Ahmad Hafiz bin Zainal Abidin

MAcc (UiTM), BAcc (Hons) UiTM, Dip Ed. (MPPP)

ahafiz77@gmail.com

Department of Accounting & Quantitative Kolej Profesional MARA Bandar Melaka

Week 1 Week 2&3 Week 4&5 Week 6-10 Week 11-13 Week 14 Week 15

Introduction to Accounting Accounting Equation The Recording Process Adjustments Financial Statements (after adjustments) Cash Control Revision week

4 Quizzes 1 Test Assignment Final Exam Total

20% (5% x 4) 10% 10% 60% 100%

Students must complete all assessments and attain at least 40% to pass.

Business Accounting 1 11th Edition Frank Wood & Alan Sangster Prentice Hall

Definition, History and Development of Accounting. Functions and Objectives of Financial Statements Uses and Main Users of Financial Statements Types and Various Forms of Business (Sole Trader, Partnership, and Private / Public Company) Differences between Book-keeping and Accounting Employment Opportunities

Evidence of accounting records can be found in the Babylonian Empire (4500 B.C.), in pharaohs Egypt and in the Code of Hammurabi (2250 B.C.). The advent of taxation, record keeping became necessity for governments to sustain social orders. The Italian Renaissance where double entry accounting was invented and practiced. In 1949, Pacioli published his famous book Summa de Arithmetica, Geometria, Proportioni et Proportionalita (The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality).

The Summa was translated into German, Russian, Dutch, and English. The double entry system was applied by most merchants in Venice for 500 years. Later in 1868, the income statement was developed (before WW II). In 1980s, statements of financial position were developed with the purpose to provide relevant information about the operating, financing and investing activities of an enterprise and the effects of those activities on cash resources

The process of identifying, measuring, communicating economic information to permit informed judgements and decisions by users of the information Wood and Sangster (2008), Page 332, Business Accounting 1, 11th Edition.

Identifying

Reporting

Classifying

Summarising

Recording

Book-keeping To ensure that all records of business transactions are kept properly for future references.

Accounting Is a process of identifying, analyzing, summarizing, and reporting financial events

Book-keeping is one part of accounting process

If they are making a profit or a loss; What their business is worth; What a transaction was worth to them; How much cash they have; How wealthy are they; How much they are owed; How much they owed to someone else; Enough information so that they can keep a financial check on the things they do.

Users of financial statements may be categorized into two groups:

Internal Users External Users

Directors
Managers

Investors
Creditors Unions Publics Government Employees

Internal Users Directors Managers These users need financial information to make decision.. For instance.. to make new investments to cut down expenditures

External Users Investors These users need financial information to assess the value and profitability performance of the business.

Financial Institutions

Bankers need financial information to evaluate the ability of the business to meet the financial obligations.
To assess tax chargeable to a business entity.

Tax Authority

Sole Trading
Partnership Company / Corporation

Sole Trading

Partnership

Company

No. of owner(s)
Capital investment Distribution of profit

1
Capital Drawings / wholly for the owner Unlimited Not separated (owner and business entity are the same) Not possible

2 20
Capital Profit sharing (based on agreement) Unlimited Not separated

2 50 (Sdn Bhd) 2 (Berhad)

Share Capital Dividends (% on share amount) Limited Separated (can sue or be sued, AND transfer of ownerships) Through merger or takeover

Liability status Legal entity

Business acquisition / combination

Not possible

Historical cost concept Assets are shown at cost price. Money measurement concept Accounting is concern about facts that can be measured monetarily (and most people agreed with the monetary value) Business entity concept the affairs of a business are to be treated as being quite separate from the non-business activities of its owner(s)

Dual aspect concept There are two aspects of accounting; assets and claims against the assets. They must always equal. Time interval concept Financial statements are prepared at regular intervals of one year.

Accrual basis The effects of transactions are recognised when they occur; not when they are paid or received.

Going concern It is assumed that the business will continue to operate for at least twelve (12) months after the end of the reporting period.

Understandability Information in financial statements should be readily understandable by users. Relevance Information in financial statements must be relevant to the decision-making needs of users.

Materiality Information is material if its omission or misstatement could influence the economic decisions by users. Reliability Information must be free from material error and bias. Prudence Ensuring financial statements are neutral gains or losses neither overstated nor understated.

Comparability Comparability requires consistency. Similar transactions and other events must be done in a consistent way throughout an entity and over time.

Accountants

Public Practice
External Auditor Financial Advisor

Industry & Commerce

Public Sector

Academicians
Teacher Lecturer

Accountants Tax Officer Internal Auditor Account Officer Managerial Accountants Cost Accountant

Which of the following is not a process in accounting?

A B C D

Summarising Reporting Auditing / verifying Recording

What was introduced by Luca Pacioli in his book of The Summa? A B C D Double entry system Recording of financial events Financial statements Materiality concepts

Which of the following is best categorized as an internal user of accounting information? A B C D Tax officer Financial institution Sales manager Supplier of goods

Which of the following user need financial statement to evaluate an organisations ability to meet its financial obligation? A B C D Sales manager Supplier / creditor Employees Potential investors

What is the minimum number of owner allowed in a corporation? A B C D 2 persons 20 persons 50 persons Infinite number

What is the maximum number of owner/member allowed in a Sdn Bhd company? A B C D 2 persons 20 persons 50 persons Infinite number

A van was bought in January 1999 for RM45,000. Today, the market value of the van is RM3,000 while its carrying value is RM1,000. According to historical cost concept, what should be the cost to be shown in the account? A B C D RM45,000 RM3,000 RM1,000 None of the above

What is materiality in accounting?

A B C D

Amount that omitted from account Amount that may affect a decision by user Amount of profit from a company Amount that misstated in the account

To promote comparability of financial statements, accounts need to be prepared ____________ . A B C D at the end of each year free from bias and misstatement consistently by accountants and audited by external auditors

Prudence concept normally makes accountants to _____ .

A B C D

predict gain and account for it predict losses and make possible notes to the users predict gains and ignore possible losses record assets at costs