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WELCOME to
BBM205/05 Business Accounting 1
General Introduction of the course
Importance of meeting the Objectives set for
each unit
Tutorial Schedule and Time spent for study
Distribution of Marks for TMAs and Final
Exam
Course Materials (Course Guide, Unit 1-5,
Textbook)


Overview of BBM205/05
The McGraw-Hill Companies, I nc., 2007
McGraw-Hill/I rwin
Unit 1
Accounting in Business

Objectives
Types of Business
Forms of Organisation
Activities in Organisation
Financing activities
Investing activities
Operating activities
1.1 The Importance of Accounting
Users of Accounting Information
External Users
Lenders
Shareholders
Governments
Consumer Groups
External Auditors
Customers
Internal Users
Managers
Officers/Directors
Internal Auditors
Sales Staff
Budget Officers
Controllers
Users of Accounting Information
External Users
Financial accounting provides
external users with financial
statements.
Internal Users
Managerial accounting provides
information needs for internal
decision makers.
Opportunities in Accounting
Financial
Preparation
Analysis
Auditing
Regulatory
Consulting
Planning
Criminal
investigation
Managerial
General accounting
Cost accounting
Budgeting
Internal auditing
Consulting
Controller
Treasurer
Strategy
Taxation
Preparation
Planning
Regulatory
Investigations
Consulting
Enforcement
Legal services
Estate plans
Accounting-
related
Lenders
Consultants
Analysts
Traders
Directors
Underwriters
Planners
Appraisers
FBI investigators
Market researchers
Systems designers
Merger services
Business valuation
Human services
Litigation support
Entrepreneurs
1.2 Fundamentals of Accounting
Financial accounting practice is governed by
concepts and rules known as accounting principles
Accounting Principles
Relevant
Information
Affects the decision of
its users.
Reliable Information Is trusted by
users.
Comparable
Information
Is helpful in contrasting
organizations.
Principles of Accounting
Now Future
Going-Concern Principle
Reflects assumption that the
business will continue
operating instead of being
closed or sold.
Cost Principle
Accounting information is
based on actual cost.
Objectivity Principle
Accounting information is
supported by independent,
unbiased evidence.
Revenue Recognition Principle
1. Recognize revenue when it is
earned.
2. Proceeds need not be in cash.
3. Measure revenue by cash
received plus cash value of items
received.
Monetary Unit Principle
Express transactions and events in
monetary, or money, units.
Business Entity Principle
A business is accounted for
separately from other business
entities, including its owner.
Principles of Accounting
Accounting Equation
Land
Equipment
Buildings
Cash
Vehicles
Store
Supplies
Notes
Receivable
Accounts
Receivable
Resources
owned or
controlled
by a
company
Assets
Taxes
Payable
Wages
Payable
Notes
Payable
Accounts
Payable
Creditors
claims on
assets
Liabilities
CAPITAL
Owner
Investments
Equity
Liabilities Equity Assets
= +
Expanded Accounting Equation
Revenues Expenses
Owner
Capital
Owner
Withdrawals
_
+
_
Owner's Equity
Liabilities Equity Assets
= +
Transaction Analysis Equation
The accounting equation MUST remain in
balance after each transaction.
Liabilities Equity Assets
= +
Transaction Analysis


The accounts involved are:
(1) Cash (asset)
(2) Owner Capital (equity)
Ahmad invests RM20,000 cash to start
the business.
Transaction Analysis
Assets = Liabilities + Equity
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital
20,000.00 20,000.00
20,000.00 0.00 0.00 0.00 0.00 20,000.00
20,000.00 = 20,000.00
Ahmad invests RM 20,000 cash to start
the business.


The accounts involved are:
(1) Cash (asset)
(2) Supplies (asset)
Transaction Analysis
Purchased supplies paying RM1,000
cash.
Transaction Analysis
Purchased supplies paying RM1,000 cash.
Assets = Liabilities + Equity
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital
(1) 20,000.00 20,000.00
(2) -1,000.00 1,000.00
19,000.00 1,000.00 0.00 0.00 0.00 20,000.00
20,000.00 = 20,000.00


The accounts involved are:
(1) Cash (asset)
(2) Equipment (asset)
Transaction Analysis
Purchased equipment for RM15,000
cash.
Transaction Analysis
Assets = Liabilities + Equity
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital
(1) 20,000.00 20,000.00
(2) -1,000.00 1,000.00
(3) -15,000.00 15,000.00
4,000.00 1,000.00 15,000.00 0.00 0.00 20,000.00
20,000.00 = 20,000.00
Purchased equipment for RM15,000
cash.


The accounts involved are:
(1) Supplies (asset)
(2) Equipment (asset)
(3) Accounts Payable (liability)
Transaction Analysis
Purchased Supplies of RM200 and
Equipment of RM1,000 on account.
Transaction Analysis
Assets = Liabilities + Equity
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital
(1) 20,000.00 20,000.00
(2) -1,000.00 1,000.00
(3) -15,000.00 15,000.00
(4) 200.00 1,000.00 1,200.00
4,000.00 1,200.00 16,000.00 1,200.00 0.00 20,000.00
21,200.00 = 21,200.00
Purchased Supplies of RM200 and
Equipment of RM1,000 on account.
Transaction Analysis


The accounts involved are:
(1) Cash (asset)
(2) Notes payable (liability)
Borrowed RM4,000 from 1st Malaysian
Bank.
Transaction Analysis
Assets = Liabilities + Equity
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital
(1) 20,000.00 20,000.00
(2) -1,000.00 1,000.00
(3) -15,000.00 15,000.00
(4) 200.00 1,000.00 1,200.00
(5) 4,000.00 4,000.00
8,000.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00
25,200.00 = 25,200.00
Borrowed RM4,000 from 1st Malaysian
Bank.
Assets = Liabilities + Equity
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital
Bal. 8,000.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00
8,000.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00
25,200.00 = 25,200.00
Transaction Analysis
The balances so far appear below. Note that the
Balance Sheet Equation is still in balance.
Transaction Analysis
Now, lets look at transactions
involving revenue, expenses and
withdrawals.




The accounts involved are:
(1) Cash (asset)
(2) Revenues (equity)
Transaction Analysis
Provided consulting services receiving
RM3,000 cash.
Assets = Liabilities +
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital Revenue
Bal. 8,000.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00
(6) 3,000.00 3,000.00
11,000.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00 3,000.00
28,200.00 = 28,200.00
Equity
Transaction Analysis
Provided consulting services receiving
RM3,000 cash.


The accounts involved are:
(1) Cash (asset)
(2) Salaries expense (equity)
Transaction Analysis
Paid salaries of RM800 to employees.
Remember that the balance in the salaries
expense account actually increases.
But, equity decreases because expenses
reduce equity.
Transaction Analysis
Assets = Liabilities +
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital Revenue Expenses
Bal. 8,000.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00
(6) 3,000.00 3,000.00
(7) -800.00 -800.00
10,200.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00 3,000.00 -800.00
27,400.00 = 27,400.00
Equity
Remember that expenses decrease equity.
Paid salaries of RM800 to employees.


The accounts involved are:
(1) Cash (asset)
(2) Withdrawals (equity)
Transaction Analysis
A withdrawal of RM500 is made by the
owner.
Remember that the withdrawal account
actually increases.
But, total equity decreases because the
withdrawal reduces equity.
Transaction Analysis
Assets = Liabilities +
Cash Supplies Equipment
Accounts
Payable
Notes
Payable
Owner
Capital
Owner
Withdrawals Revenue Expenses
Bal. 8,000.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00
(6) 3,000.00 3,000.00
(7) -800.00 -800.00
(8) -500.00 -500.00
9,700.00 1,200.00 16,000.00 1,200.00 4,000.00 20,000.00 -500.00 3,000.00 -800.00
26,900.00 = 26,900.00
Equity
Remember that withdrawals decrease equity.
A withdrawal of RM500 is made by the
owner.
Financial Statements
1. Income Statement
2. Statement of Changes in Equity
3. Balance Sheet
4. Cash Flow Statement
5. Notes to the Financial Statements
Financial Statement Relationships
Lets prepare the Financial Statements
reflecting the transactions we have
recorded for Ahmad Company.
Net income is the
difference
between
Revenues and
Expenses.
RM
Revenues:
Consulting revenue 3,000.00
Expenses:
Salaries expense 800.00
Net income 2,200.00
Ahmad Company
Income Statement
For Month Ended December 31, 2007
The income statement describes a
companys revenues and expenses along
with the resulting net income or loss over a
period of time due to earnings activities.
Income Statement
The net income of
RM2,200 increases
Owner's Equity by
RM2,200.

RM
Revenues:
Consulting revenue 3,000.00
Expenses:
Salaries expense 800.00
Net income 2,200.00
Ahmad Company
Income Statement
For Month Ended December 31, 2007
Statement of Changes in Equity
Ahmad Company
Statement of Owner's Equity
For Month Ended December 31, 2007
Capital, December 1, 2007 -
Plus: Investments by Owner 20,000
Net Income 2,200 22,200
22,200
Less: Withdrawals by owner 500
Capital, December 31, 2007 21,700
Cash 9,700.00 Accounts payable 1,200.00
Supplies 1,200.00 Notes payable 4,000.00
Equipment 16,000.00 Total liabilities 5,200.00
Owner Capital 21,700.00
Total assets 26,900.00
Total liabilities and equity
26,900.00
Assets Liabilities & Equity
Ahmad Company
Balance Sheet
December 31, 2007
The Balance Sheet describes
a companys financial position
at a point in time.
Balance Sheet
Cash flows from operating activities:
Cash received from clients 3,000.00
Purchase of supplies -1,000.00
Cash paid to employees -800.00
Net cash provided by operating activities 1,200.00
Cash flows from investing activities:
Purchase of equipment -15,000.00
Net cash used in investing activities -15,000.00
Cash flows from financing activities:
Investment by owner 20,000.00
Borrowed at bank 4,000.00
Withdrawal by owner -500.00
Net cash provided by financing activities 23,500.00
Net increase in cash 9,700.00
Cash balance, December 1, 2007 0.00
Cash balance, December 31, 2007 9,700.00
Statement of Cash Flows
For Month Ended December 31, 2007
Ahmad Company
Statement of Cash Flows
Beliefs that
distinguish
right from
wrong
Accepted
standards of
good and bad
behavior
Ethics
EthicsA Key Concept
1.3 Ethics and Social Responsibility
Identify
ethical concerns
Analyze
options
Make ethical
decision
Use personal
ethics to
recognize ethical
concern.
Consider all good
and bad
consequences.
Choose best
option after
weighing all
consequences.
Guidelines for Ethical Decisions
Social Responsibility
Social responsibility is the concern for
the impact of actions on society.
Socially responsible accounting has
also grown in importance to the point
where an increasing number of
companies are including socially
relevant information when they publish
their financial statements.
1.4 Accounting Framework in Malaysia
Financial Reporting Foundation (FRF)
Malaysian Accounting Standards Board
(MASB)
Malaysian Accounting Standards Board
(MASB) cont.
Malaysian Institute of Accountants
(MIA)
Activities and Self-tests
Unit Practice Exercises



Practice makes perfect!
Tutorial Discussions
Preparing for TMA 1
Please download TMA 1 from
WawasanLearn, under the folder
Tutor-marked Assignments.
Students are welcomed to post any
questions and conduct discussions in
the e-forums in WawasanLearn.
Tutor to brief students on TMA 1
during Tutorial Session.

Outline on What to Prepare
for Tutorial 2
Unit 2: The Accounting Cycle

2.1 Analysing and Recording Process
2.2 Adjusting Accounts and Preparing
Financial Statements
2.3 The Accounting Cycle



Due in Tutorial 2.

Please attach the T-MA form together
with your assignment TMA1 and
submit to your tutor.

Tutorial 2 on : (date/time/place)
Reminder: Submission of TMA 1
Thank you!