1.

1 Accounting Cycle
1) What is accounting?
Accounting is a recording of financial transactions that happens
in the business organisation and non-profit organisation that
records in a systematic way for financial performance, financial
position, financial planning and financial analysis.
2) Bookkeeping and accounting
Bookkeeping is the process of accounts that includes compiling,
arranging, keeping, recording, and reporting accounting
records.
Accounting itself covers a wider range of activities that includes
collecting, arranging, keeping, recording, reporting, and also
analysing, interpret, planning, valuing, and summarizing
financial transactions.
3) Accounting cycle
Accounting cycle is the procedure of preparing accounting
records that starts from source document until closing of
accounts.
There are eight levels of preparation of accounting records for
an accounting period.

Business
Documents
First
Financial Notebook
Statement

Closure Accounting Ledger

Notes Cycle

Adjusted
Trial Trial
Balance Balance

Adjustments
4) Business Documents
Made up of sourced document and non-sourced document that
is systematically filed to make it easier for future reference like
invoice, receipts, credit/debit notes etc.
Written proof for all transactions
5) First Notebook
Books are used to record transactions. When the business
document is accepted and is issued, information such as date,
amount and details are recorded into the first notebook
Made up of general journal, special journal, cash book and
petty cash book (for retail).
6) Ledger
Notes from the first notebook are carried to ledger using double
entry system.
7) Trial Balance
Lists balance of all ledger accounts.
Final balance is listed in the predictive balance sheet to test the
accuracy of the double entry system. (Debit=Credit)
8) Adjustments
Transactions are adjusted on the date of adjustment in the
general journal and the ledger such as adjustment of income
and expenses, depreciation of assets, provision for doubtful
debts (help pay for customer’s debts), and missed up entries
Adjustments are done in the general journal and is moved to
the ledger to determine the newest balance for relative
accounts.
9) Adjusted Trial Balance
All balances are listed including accounts that are balanced
beforehand.
An adjusted trial balance is used to test the accuracy of the
double entry system in the ledger.
10) Closure Notes
Notes are written in the general journal and the ledger to
record the closure of all profit and spending accounts.
At this stage, income and expenses accounts are moved to
trade accounts and profit and loss statement (P&L).
11) Financial Statement (Mandatory in a company)
Statements are prepared to calculate the profit and loss of a
business for a fixed period of time and is used to look at the
financial position of the business (balance sheet) at a certain
date.
Normally it is prepared at the end of an accounting period.
(normally 1 month)

1.2 Sub-fields of Accounting

1) Financial accounting
Prepares accounting reports in the form of financial statement
that is used internally and externally (boss,employee v.s.
bankers)
2) Management accounting
Prepares accounting information for internal usage.
Their scope involves controlling, planning, and management of
output.
3) Auditing
Check the documents of a business and financial records to
check whether the accounting records are correct and
accurate.
Auditors have to make sure that financial statement that they
provide are following the accounting standards (MFRS-Malaysia
Financial Reporting Standards). Government auditors also
follow the code of ethics that is set by the National Auditing
Department.
4) Taxation
Planning taxation matters and prepare tax computation for the
company.
Tax advisors will advise about tax management for a business.
5) Four Auditing Giants (Big Four)
Big Four Other famous firms
Ernst & Young (E&Y) McGladrey
KPMG Grant Thornton
Deloitte
Price Water House Cooper
(PwC)

Financial accountant- Release financial reports

Auditor Tax Advisor
Auditors will thoroughly check Financial statements that
the report and an auditing report are audited is used for tax
will be released. assessment.

Financial reports that received Taxable income is counted

the status “true and fair and after counting all tax
unqualified” in an auditing report deductions that can be
is accurate and can be trusted determined in the financial
because it achieved all statement.
accounting standards.
6) Relationship between Financial accounting, Auditing and
Taxation
1.3 Accounting is a Profession
1) Professionals are people who are experts in a particular field
and shows commitment and deep interest towards it.
2) Accountants are professionals because accountants have
specialized skills to manage business funds, make reports and
provide advice to increase business performance.
3) There are different professions in accounts and the job scope
is very wide.
4) These are some of the accounting professions that you can
find in Malaysia.
a) Accountant
b) Auditors
c) Fund Manager
d) Financial Advisor
e) Chief Financial Officer
5) Accountants can act as leaders as an accountant also have
expertise in various job scopes. These includes:
a) Planning and strategic management
b) Implementation of policy
c) Improvement of policy
d) Budget and fund management
e) Problem solver
f) Consultant
g) Decision Maker
h) Counsellor and mentor (advisor)
i) Human Resource Development