week 1 intro to accounting
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Week 1Introduction to
Accounting
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Outline:
Meaning and functionsof accounting
Users andusesof accounting
Accounting process Accounting profession and
accounting bodies
Introductionof financialstatements
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Whatis Accounting?
artof recording,classifying and
summarising of businesstransactions
and business eventsin monetaryterms andinterpreting the resultsso
obtained.
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Whatis Accounting?
Recording: where transactions are recordedinthe booksofthe business
Classifying: which involvessortingoutthe mass
of accountingdata intoorderly and meaningfulcategories
Summarising: where periodically the accountingdata are summarised.
Interpreting: where the financialdata areanalysed andusedto assistin more effectivedecision making.
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Statementof Accounting
Principles Board No.4Accountingis a service activity. Its
functionisto provide quantitative
information, primarily financial innature, about economic entities,that
isintendedto be usefulin making
economicdecisions
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TYPESOF INFORMATION
Quantitative information: Any information,
which relatestosomething, which can be
calculated,countedor measured
Financialinformation: Any information
which can be calculatedin monetary
denominationorterms
Accountinginformation: Any informationwhich is producedthrough the accounting
process
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ECONOMIC ENTITY
Bodiesthat existseparately andin
varyingsizes forthe sole purpose of
servingthe needsofcommunities
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Economic Entity
ECONOMIC ENTITY
LIMI
TED COMPANIE
S
PARTNERSHIPS
SOLE
PROPRIETERSHIPS
NON-PROFIT BUSINESS
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Economic Entity
ECONOMIC ENTITY
NON-PROFIT BUSINESS
SERVICE
MERCHANDISING
MANUFACTURING
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Usersof Accounting
External parties:
Potentialinvestors
Shareholders
Banks and financialinstitutions(creditors/lendors)
Academicians
T
ax authorities Othercompanies (competitors)
Public
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Usersof Accounting
Internal parties:
Boardofdirectors
Management Employees/Union
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Users andusesof Accounting
Owners Managers Employees
To evaluate the
financialstatusof
the business
To evaluate the
financialstatusof
the business
To evaluate the firms
ability to pay wages/
salaries
To be able to
evaluate their
interestinthe
business
To have the information
necessary to make
sound business
decisions
Toget anidea oftheir
employment prospects
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Users andusesof Accounting
Creditors Investors Governments Others
Todetermine the
firms ability to
repay loans.
To evaluate the
financial
positionofthe business
Todetermine the
taxable income of
a business
For academic
purposes
To be able to
evaluate their
interestinthebusiness
To evaluate
whetherthe
businessis agoodinvestment
To make better
financialdecisions
forthe economy
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Accounting process
MEASURING
& RECORDINGIDENTIFYING
REPORTING
(COMMUNICATING)
Choose whatevents
(transactions)
are businessin
nature and
have impacton
an entitys
financial
position
Placingmonetary values
(Ringgit and
Sen)on
transactions
identified as
business
transactions
Provisionofaccounting and
financial
informationto
the various
interestedparties
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BOOKKEEPING VS.
ACCOUNT
ING Bookkeepingisonly a partofthe
accounting process andcoversonly
recordingof transactions
Otherscope of accountinginclude
accountingsystems, auditing,
budgeting,cost analysis, forecasting,
taxation and accountinginformationanalysis
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Accounting profession and
accounting bodies Malaysian Institute of Accountants (MIA),
formedunderthe Accountants Act 1967,is
responsible forthe accounting profession
in Malaysia Malaysian Institute of Certified Public
Accountants (MICPA), formedin 1958,is
another professional body with contribution
instandards formulation, publicationof
guides and articles andconducting
professional examination
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Accounting profession and
accounting bodies Accountants are in various economicentities companies, accounting firms,not-for-profitorganisations, etc
Accounting firms provide financialstatements preparation, auditing andconsultancy services
Code of Ethics adopted by the professional
bodiesspelloutthe functions, quality ofservice and mannerofconductofaccountants
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Accounting profession and
accounting bodies Regulatory Bodies (1)
Companies Commissionof Malaysia
(CCM): Establishedunder Companies
Act 1965 andits main functionisto
regulate registrationofcompanies
Securities Commission: Established
underS
ecurities Commission Act 1993andits main functionistocontrol and
supervise securitiestransactions
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Accounting profession and
accounting bodies Regulatory Bodies (2)
Bursa Malaysia: Main functionisto
regulate listingonthe Malaysian bourse
Foreign Investment Committee (FIC)/
Ministry Of InternationalTrade and
Industry
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