Introduction to Acctg
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Transcript of Introduction to Acctg
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Ahmad Hafiz bin Zainal AbidinMAcc (UiTM), BAcc (Hons) UiTM, Dip Ed. (MPPP)
Department of Accounting & Quantitative
Kolej Profesional MARA Bandar Melaka
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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
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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.
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Business Accounting 1
11th Edition
Frank Wood & Alan Sangster
Prentice Hall
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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
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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).
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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
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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.
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Identifying
Classifying
RecordingSummarising
Reporting
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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
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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.
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Users of financial statements may be categorized into two
groups:
Internal
Users
External
Users
Directors
Managers
Employees
Creditors
Investors
Unions
Publics
Government
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These users need financial information to
make decision.. For instance..
to make new investments
to cut down expenditures
Internal Users
Managers
Directors
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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
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Sole Trading
Partnership
Company / Corporation
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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
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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)
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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.
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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.
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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.
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Comparability
Comparability requires consistency. Similar transactions and
other events must be done in a consistent way throughout an
entity and over time.
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Accountants
Public PracticeIndustry &Commerce
Public Sector Academicians
External Auditor
Financial Advisor
Accountants
Internal Auditor
Managerial Accountants
Cost Accountant
Tax Officer
Account Officer
Teacher
Lecturer
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Which of the following is not a process in accounting?
Summarising
Reporting
Auditing / verifying
Recording
A
B
C
D
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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
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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
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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
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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
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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
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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
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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
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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
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