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 Forms of business entities

1.6 Types of business activities

1.7 Components of financial statements

1.8 Professional accounting bodies in Malaysia

1.9 Potential career in Accounting

1.1 Definition of Accounting

Process of:
1) Identifying
2) Recording
3) Classifying
4) Summarizing
5) Communicating
6) Interpreting

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

1.2 Users of Account Information

Internal Users
Directors of companies
Managers
Internal Auditors

External Users
Investors
Creditors
Government Agencies

Internal Users
Management Making routine decisions and controlling
operations.
Internal Auditor Confirmed the management system and
the financial system of a company
comply with accounting standards.
Workers Identify and evaluate business
performance for salary and bonus.

External Users
Investors To know the company’s profitability and the amount of
dividends paid out to shareholders.
To decide whether to buy more shares or dispose the shares
they have.
Creditors Assess the ability of the business to repay the loan.
(Suppliers & Bankers)
Lembaga Hasil Dalam To determine the amount of tax to be collected by them.
Negeri LHDN
1.3 Differences Between Bookkeeping and Accounting

Bookkeeping Accounting
Bookkeeping is a Accounting is an information
part of accounting. system.

Process of recording, in Process of recording,

Definition chronological order, the daily classifying, summarizing,
transactions of a business reporting, analyzing and
entity. interpreting the financial
condition and performance of
a business.

The process involved is Accounting is more extensive

Scope preliminary work in the and thorough work beyond
accounting. bookkeeping.

Person in charge Accounting Clerk Accountant

1.4 Branches of Accounting

Financial Accounting Managerial Accounting

Financial accounting is the field of accounting Managerial accounting provides economic
that provides economic and financial for and financial for internal users.It involves in
external users. It involves recording and activities such as cost
categorizing transactions for business accounting,budgeting,accounting information
system

Cost Accounting

Is considered a type of managerial accounting. It involves in finding cost of

producing specific products

Auditing

An audit is an “independent examination of financial information of any entity,

whether profit oriented or not, irrespective of its size or legal form when such an
examination is conducted with a view
Taxation

The main purpose of tax accounting is to impose tax against taxable income or
net earnings of the business

Public Sector Accounting

Is an accounting method applied to non-profit pursuing entities in the public

sector-including central and local governments,and quasi-governmental special
corporations - for which the size of profits does not provide an effective
measurement for evaluating performance.

1.5 Forms of Business Entities

Sole Proprietorship
Partnership
Company

Differences Sole Proprietorship Partnership Company

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

1.6 Types of Business Activities

Services
Manufacturing
Merchandising

Services Manufacturing Merchandising

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

(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.

Statement of Comprehensive Income for Service Companies.

Syarikat Dobi Cuci Berseri

Statement of Comprehensive Income

For the year ended 31st December 2019 Revenues :

Laundry fees RM 140,000

(-) Expenses:
Rental expenses RM (40,000)
Utilities expenses RM (20,000)
RM (60,000)
Net profit RM 80,000

Statement of Comprehensive Income for Merchandise Companies.

Rahayu Baju Kurung Enterprise

Statement of Comprehensive Income

For the year ended 31 December 2019

Sales RM 100,000
(-) Cost of good sold RM (60,000)
Gross profit RM 40,000
(-) Operating expenses :
Depreciation expenses RM 3,000
Salaries expenses RM 10,000 RM(13,000)
Net Profit RM 27,000
(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.

A Statement Of Changes In Equity

Rahayu Baju Kurung Enterprise

Statement of Changes in Equity

For the year ended 31 December 2019

Opening Capital (1 Jan. 2019) RM 40,000

Net Profit RM 27,000
(-) Drawings RM (10,000)
Closing Capital RM 57,000

(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

A Statement of Financial Position

Rahayu Baju Kurung

A Statement of Financial Position as at 31 December 2019

RM RM RM
ASSETS :
Non current assets :
Motor Vehicle 64,600
(-) Accumulated depreciation (3,000) 61,600
Current assets :
Inventory 6,200
TOTAL ASSETS 67,800
EQUITY AND LIABILITIES
Equity
Opening capital 40,000
+ Net profit 27,000
- Drawings (10,000)
Closing capital 57,000
Non current liabilities
Long term borrowings 5,000
Current liabilities :
Account Payables 5,800
Total liabilities 10,800
TOTAL EQUITY AND LIABILITIES 67,800

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 organization according to three main activities
which are operating, investing and financing.

Rahayu Baju Kurung Enterprise

Statement of Cash Flows for the year ended 31 December 2019

Cash flow from operating activities

RM RM

Cash receipts from customers 25,000

Cash payment to suppliers (8,000)
Cash payment for expenses (5,000)
Net cash flow from operating activities : 12,000
Cash flow from investing activities
Purchase of land and building (13,000)
Net cash flow used for investing activities (13,000)
Cash flow from financing activities
Owner investment 6,000
Drawings (3,000)
Net cash flow from financing activities 3,000
Net cash inflow 2,000
Add opening cash balance - 1 Jan 2019 500
Closing cash – 31 Dec 2019 2,500

1.8 Professional Accounting Bodies in Malaysia

Malaysian Accounting Standards Board (MASB)

Malaysian Institute of Accountants (MIA)
Malaysian Institute of Certified Public Accountants (MICPA)
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.

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.

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.

1.9 Potential career in accounting

In Malaysia, under the Accounting Act 1967,those who register with MIA are known as
Chartered Accountants. To be called a Chartered Accountant they must have:
(i) An accounting degree from any institution recognized by the Malaysia Institute of
Accountant(MIA)’
(ii) 3 years of working experience in accounting, or
(iii) Becoming a full member of recognized professional body of the MIA,or pass the
eligibility exam conducted by MIA.
Potential Career for a Chartered Accountants in a Public and Private Sector:

(1) Auditors – The duty of an auditors is to examine and to evaluate the financial
statements to determine and ensure that the financial statements provide a true and
fair view.
(2) Tax Consultant – A tax consultant will assist individuals as well as businesses for tax
preparation and planning. They need to make sure that it is in line with the
requirements of the tax laws.
(3) Management Advisory Services – This field involves the process of designing
computerized accounting information systems and planning more efficient business
finance.

Others
(i) Accounts Assistant
(ii) Accounts Clerk
(iii) Forensic Accounting