Types of Business
1. Manufacturing business:
Changes raw materials (basic input) into finish goods that are sold to individual customers.
2. Merchandising business:
Purchases inventories from other businesses and resell these inventories to individual customers.
3. Service business:
Provides services instead of products to customers.
Accounting Professional Bodies
FRF - Financial Reporting Foundation
Oversees MASB performance, financial and funding requirement and reviews proposed standard bu MASB.
MASB - Malaysian Accounting Standard Board
Adopt international accounting standards or develop new accounting standards for Malaysian companies.
MICPA - Malaysian Institution of Certified Public Accountant
To advance the theory and practice of accounting and to provide education, training and exam to accountants.
MIA - Malaysian Institute of Accountant
To develop, support and monitor quality and expertise consistent with global practice in accounting profession.
Accounting Information Users.
Managers, employees who use financial information to make decisions.
Creditors, bankers, investors, government agencies and the general public who use financial inforamtion to support their decisions.
1. Separate business entity: Accounting only records economic events which are related directly to a particular business.
2. Going concern: The assumption that businesses shall continue its operation to the foreseeable future.
3. Monetary unit: Business should report all the economics events in a monetary unit.
4. Time period: Business operation can be divided into specific period of time such as month, a quarter or a year.
1. Historical cost principle: Business should report its activities as their actual cost.
2. Objectivity principle: Accounting records and reports should be base on objective evidence.
3. Revenue recognition principle: Revenue should be recognized as soon as i is earned and not in the period in which the business receives the cash.
4. Matching principle: Report the expenses in the period of which the revenue is actually earned as a result of these expenses.
5. Full disclosure principle: Require businesses ti disclose sufficient information to the users.
Conservatism: A concept to guide accountants to choose between available options. The selected option should minimize the possibility of overstating income or assets of the company.
Materiality: Require businesses to account only for the items that are deemed significant for a given size of operation.
Asset = Liabilities + Owner Equity
Financial Statement Components
Income statement: A summary of revenue and expenses for a specific period of time such as month or a year.
Statement of owners's equity: A summary of the changes in the owner's equity as of a specific date.
Balance Sheet: A list of assets, liabilities and owner's equity as of specific date, usually at the close of the last day of the month or a year.
Statement of cash flows: A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.