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Business Environment
Chapter 1
BBCA 1033 – Introduction to
Accounting
Lecturer : Pn Hazlina Hussein
Contact : 016.238.4246
Email : hhazlina66@gmail.com /pt.hazlina@city.edu.my
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Accounting...
RM
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
What is accounting?
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
What are the objectives of
accounting?
Is the business making a profit or a loss?
What is the business worth?
What is a transaction worth?
How much cash is in the business?
How wealthy is the business?
How much is the business owed?
How much does the business owe?
Keeping a financial check on activities.
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Users of Accounting Information
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Fields of Accounting
Financial Accounting
Management Accounting
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Fields of Accounting
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Standards of
Professional Conduct
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Objective 2
Apply accounting
concepts and principles
to business situations.
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Generally Accepted
Accounting Principles
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Malaysian Accounting
Standards
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Objective 3
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The Accounting Equation
Financial accounting is based upon the accounting equation.
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
The Basic Accounting
Equation
Balance Sheet
Assets Liabilities and Owners’ Equity
Cash 5,000 Liabilities
Accounts receivable 7,000 Accounts payable 8,000
Inventory 10,000 Notes payable 2,000
Equipment 7,000 Total liabilities 10,000
Owners’ equity 19,000
Total assets 29,000 Total liabilities and
owners’ equity 29,000
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Owner’s Equity
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Transactions that Affect
Owner’s Equity
Owner’s Equity
Revenues Expenses
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Revenues
RM
– rent received
– interest received
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Expenses
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Objective 4
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Accounting for
Business Transactions
What is a transaction?
It is any event that both affects the financial position
of the business and can be reliably recorded.
It is ‘money’ into or out of the business.
Transaction analysis is the central component of the
financial accounting process.
Remember that every transaction must keep the
accounting equation in balance
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A transaction may do one of
several things:
It may increase both the asset side and the liabilities
and owners' equity side.
It may decrease both the asset side and the liabilities
and owners' equity side.
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Assets Liabilities Capital
a Pay creditor RM60 cash
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Assets Liabilities Capital
a Bought a van on credit RM 8700
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Transaction Analysis
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Transaction Analysis
B a nk Lo a n
ASSETS = LIABILITIES + OWNERS’ EQUITY
Cash Notes
+$20,000 Payable
+$20,000
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Transaction Analysis
Rent
ASSETS = LIABILITIES + OWNERS’ EQUITY
Cash
–$12,000
Prepaid
rent
+$12,000
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Transaction Analysis
Inventory
ASSETS = LIABILITIES + OWNERS’ EQUITY
Inventory Accounts
+$30,000 Payable
+$30,000
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Transaction Analysis
Equipment
ASSETS = LIABILITIES + OWNERS’ EQUITY
Cash
–$25,000
Equipment
+$25,000
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Transaction Analysis
ASSETS
Cash Prepaid Rent Inventory Equipment
+50,000
+20,000
–12,000 +12,000
+30,000
–25,000 +25,000
33,000 12,000 30,000 25,000
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Transaction Analysis
+30,000
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Transaction Analysis
Balance Sheet
Assets Liabilities and Owners’ Equity
Cash 33,000 Liabilities
Accounts receivable 12,000 Accounts payable 30,000
Inventory 30,000 Notes payable 20,000
Equipment 25,000 Total liabilities 50,000
H.Jacobs, capital 50,000
Total assets 100,000 Total liabilities and
owners’ equity 100,000
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Accounting for
Business Transactions Let’s Do It
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Accounting for
Business Transactions
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Accounting for
Business Transactions
Owner’s
Assets = Liabilities + Equity
1) Cash + RM30,000 + RM30,000
2) Cash – 20,000
Land + 20,000
3) Supplies + 500 + 500
4) Cash + 5,500 + 5,500
5) Receivable + 3,000 + 3,000
6) Cash – 3,100 – 3,100
7) Cash – 300 – 300
Totals + RM35,600 + 200 + RM35,400
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Accounting for
Business Transactions
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Accounting for
Business Transactions
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Objective 5
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Financial Statements...
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Financial Statements
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Objective 6
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Relationships Among the Statements:
Statement of Financial Performance
Revenue:
Fees earned $8,500
Expenses:
Salary expense $1,200
Electricity and phone expense 400
Equipment rental expense 400
Office rent expense 1,100
3,100
Net profit $5,400
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
Relationships Among the Statements:
Statement of Owner’s Equity
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Relationships Among the Statements:
Statement of Financial Position
Assets Liabilities
Cash $ 20,000 Accounts payable $ 200
Accounts receivable 2,000 Owner’s Equity
Supplies 500 P. Lee, capital 33,300
Land 11,000
Total liabilities and
Total assets $ 33,500 owner’s equity $33,500
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Relationships Among the Statements:
Statement Of Cash Flows
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Relationships Among the Statements:
Statement Of Cash Flows
Cash Flows from Financing Activities:
Beginning Balance 0
Investment by Owner $30,000
Drawings 2,100
Net Cash Flows from Financing Activities $27,900
Net Increase in cash $20,000
Cash at Beginning of Year 0
Cash at End of the Year $20,000
Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia
End of
Chapter 1
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