a.

Briefly explain any TWO (2) accounting concepts that Datuk Rizalman was supposed

to follow when dealing with his business.

Two Accounting concepts that Datuk Rizalman was supposed to follow as below.

1. Business Entity Concept.

This concept assumes that, for accounting purposes, the business enterprise and its owners are two
separate independent entities. Thus, the business and personal transactions of its owner are separate.
For example, when the owner invests money in the business, it is recorded as liability of the business
to the owner. Similarly, when the owner takes away from the business cash/goods for his/her personal
use, it is not treated as business expense. Thus, the accounting records are made in the books of
accounts from the point of view of the business unit and not the person owning the business. This
concept is the very basis of accounting.

So, for example, if the owner brings in additional capital into the business, we will treat this as a
liability on the balance sheet of the business. Besides, insurance premiums for the owner’s house
should be excluded from the expense of the business

2. Prudence / Conservatism Concept

Conservatism concept implies that entity must select those accounting methods (among available)
with least possible chances of overstating assets or income and understating liabilities or expenses of
the entity in the financial statements. It is also called prudence concept.

Because of accrual basis of accounting, expenses and revenues reported in financial statements by the
entity are mostly not paid or received yet. This gives the room to accountants and management to
manipulate the figures in their favour that can mislead other users of financial statements.

To make the financial statements reliable and presenting realistic and fairer view of the entity’s
operations, accounting frameworks uphold the concept of conservatism under which entity is required
to recognize losses that occurred and make provisions for expected losses or when probability of cash
outflow arises or give disclosure for losses that are less probable but not entirely remote. Whereas
revenues are recognized only after entity has received or is certain in receiving the benefit or cash
inflow.
b. Classify the assets of Datuk Rizalman’s business into Non-Current Assets and Current Assets.

Current assets are considered short-term assets because they generally are convertible to cash within a
firm's fiscal year and are the resources that a company needs to run its day-to-day operations and pay
its current expenses. Current assets are generally reported on the balance sheet at their current or
market price. Current assets may include items such as cash and cash equivalents, accounts
receivable, prepaid expenses. Inventory, marketable securities etc.

Noncurrent assets are a company’s long-term investments that have a useful life of more than one
year. Noncurrent assets cannot be converted to cash easily. They are required for the long-term needs
of a business and include things like land and heavy equipment. Noncurrent assets are reported on the
balance sheet at the price a company paid for them, which is adjusted for depreciation and
amortization and is subject to being re-evaluated whenever the market price decreases compared to
the book price.

Noncurrent assets may include items such as land, property, plant, and equipment (PP&E),
trademarks, long-term investments, and goodwill—when a company acquires another company

Based on table given, current assets and non-current assets of Datuk Rizalman business as below;

CURRENT ASSETS NON-CURRENT ASSETS

Deposit bank account Premises
Inventories Fixtures and fittings
Account receivable Motor Vehicle
Bank Office Equipment
Cash
c. Identify the amount of Non-current Assets and Current Assets as at 31 December 2018

Datuk Rizalman’s Balance Sheets as of 31 December 2018

Assets

Current Assets

Cash RM11,000.00
Inventories RM4,500.00
Account Receivable RM3,500.00
Cash at Bank RM20,500.00

TOTAL CURRENT ASSET RM39,500.00

Non-Current Assets

- Premises RM70,000.00
- Fixtures and fittings RM20,000.00
- Office equipment RM10,000.00
- Motor Vehicle RM15,000.00

TOTAL NON-CURRENT ASSET RM115,000.00

TOTAL ASSET RM154,500.00