Program Matrikulasi Satu Tahun Perakaunan

TOPIC 1
INTRODUCTION TO
ACCOUNTING
 CONTENTS
1.1 Definition of accounting

1.2 Users of accounting information

1.3 Differences between bookkeeping and accounting

1.4 Categories of accounting

1.5 Forms of business entities

1.6 Types of business activities

1.7 Components of financial statements

1.8 Professional accounting bodies in Malaysia

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 1.1 Definition of Accounting

Accounting is the language of business

It is a process of:
1)Identifying,
2)recording,
3)classifying,
4)summarising,
5)communicating, and
6)interpreting
the results of business or economic
transactions to users in order for them to make
better decisions.

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1.2 Users of Accounting Information

Directors of companies
Internal Users
Managers

Internal auditors

Investors

External Users Creditors

Government Agencies

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1.2 Users of Accounting Information

Internal Users
Management Making routine decisions and needs
information in planning, organizing, and
controlling operations.
Internal Ensuring the management system and
auditors the financial system of a company
comply with accounting standards.

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1.2 Users of Accounting Information

External Users
Investors  Assessing the company’s
profitability and the amount of
dividends paid out to shareholders.
 Deciding as to whether to buy more
shares or dispose the shares they
have.
Creditors Assessing the ability of a business to
(Suppliers & repay loan.
bankers)

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1.2 Users of Accounting Information

External Users
Inland Determining the amount of tax to be
Revenue collected
Board

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1.3 Differences Between Bookkeeping
and Accounting
Bookkeeping Accounting
Definition  Bookkeeping is a  Accounting is an
part of information system.
accounting.  A process of
 A process of recording, classifying,
recording, in summarizing,
chronological reporting, analyzing
order, the daily and interpreting the
transactions of a financial condition
business entity. and performance of a
business.

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1.3 Differences Between Bookkeeping
and Accounting
Bookkeeping Accounting
Scope A preliminary Accounting is a more
process of extensive and
accounting. thorough process
beyond bookkeeping.

Person in Accounting Clerk Accountant

charge

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 1.4 Categories of Accounting

Financial Accounting Managerial Accounting

Financial accounting is the
field of accounting that
provides economic and
financial information for
external users.
Managerial accounting
provides economic and
financial information for
internal users.

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1.5 Forms of Business Entities

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 1.5 Forms of Business Entities

Differences Sole Partnership Company

Proprietorship

1. Number of owner 1 2 – 20 2 – unlimited

2. Capital source Proprietor Partners Shareholders
3. Life of Limited Limited Indefinite
organization
4. Liabilities Unlimited Unlimited Limited

5. Laws and Businesses Act Partnership Act Companies Act

Regulations 1956 1961 1965
6. Distribution of Wholly owned by Among partners Allocated
profits/losses proprietor according to
shares of capital/
equity ratio

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1.6 Types of Business Activities

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1.6 Types of Business Activities

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 1.7 Components of Financial
Statements

The basic components of financial statements as

stated in MFRS 101 are as follows :
 a statement of profit or loss and other
comprehensive income for the period;
 a statement of financial position as at the end
of the period;
 a statement of changes in equity for the
period;
 a statement of cash flows for the period.

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 1.7 Components of Financial
Statements

(1) Statement of Profit or Loss (Comprehensive

Income is more likely to be used by
companies)
 Reports the financial performance of an entity
over a specific accounting period.
 Contains information on revenues and
expenses including the net profit or loss of a
business entity.
 There are several formats in reporting the
revenue and expenses depending on the
nature of business run by an entity.
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An example of Statement of Profit or Loss for
a service business.

Syarikat Dobi Cuci Berseri

Statement of Profit or Loss
For the year ended 31 December 2015
RM
Revenues:
Laundry fees 140,000
(-) Expenses:
Rental expenses (40,000)
Utilities expenses (20,000) (60,000)
Net profit 80,000

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An example of Statement of Profit or Loss for
a merchandise business

Rahayu Baju Kurung Enterprise

Statement of Profit or Loss
For the year ended 30 December 2015
RM RM
Sales 100,000
(-) Cost of good sold (60,000)
Gross profit 40,000
(-) Operating expenses :
Depreciation expenses 3,000
Salaries expenses 10,000 (13,000)

Net Profit 27,000

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 1.7 Components of Financial
Statements
(2) Statement of Changes in Equity
 Reports how the owner’s equity has changed
over the reporting period.
 It reports how opening capital has increased
through net income, and how it decreased
through net losses and drawings.

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 An example of Statement Of
Changes In Equity
Rahayu Baju Kurung Enterprise
Statement of Changes in Equity
For the year ended 31 December 2015

Opening Capital (1 Jan. 2015) 40,000

Net Profit 27,000
(-) Drawings (10,000)
Closing Capital 57,000

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 1.7 Components of Financial
Statements

(3) Statement of Financial Position

 Previously known as the balance sheet. It
reports the financial position of a business
entity.
 It contains of three main components:
(1) Assets
(2) Liabilities
(3) Owner’s equity

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 A Statement of Financial Position
Rahayu Baju Kurung
A Statement of Financial Position
as at 31 December 2015
RM RM RM
ASSETS :
Non current assets :
Motor Vehicle 64,600
(-) Accumulated depreciation (3,000) 61,600
Current assets :
Inventory 6,200
TOTAL ASSETS 67,800
EQUITY AND LIABILITIES
Equity
Opening capital 40,000
+ Net profit 27,000
- Drawings (10,000)
Closing capital 57,000
Non current liabilities
Long term borrowings 5,000
Current liabilities :
Account Payables 5,800
Total liabilities 10,800
TOTAL EQUITY AND LIABILITIES 67,800

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 A Statement Of Cash Flows

(4) Statement Of Cash Flows

 Also known as cash flow statement. It presents the
movement in cash flows over the period.
 It separates the in-flows and out-flows of cash of an
entity according to three main activities: operating,
investing and financing.

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 - See more at: http://accounting-simplified.com/financial/statements/cash-flow-statement.html#sthash.oLcqgqTN.dpuf

An example of A Statement Of
Cash Flows
Rahayu Baju Kurung Enterprise
Statement of Cash Flows
for the year ended 31 December 2015

Cash flow from operating activities RM RM

Cash receipts from customers 25,000
Cash payment to suppliers (8,000)
Cash payment for expenses (5,000)
Net cash flow from operating activities : 12,000
Cash flow from investing activities
Purchase of land and building (13,000)
Net cash flow used for investing activities (13,000)
Cash flow from financing activities
Owner investment 6,000
Drawings (3,000)
Net cash flow from financing activities 3,000
Net cash inflow 2,000
Add opening cash balance - 1 Jan 2015 500
Closing cash – 31 Dec 2015 2,500
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1.8 Professional Accounting
Bodies in Malaysia

Malaysian Accounting Malaysian Institute of

Standards Board Accountants
(MASB) (MIA)

Malaysian Institute of
Certified Public Accountants
(MICPA)

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 Malaysian Accounting Standards
Board (MASB)
Established under the Financial Reporting Act 1997
The main functions and authority are to:
1)Issue new accounting standards [Malaysian
Financial Reporting Standards (MFRS)
2)Review, revise or adopt existing accounting
standards.
3)Issue statements of principles for financial
reporting.
4)Develop a conceptual framework for the purpose of
evaluating current and propose accounting standards.

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 Malaysian Institute of Accountants
(MIA)

Established under the Accountants Act (1967)

The main functions of MIA are to:
1)determine the qualifications for members.
2)provide training and continuing professional
education to existing and potential practitioners.
3)control the accounting practice in Malaysia.

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Malaysian Institute of Certified Public
Accountants (MICPA)
The Malaysian Institute of Certified Public
Accountants (MICPA) was formed as a professional
body in 1958.
The main functions of MICPA are to:
1)advance the theory and practice of accountancy in
all of its aspects.
2)recruit, educate, train and assess a body of
members skilled in these areas.
3)maintain high standards of practice and
professional conduct by all its members.
4)develop the accounting profession.

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Program Matrikulasi Satu Tahun Perakaunan

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