHY?
Enable business to realize its assets and
obligations in normal course.

31

MONEY MEASUREMENT
CONCEPT

• Only transactions capable of being
MEASURED in MONETARY TERMS are
RECOGNIZED in FINANCIAL STATEMENTS.

• IF cannot be MEASURED it should not be
recorded.

• i.e.: Employer skill level, employer working
conditions, quality of customer support

32

BUSINESS ENTITY CONCEPT

• PERSONAL ACTIVITIES of BUSINESS
OWNER have NOTHING TO DO with business
(cant be recorded as business activity)

• BUSINESS ENTITY treated as a unit on its own
and separate from the financial information of
the owner.

33

PERIODICITY CONCEPT

• FINANCIAL REPORT can be divided into
specific ACCOUNTING TIME PERIODS.

• Periodical basis – monthly, quarterly, semi
annually, annually

• Assist the accounting user in making relevant
financial related decisions.

34

ACCOUNTING
CONSTRAINTS

Accounting
Constraints

Prudence Materiality

35

• Accountants exercise cautions in adoption of
ACCOUNTING POLICIES

• To AVOID overstating assets/revenue or
understating liabilities/expenses

• SHOULD NOT recognize ASSET/REVENUE
higher than the amount which is expected to be
recovered from its sale or use

• LIABILITY/EXPENSES should not be prepaid
below the amount that is likely to be paid in the
future

36

MATERIALITY CONCEPT

• Financial information is material to the
financial statement if it would change the
opinion or view of a reasonable person.

• In other words, all important financial
information that would sway the opinion of
a financial statement user should be
included in the financial statements.

• May DIFFER to the business size or
circumstances

• Record transactions that can alter the
decisions made by users of a business
financial statement.

37

EXERCISES

Question 1 True false
Tick (/) the correct answer

Accounting concept

1 Accounting Principle is general law or
rule followed in the preparation of
financial statements.

2 Consistency, objectivity and full
disclosure are the three basic norms
generally found in accounting
principles.

3 The separate entity concept considers
the business and the proprietor as
distinct from each other.

4 It is on the basis of historical cost
concept that the assets are always
valued at market value.

5 In going concern concept, the life of
the business is assumed to be
indefinite.

38

EXERCISES

Question 2
identify the correct answer

Situation Accounting

concept

1 Hijrah Tour and Travel will continue
to operate the business for a long

time

2 Azwan must record the cash
drawing she made from her shop.

3 All transactions must be recorded
based on objective evidence of each

transaction

4 Cash account was debited, whereas
sales account was credited for cash

sales transaction

5 Financial report that prepared by
account is based on certain period

39

EXERCISES

Question 3

Fill the accurate date for the following accounting
period

Duration Starting date Closing date
Monthly
Quarterly 1st August 2021 30th September
2021
Semi-annually 1st February
2021 30th June 2019
Yearly
quarterly 1st March 2020

40

EXERCISES

Question 4
List down types of accounting user

Duration Starting date

Internal users 1.
2.
3.

External users 1.
2.
3.

41

EXERCISES

Question 5
List down the point discussed in the following

Duration Starting date

Accounting principles 1.
2.
3.

1.
Accounting assumptions 2.

3.

Accounting concepts 1.
2.
3.

42

CHAPTER 2:

ACCOUNTING
CLASSIFICATION AND
ACCOUNTING EQUATION

2.1 Accounting classification and accounting
equation

2.2 Definition of assets, owner’s equity &
liabilities.

2.3 Definition of revenues and expenses
2.4 Definition of finished goods

(finished goods)
2.5 Effects of transaction on the accounting

equation

43