Introduction to Acctg

download Introduction to Acctg

of 35

Transcript of Introduction to Acctg

  • 8/2/2019 Introduction to Acctg

    1/35

    Ahmad Hafiz bin Zainal AbidinMAcc (UiTM), BAcc (Hons) UiTM, Dip Ed. (MPPP)

    [email protected]

    Department of Accounting & Quantitative

    Kolej Profesional MARA Bandar Melaka

  • 8/2/2019 Introduction to Acctg

    2/35

    Week 1 Introduction to Accounting

    Week 2&3 Accounting Equation

    Week 4&5 The Recording Process

    Week 6-10 AdjustmentsWeek 11-13 Financial Statements (after adjustments)

    Week 14 Cash Control

    Week 15 Revision week

  • 8/2/2019 Introduction to Acctg

    3/35

    4 Quizzes 20% (5% x 4)

    1 Test 10%

    Assignment 10%

    Final Exam 60%Total 100%

    Students must complete all assessments and attain

    at least 40% to pass.

  • 8/2/2019 Introduction to Acctg

    4/35

    Business Accounting 1

    11th Edition

    Frank Wood & Alan Sangster

    Prentice Hall

  • 8/2/2019 Introduction to Acctg

    5/35

    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

  • 8/2/2019 Introduction to Acctg

    6/35

    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).

  • 8/2/2019 Introduction to Acctg

    7/35

    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 financialposition were developed with thepurpose to provide relevant

    information about the operating,financing and investing activities of anenterprise and the effects of thoseactivities on cash resources

  • 8/2/2019 Introduction to Acctg

    8/35

    http://upload.wikimedia.org/wikipedia/commons/7/76/Wachovia_National_Bank_1906_statement.jpg
  • 8/2/2019 Introduction to Acctg

    9/35

    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.

  • 8/2/2019 Introduction to Acctg

    10/35

    Identifying

    Classifying

    RecordingSummarising

    Reporting

  • 8/2/2019 Introduction to Acctg

    11/35

    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

  • 8/2/2019 Introduction to Acctg

    12/35

    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 afinancial check on the things they do.

  • 8/2/2019 Introduction to Acctg

    13/35

    Users of financial statements may be categorized into two

    groups:

    Internal

    Users

    External

    Users

    Directors

    Managers

    Employees

    Creditors

    Investors

    Unions

    Publics

    Government

  • 8/2/2019 Introduction to Acctg

    14/35

    These users need financial information to

    make decision.. For instance..

    to make new investments

    to cut down expenditures

    Internal Users

    Managers

    Directors

  • 8/2/2019 Introduction to Acctg

    15/35

    These users need financial information to

    assess the value and profitability

    performance of the business.

    External Users

    Investors

    Bankers need financial information to

    evaluate the ability of the business to

    meet the financial obligations.

    Financial

    Institutions

    To assess tax chargeable to a business

    entity.

    Tax Authority

  • 8/2/2019 Introduction to Acctg

    16/35

    Sole Trading

    Partnership

    Company / Corporation

  • 8/2/2019 Introduction to Acctg

    17/35

    Sole Trading Partnership CompanyNo. of owner(s) 1 2 20 2 50 (Sdn Bhd)

    2 (Berhad)

    Capital investment Capital Capital Share Capital

    Distribution of profit Drawings /wholly for the

    owner

    Profit sharing(based on

    agreement)

    Dividends (% onshare amount)

    Liability status Unlimited Unlimited Limited

    Legal entity Not separated

    (owner andbusiness entity

    are the same)

    Not separated Separated (can sue

    or be sued, ANDtransfer of

    ownerships)

    Business acquisition /

    combination

    Not possible Not possible Through merger or

    takeover

  • 8/2/2019 Introduction to Acctg

    18/35

    Historical cost concept

    Assets are shown at cost price.

    Money measurement conceptAccounting is concern about facts that can be measured

    monetarily (and most people agreed with the monetary value)

    Business entity conceptthe affairs of a business are to be treated as being quite

    separate from the non-business activities of its owner(s)

  • 8/2/2019 Introduction to Acctg

    19/35

    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.

  • 8/2/2019 Introduction to Acctg

    20/35

    Going concern

    It is assumed that the business will continue to operate for atleast twelve (12) months after the end of the reportingperiod.

    Understandability

    Information in financial statements should be readilyunderstandable by users.

    Relevance

    Information in financial statements must be relevant to thedecision-making needs of users.

  • 8/2/2019 Introduction to Acctg

    21/35

    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.

    PrudenceEnsuring financial statements are neutral gains or losses

    neither overstated nor understated.

  • 8/2/2019 Introduction to Acctg

    22/35

    Comparability

    Comparability requires consistency. Similar transactions and

    other events must be done in a consistent way throughout an

    entity and over time.

  • 8/2/2019 Introduction to Acctg

    23/35

    Accountants

    Public PracticeIndustry &Commerce

    Public Sector Academicians

    External Auditor

    Financial Advisor

    Accountants

    Internal Auditor

    Managerial Accountants

    Cost Accountant

    Tax Officer

    Account Officer

    Teacher

    Lecturer

  • 8/2/2019 Introduction to Acctg

    24/35

  • 8/2/2019 Introduction to Acctg

    25/35

    Which of the following is not a process in accounting?

    Summarising

    Reporting

    Auditing / verifying

    Recording

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    26/35

    What was introduced by Luca Pacioli in his book of The

    Summa?

    Double entry system

    Recording of financial events

    Financial statements

    Materiality concepts

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    27/35

    Which of the following is best categorized as an internal

    user of accounting information?

    Tax officer

    Financial institution

    Sales manager

    Supplier of goods

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    28/35

    Which of the following user need financial statement to

    evaluate an organisationsability to meet its financial

    obligation?

    Sales manager

    Supplier / creditor

    Employees

    Potential investors

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    29/35

  • 8/2/2019 Introduction to Acctg

    30/35

    What is the maximum number of owner/member allowed

    in a Sdn Bhd company?

    2 persons

    20 persons

    50 persons

    Infinite number

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    31/35

    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?

    RM45,000

    RM3,000

    RM1,000

    None of the above

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    32/35

    What is materiality in accounting?

    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

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    33/35

    To promote comparability of financial statements,

    accounts need to be prepared ____________ .

    at the end of each year

    free from bias and misstatement

    consistently

    by accountants and audited by external auditors

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    34/35

    Prudence concept normally makes accountants to _____ .

    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

    A

    B

    C

    D

  • 8/2/2019 Introduction to Acctg

    35/35