1. What is Accounting?

Definition:
Process of identifying, measuring, recording
and communicating economic information
about an entity to allow informed judgments
and decisions by users of the information.

Measuring
Transactions can be
measured in financial
term (RM)

The accounting process includes the bookkeeping

function (mechanical aspect such as
recording the transaction systematically).
 DIFFERENCES BETWEEN
BOOKKEEPING & ACCOUNTING
 Accounting is the process of classifying,
recording and summarizing of transactions
and business events in monetary terms, and
interpreting the results to interested parties to
assist in decision making while.
(Text book: page 3-4)

 Bookkeeping is the mechanical aspects of

accounting involving recording, classifying
and summarizing business transactions

 Bookkeeping is only a part of accounting

which concerned with the accurate recording
of transactions.

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Provide information
• Information on the financial status of the business, whether
the business is making profit/loss, corrective actions to be
taken.
Decision making
• Management may analyze the information to assist them to
make decision. Example whether or not to open up another
restaurant outlet
Performance evaluation
• Accounting information can be used by potential investors to
determine whether or not to invest in the business or not

PURPOSE OF FINANCIAL STATEMENT

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 2. Users of Accounting Data

1. Owners: Interested in
profit earned from
investments, financial
stability & growth of
business

2. Management: As a
Internal guidance in planning,
organizing and controlling
Users the operation

3. Employees: Interested
in business ability to
progress and expand (focus
on employee benefit)
 External
Users
Government Bankers/
How much tax they are going
1. Creditors/ Bankers: To to pay us???
know the ability of the
business in repaying the
amount owed to them

2. Potential Investors: Require

information on business financial
strength, present and future earning
capacity Potential
3. Government: Tax
purposes

LO 2
 3. TYPES OF BUSINESSES
SOLE PROPREITOR PARTNERSHIP COMPANIES

Registration Business registrar Companies Commission Companies Commission Malaysia (CCM)

Business Malaysia (CCM) Companies Act 1957
Registration Act Business Registration Act
1957 1956 & 1957
No of owner ONE Normal: 2 – 20 partners Private (Sdn. Bhd.): 2-50 shareholders
Professional: 2-50 partners Public (Bhd.): Min 2 shareholders
Management Owner have FULL SHARED by partners Board of directors appointed by the
& Control control shareholders
Sources of Contribute by 1 Contribute by partners based Contribute by shareholders through
Capital person (size capital on agreement purchase of shares
smaller)
Profit/Loss FULL Entitlement SHARED among partners SHARED among the shareholders
based on profit sharing ratio through DIVIDEND

Liabilities Unlimited Liability Unlimited Liability Limited Liability

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Types and Forms of Businesses
Common title (examples)

Restoran Ali
a) Sole Kedai Kek Suraya Enterprise
Penjual Alat Ganti KT Lim Auto Spare
Proprietorship Kedai Runcit Pak Abu
Ah Long Trading

Ali and Associates

MP Lingam & Sons
b) Partnership Arif and Co.
Klinik Nathan dan Rakan-rakan

Risda Plantation Sdn Bhd

c) Limited Computer BUsiness Solutions Sdn Bhd
Companies Sime Darby Berhad
Kumpulan Guthrie Berhad
QUIZZES
DEC 2013 PART A (MCQ)

1. The accounting process involves all the following EXCEPT:

a. Analyzing and interpreting financial reports.

b. Recording non quantifiable economics events.
c. Identifying economics transactions that are relevant to the business.
d. Communicating financial information to the users by preparing financial report.
(1 mark)

2. From the legal point of view, the type of business organization that has a separate legal entity from
its owners and where the owners are not personally liable for the debts of business is

a. Limited company
b. Sole proprietorship
c. Partnership
d. None of the above
(1 mark)
3. Which of the following is FALSE in explaining the users of accounting information:

a. Bankers need accounting information to evaluate the business ability to pay debts on time.
b. Investors use the accounting information for planning, controlling and organising the business.
c. Government needs accounting information for tax purposes.
d. Employees needs accounting information to ensure steady employment.
(1 mark)

4. All of the followings are considered as business transactions and will be recorded in the business’s account
EXCEPT:

a. Received RM500 cash from Johan, a customer for the sales made.
b. Purchased motor vehicle on credit worth RM4,000 for business purposes.
c. Paid housing loan of RM900 monthly from a personal credit card.
d. Withdrew RM700 cheque from business’s account for personal use.
(1 mark)
Overview of the Accounting Cycle
( REFER TEXT BOOK, PAGE 6 )

TRANSACTIONS

SOURCE DOC FINANCIAL STATEMENTS

JOURNALS LEDGERS TRIAL BALANCE ADJUSTMENTS (IF ANY)