DPA10183

BUSINESS
ACCOUNTING
CHAPTER 1
INTRODUCTION TO
ACCOUNTING
 COURSE LEARNING OUTCOME

CLO 1
Explain clearly the principles and practices in
accordance with the approved accounting standards to
generate the Financial Statements (C2, PLO 1)
 CHAPTER LEARNING OUTCOME

• Define Accounting & Bookkeeping

• Describe the users of accounting information
• Describe the roles of an accountant
• Discuss each type of accounting field
• Describe the approved accounting standards in Malaysia
• Describe the functions of regulatory bodies in Malysia
• Explain basic accounting concepts
ACCOUNTING AND BOOKKEEPING
• Definition
• The importance
• The differences
 PROCESS OF ACCOUNTING

RECORDING INTEPRETING

CLASSIFYING ANALYSING

SUMMARIZING REPORTING
 ACCOUNTING DEFINITION
WHAT?
BUSINESS ACTIVITIES into
RECORDING INTEPRETING Monetary Units

WHY?
ASSISTS users in decision
CLASSIFYING ANALYSING making

WHEN?
SUMMARIZING REPORTING Within stipulated
accounting period.
 BOOKKEEPING DEFINITION

RECORDING INTEPRETING WHAT?

Process of recording
business activities
CLASSIFYING ANALYSING
WHERE?
INTO books of accounts

SUMMARIZING REPORTING WHY?

Keeping business record
organized
 DIFFERENCES
ACCOUNTING BOOKKEEPING

Complete Accounting Process Bookkeeping only

Involve technical & advance Basic accounting understanding

accounting procedures

Performed by certified Non Accountants (training &

professionals accountants experience)

Responsible to give information Simple accounting tasks to

to various department (users) financial department.
ACCOUNTING INFORMATION USERS
• Internal Users
• External Users
 INTERNAL USERS

Middle/Top
Strategic
Level
Planning Dept
Management

Marketing Human
Department Resource Dept
 EXTERNAL USERS

Potential Government
Shareholders related bodies

Creditors

Analysts Public at large

ROLES OF ACCOUNTANT
• Accountant Profession
• Roles
 ACCOUNTING PROFESSION

PROFESSIONAL

PROVIDES
MONITORING RELIABLE
ACCOUNTING PROFESSION
FINANCIAL
PROCESS INFORMATION

ADVICE FINANCIAL
MANAGEMENT TASKS
 ACCOUNTANT ROLES

PREPARE & MONITOR CHECK CASH &

PREPARE ACCOUNTING ENTRIES BANKING
BUDGETING TRANSACTIONS
ROLES
UPDATE
PREPARE S&P STATUS OF
REPORTS MANAGE PAYMENT ACCRUED &
RECONCILITATION PREPAID
ACCOUNTING FIELD
• Financial Accounting
• Cost Accounting
• Management Accounting
• Auditing
• Taxation
 FINANCIAL ACCOUNTING

WHAT?
Keeps track of a
company's financial transactions
or financial statement such as an
WHY?
Prepare financial reports that provide information
about a firm's performance to external parties
such as investors, creditors, and tax authorities.
HOW?
Using standardized guidelines,
the transactions are recorded,
summarized, and presented in
a financial report
income statement or a balance
sheet.
 COST ACCOUNTING

HOW?
WHAT? Job costing, process costing,
Capture a company's total cost of standard costing, activity-
production by assessing the based costing, throughput
variable costs of each step of analysis, and direct costing.
production as well as fixed costs, such
WHY?
as a lease expense.
Purpose of budget preparation and
profitability analysis (USEFUL FOR
MANAGERS)
 MANAGEMENT ACCOUNTING
WHAT?
Provision of financial and non-
financial decision-making
information to managers.
HOW?
Margin analysis, Constraint Analysis,
Capital Budgeting, Inventory
valuation and product costing, trend
analysis & forecasting
WHY?
Used in short-term and long-term
decisions involving the financial health
of a company.
 AUDITING

HOW?
WHAT?
Internal
Performing procedures in order to External (CPA)
obtain audit evidence about the Inland Revenue Service
amounts and disclosures in the
financial statements.. WHY?
To ascertain the accuracy of financial
statements provided by the
organisation.
 TAXATION

HOW?
WHAT?
A structure of accounting methods
A structure of accounting methods focused on taxes rather than the
focused on taxes rather than the appearance of public financial
appearance of public financial statements
statements WHY?
To raise revenue for government
expenditures
ACCOUNTING STANDARDS IN MALAYSIA
• Malaysian Financial Reports Standard
(MFRS)
• Malaysia Public Entity Fincancial
Reports Standards (MPERS)
 MFRS

WHAT? WHO?
Common set of Malaysian Accounting Standards
principles, standards, and Board (MASB)
procedures that define the basis of Entities Other Than Private Entities
financial accounting policies and
practices WHY?
Ensure the financial statements from
multiple companies are comparable.
WHEN? Make Financial Statements credible and
1 JANUARY 2012 economic decision (accurate & consistent
information)
 MPERS

WHAT? WHO?
Common set of Malaysian Accounting Standards
principles, standards, and Board (MASB)
procedures that define the basis of
Private Entities (Company Act 2016)
financial accounting policies and
practices WHY?
Ensure the financial statements from
WHEN? multiple companies are comparable.
1 JANUARY 2016 Make Financial Statements credible and
economic decision (accurate & consistent
information)
 REGULATORY BODIES IN MALAYSIA
• Malaysian Institute of Accountants
(MIA)
• Malaysian Accounting Standards
Board(MASB)
• The Companies Commission of
Malaysia
• Inland Revenue Board (LHDN)
 MALAYSIAN INSTITUTE OF ACCOUNTANT

SECTION 6 ACCOUNTANTS ACT 1967

• To determine the qualifications of persons for admission as members;
• To provide for the training and education by the Institute or any other body, of persons
practising or intending to practice the profession of accountancy;
• To approve the MIA Qualifying Examination(QE) and to regulate and supervise the
conduct of that Examination;
• To regulate the practice of the profession of accountancy in Malaysia;
• To promote, in any manner it thinks fit, the interest of the profession of accountancy in
Malaysia;
• To render pecuniary or other assistance to members or their dependents as it thinks fit
with a view to protecting or promoting the welfare of members; and
• Generally to do such acts as it thinks fit for the purpose of achieving any of the
aforesaid objectives.
https://www.mia.org.my/
 MASB

• The MASB's primary role is to develop accounting and financial

reporting standards.
• Precludes the MASB or its staff from giving advice to any
individuals or corporations or individual cases nor to act as an
arbitrator regarding any issue.
• Resolution of matters concerning the application of the accounting
standards should be addressed and discussed with the respective
independent accountants, or auditors.
www.masb.org.my
 THE COMPANIES COMMISSION OF MALAYSIA

SECTION 17 ACT 614 COMPANIES COMMISSION OF MALAYSIA ACT 2001

• To ensure that the provisions of this Act and the laws specified in the First Schedule are
administered, enforced, given effect to, carried out and complied with;
• To act as agent of the Government and to provide services in administering, collecting and
enforcing payment of prescribed fees or any other charges under the laws specified in the
First Schedule;
• To regulate matters relating to corporations, companies and businesses in relation to the
laws specified in the First Schedule;
• To encourage and promote proper conduct amongst directors, secretaries, managers and
other officers of a corporation, and self-regulation by corporations, companies, businesses,
industry groups and professional bodies in the corporate sector in order to ensure that all
corporate and business activities are conducted in accordance with established norms of
good corporate governance;
www.ssm.com.my
 THE COMPANIES COMMISSION OF MALAYSIA

SECTION 17 ACT 614 COMPANIES COMMISSION OF MALAYSIA ACT 2001

• To enhance and promote the supply of corporate information under any laws
specified in the First Schedule and to create and develop a facility whereby any
corporate information received by, or filed or lodged with, the Commission may be
analysed and supplied to the public;
• To carry out research and commission studies on any matter relating to corporate
and business activities;
• To advise the Minister generally on matters relating to corporations, companies and
businesses in relation to the laws specified in the First Schedule; and
• To carry out all such activities and do all such things as are necessary or
advantageous and proper for the administration of the Commission, or for such
other purpose as may be directed by the Ministes. www.ssm.com.my
 THE COMPANIES COMMISSION OF MALAYSIA

Inland Revenue Board of Malaysia Act 1995

• To act as agent of the Government and to provide services in administering, assessing,
collecting and enforcing payment of income tax, petroleum income tax, real property
gains tax, estate duty, stamp duties and such other taxes as may be agreed between
the Government and the Board;
• To advise the Government on matters relating to taxation and to liaise with the
appropriate Ministries and statutory bodies on such matters;
• To participate in or outside Malaysia in respect of matters relating to taxation;
• To perform such other functions as are conferred on the Board by any other written
law;
• May act as a collection agent for and on behalf of any body for the recovery of loans
due for repayment to that body under any written law. www.hasil.gov.my
 BASIC ACCOUNTING CONCEPTS
• Accounting Principles
• Accounting Assumptions
• Accounting Concepts
 ACCOUNTING PRINCIPLES

HISTORICAL COST

CONCEPT OF
OBJECTIVITY MATCHING
ACCOUNTING PRINCIPLES
 ACCOUNTING PRINCIPLES

HISTORICAL COST

CONCEPT OF
OBJECTIVITY MATCHING
ACCOUNTING PRINCIPLES
 ACCOUNTING PRINCIPLES

HISTORICAL CONCEPT
• All ASSETS and LIABILITIES of a business – recorded at
their historical cost

• HISTORICAL COST – Cost when obtaining the

asset/liability

• Where to get HISTORICAL COST?

- ORIGINAL source document
 ACCOUNTING PRINCIPLES

HISTORICAL COST

CONCEPT OF
OBJECTIVITY MATCHING
ACCOUNTING PRINCIPLES
 ACCOUNTING PRINCIPLES

MATCHING CONCEPT
• EXPENSES incurred by a business be charged in the income
statement in the same ACCOUNTING PERIOD as REVENUE
related is EARNED.

• WHY?
- Ensure all aspects of business expenses recorded at the
same time as the business revenue is earned.
 ACCOUNTING PRINCIPLES

HISTORICAL COST

CONCEPT OF
OBJECTIVITY ACCOUNTING PRINCIPLES
MATCHING
 ACCOUNTING PRINCIPLES

OBJECTIVITY CONCEPT
• Requires a BUSINESS FINANCIAL RECORD to be prepared
based on VERIFIABLE evidence details obtained from
SOURCE DOCUMENTS related.

• WHY?
- AVOID entries based on personal view or perceptions as it is
INACCURATE & UNRELIABLE.
 ACCOUNTING ASSUMPTION

GOING CONSISTENCY
ACCRUAL
CONCERN
ACCOUNTING
ASSUMPTIONS
CONCEPT
MONEY PERIODICITY
MEASUREMENT
BUSINESS
ENTITY
 ACCOUNTING ASSUMPTION

GOING CONSISTENCY
ACCRUAL
CONCERN
ACCOUNTING
ASSUMPTIONS
CONCEPT
MONEY PERIODICITY
MEASUREMENT
BUSINESS
ENTITY
 ACCOUNTING ASSUMPTION

CONSISTENCY CONCEPT
• Requires a BUSINESS keep using the same specific
ACCOUNTING METHOD that has been used. (I.E
CASH/ACCRUAL?)

• AVOID changing method unless had to.

• WHY?
- ENSURE that the FINANCIAL STATEMENTS prepared in
multiple periods can be reliably compared.
 ACCOUNTING ASSUMPTION

GOING CONSISTENCY
ACCRUAL
CONCERN
ACCOUNTING
ASSUMPTIONS
CONCEPT
MONEY PERIODICITY
MEASUREMENT
BUSINESS
ENTITY
 ACCOUNTING ASSUMPTION

ACCRUAL CONCEPT
• Requires a to RECOGNIZE REVENUES based on the cash received
into business.

• Also RECOGNIZE EXPENSES when issued a payment

• WHY?
- Revenues recognized when earned – Expenses recognized when
assets consume
 ACCOUNTING ASSUMPTION

GOING CONSISTENCY
ACCRUAL
CONCERN
ACCOUNTING
ASSUMPTIONS
CONCEPT
MONEY PERIODICITY
MEASUREMENT
BUSINESS
ENTITY
 ACCOUNTING ASSUMPTION

GOING CONCERN CONCEPT

• Assumed that accounting is prepares as BUSINESS WILL
CONTINUE to OPERATE FOR AN INDEFINITE TIME.

• It (accounting) should be done carefully to avoid risking

business operational activities.

• WHY?
- Enable business to realize its assets and obligations in
normal course.
 ACCOUNTING ASSUMPTION

GOING CONSISTENCY
ACCRUAL
CONCERN
ACCOUNTING
ASSUMPTIONS
CONCEPT
MONEY PERIODICITY
MEASUREMENT
BUSINESS
ENTITY
 ACCOUNTING ASSUMPTION

MONEY MEASUREMENT CONCEPT

• Only transactions capable of being MEASURED in
MONETARY TERMS are RECOGNIZED in FINANCIAL
STATEMENTS.

• IF cannot be MEASURED it should not be recorded.

• i.e employer skill level, employer working conditions,

quality of customer support
 ACCOUNTING ASSUMPTION

GOING CONSISTENCY
ACCRUAL
CONCERN
ACCOUNTING
ASSUMPTIONS
CONCEPT
MONEY PERIODICITY
MEASUREMENT
BUSINESS
ENTITY
 BUSINESS ENTITY CONCEPT
• PERSONAL ACTIVITIES of BUSINESS OWNER have
NOTHING TO DO with business (cant be recorded
as business activity)

• BUSINESS ENTITY treated as a unit on its own and

separate from the financial information of the
owner.
 ACCOUNTING ASSUMPTION

GOING CONSISTENCY
ACCRUAL
CONCERN
ACCOUNTING
ASSUMPTIONS
CONCEPT
MONEY PERIODICITY
MEASUREMENT
BUSINESS
ENTITY
 ACCOUNTING ASSUMPTION

PERIODICITY CONCEPT
• FINANCIAL REPORT can be divided into specific
ACCOUNTING TIME PERIODS.

• Periodical basis – monthly, quarterly, semi annually,

annually

• Assist the accounting user in making relevant financial

related decisions.
 ACCOUNTING CONSTRAINT

ACCOUNTING
PRUDENCE CONSTRAINTS MATERIALITY
CONCEPTS
 ACCOUNTING CONSTRAINT

ACCOUNTING
PRUDENCE CONSTRAINTS MATERIALITY
CONCEPTS
 ACCOUNTING CONSTRAINT

PRUDENCE CONCEPT
• Accountants exercise cautions in adoption of ACCOUNTING
POLICIES
• To AVOID overstating assets/revenue or understating
liabilities/expenses
• SHOULD NOT recognize ASSET/REVENUE higher than the
amount which is expected to be recovered from its sale or
use
• LIABILITY/EXPENSES should not be prepaid below the
amount that is likely to be paid in the future
 ACCOUNTING CONSTRAINT

ACCOUNTING
PRUDENCE CONSTRAINTS MATERIALITY
CONCEPTS
 ACCOUNTING CONSTRAINT

MATERIALITY CONCEPT
• SIGNIFICANCE of transactions, balance or errors
contained in the FINANCIAL INFORMATION.
• May DIFFER to the business size or circumstances
• Record transactions that can alter the decisions
made by users of a business financial statement.
THANK YOU
03-32806467 norman@psis.edu.my 0193848783

MR. NORMAN BIN ZAMRI

JABATAN PERDAGANGAN
POLITEKNIK SULTAN IDRIS SHAH