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CHAPTER 1: INTRODUCTION TO ACCOUNTING, Scope & Person In Charge -…
CHAPTER 1: INTRODUCTION TO ACCOUNTING
1.1: DEFINITION OF ACCOUNTING
•
Language of business
Process :
Identifying
Recording
Classifying
Summarising
Communicating
Interpreting
1.2: USERS OF ACCOUNTING INFORMATION
Internal Users
Directors of companies
Managers
Internal auditors
External Users
Investors
Creditors
Government agencies
Suppliers
Customers
1.3: DIFFERENCE BETWEEN BOOKKEEPING
AND ACCOUNTING
Definition
Accounting ~ Process recording, classifying, summarizing, reporting, analyzing and interpreting the financial and performance business
Bookkeeping ~ Process of recording the daily transactions of a business entity
1.4: BRANCHES OF ACCOUNTING
Financial Accounting
• External Users
Managerial Accounting
• Internal Users
Cost Accounting
• Internal Users
Auditing Accounting
• Internal Users
• External Users
1.5: FORMS OF BUSINESS ENTITIES
Sole Proprietorship
• 1 owner
• Proprietor source
• Limited lifespan
• Unlimited liabilities
• Business Act 1956
• Wholly owned by proprietor
Partnership
• 2-20 owners
• Partners source
• Limited lifespan
• Unlimited liabilities
• Partnership Act 1961
• Among partners
Company
• 2- unlimited
• Shareholders source
• Indefinite lifespan
• Limited liabilities
• Companies Act 1965
• Allocated according to equity ratio
1.6: TYPES OF BUSINESS ACTIVITIES
Services
~ Provide services rather than products to customers
~ Example: MAS, Keretapi Tanah Melayu
Manufacturing
~ Change raw or basic inputs into products that are sold to customers
~ Example: Gardenia, Intel, Nestle
Merchandise
~ Purchase inventories from other businesses (resell the inventories to customers)
~ Example: Tesco, Giant, Econsave
1.7: TYPES OF FINANCIAL STATEMENT
Income statement
~ reports the revenues and expenses
Owner's statement
~ reports the changes in owner's equity for a specific period of time
Balance sheets
~ reports the assets, liabilities and owner's equity at a specific date
Statement cash flows
~ information on the cash receipts and payments for a specific period of time
1.8: PROFESSIONAL ACCOUNTING BODIES IN MALAYSIA
MASB
MIA
MICPA
1.9: POTENTIAL CAREER OPPORTUNITIES IN ACCOUNTING
~ auditing, taxation management consulting serving the general public
Public Accounting
~ industry working in cost accounting, budgeting accounting information systems and taxation
Private Accounting
Govermental Accounting
~ IRS, FBI, SEC, Public colleges and universities
Forensic Accounting
~ investigative skills to conduct investigations into theft and fraud
Scope & Person In Charge
Bookkeeping
~ A preliminary process of accounting
~ Accounting Clerk
Accounting
~ More extensive & thorough process beyond bookkeeping
~ Accountant