ACC 117/106

INTRODUCTION TO FINANCIAL
ACCOUNTING
 Definition of accounting
• The system of recording and summarizing business and
financial transactions and analyzing, verifying, and reporting
the results

• In other words accounting is the process of measuring,

processing, and sharing financial and other information about
businesses and corporations.
Differentiate between bookkeeping and accounting

• Bookkeeping is the process of recording your company's financial

transactions into organized accounts on a daily basis.
• It can also refer to the different recording techniques businesses can use.
Bookkeeping is an essential part of your accounting process for a few
reasons.
• Bookkeeping refers to the daily tasks of recording and managing a
business's financial information.
• Data like transactions, expense accrual and other financial information can
be accounted for in the completion of bookkeeping tasks.
 Functions of financial statements

• Financial statements provide a snapshot of a corporation's financial health, giving

insight into its performance, operations, and cash flow.

• Financial statements are essential since they provide information about a company's
revenue, expenses, profitability, and debt.

• Financial statement analysis evaluates a company's performance or value through a

company's balance sheet, income statement, or statement of cash flows.
• By using a number of techniques, such as horizontal, vertical, or ratio analysis, investors
may develop a more nuanced picture of a company's financial profile.
Main user groups of financial statements

• Three primary users of accounting information were previously

identified, internal users, external users, and government/IRS.
• Each group uses accounting information differently and requires the
information to be presented differently.
• Please refer to additional slides for specific usage of financial
statements
 Accounting cycle
The seven steps in the accounting cycle are as follows: (slides attached)
• Identifying and Analysing Business Transactions.
• Posting Transactions in Journals.
• Posting from Journal to Ledger.
• Recording adjusting entries.
• Preparing the adjusted trial balance.
• Preparing financial statements.
• Post-Closing Trial Balance.
Various forms of business entities

Sole proprietorship
Conventional partnership
Private and public companies
 INTRODUCTION TO
PRIVATE AND PUBLIC
COMPANIES
COMPANY’S BACKGROUND
Company is created under the provisions of Companies Act 2016

Companies Act 2016 requires all businesses to be registered with the

Companies Commission of Malaysia (CCM).

Definition -Company

“A body of persons ( ≥2) registering as shareholders for purposes of

business, has a separate legal entity; having a separate and distinct
existence apart from natural persons who created it and enjoy limited
liability”
THE BASIC CHARACTERISTICS OF A
COMPANY
• Minimum 2 persons

• Can raise large amount of capital –shares

• Limited liability

• Has perpetual existence

• Managed by BOD

• Have the opportunity to be listed on Bursa Malaysia

CATEGORIES OF COMPANIES
According to Companies Act 2016:

1.Company limited by shares

2.Company limited by guarantee

3.Company limited by both shares and guarantee

4.An unlimited company

DISTINCTION BETWEEN COMPANIES, SOLE
PROPRIETORSHIP AND PARTNERSHIP
1.Ownership :

2.Capital contribution :

3.Liability for firm’s debt :

4.Management :
CATEGORIES OF COMPANIES

1.Company limited by shares

Liability of member is limited to the amount of the
share capital contribution

2.Company limited by guarantee

Members of company ‘guarantee’ to contribute to settle
the liabilities of company
CATEGORIES OF COMPANIES

3.Company limited by both shares and guarantee

as 1 & 2

4.An unlimited company

No limit to the liability of shareholders, creditors have right to
seize the ‘personal’ assets of shareholders
TYPES OF COMPANIES
2 basic types of company:

1.Statutory companies
•Bodies incorporated under Acts of Parliament

2.Registered companies
•Formed under Companies Act 2016
TYPES OF REGISTERED COMPANIES

1.Public company

2.Private company

3.Exempt private company

4.Foreign company

5.Investment company

6.GLC –Government-Linked Company

PUBLIC COMPANY

•Minimum: 2
•Maximum: no limit
•May issue shares and debentures to public
•Name ends with Bhd
•May seek listings on the stock exchange
•All listed co are public co but not all public co
are listed co.
PRIVATE COMPANY

•Minimum: 1
•Maximum: 50 persons
•Prohibited to issue shares and debentures to
public
•Name ends with Sdn Bhd
•Family owned business and small businesses
•Cannot seek listings on stock exchange
EXEMPT PRIVATE COMPANY

•Maximum: 20 persons
•Share cannot be held by other company
•Need not file its annual F/S provided that
company files a certificate signed by director,
secretary and auditor of company, stating the
company can pay liability
FOREIGN COMPANY
•Incorporated outside M’sia but carries business in M’sia

INVESTMENT COMPANY
•The company involves in investment in marketable securities
for purpose of revenue and not for control
GOVERNMENT LINKED CO. –GLC

•Government owns some or all shares

•GLC can be public or private co
FORMATION OF COMPANIES
•2> subscribe their names and comply with the requirements of the
registration of a company.
•Having a constitution is optional.

(Except for companies limited by guarantee)

•Companies may adopt a constitution if it wishes to tailor
provisions for itself and its members.

•Rights, powers, duties and obligations of directors and members

are as set out in the companies act 2016 unless modified by a
constitution.
FORMATION OF COMPANIES

•For a company which was incorporated before the CA 2016, the existing
MOA & AOA will continue to be applicable to such companies until the
companies resolve otherwise.

•Payment of registration fees

•Commencement of business:
•Private co. –Certificate of Incorporation
•Public co. -Certificate of Incorporation and Certificate of Commence
Business
END OF CHAPTER
ONE