Sunday, May 25, 2014

Basic Accounting: Chapter 1: Malaysian Accounting.

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.

Internal users:
Managers, employees who use financial information to make decisions.

External users:
Creditors, bankers, investors, government agencies and the general public who use financial inforamtion to support their decisions.

Accounting Assumptions

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.

Accounting Principles

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.

Accounting Constraints

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.

Accounting Equation

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.

No comments:

Post a Comment