BIT 163INTRODUCTION TO

ACCOUNTING

Accounting Definition Definition“Accounting maybe define as “A

systematic recording of information which involves analyzing, classifying, summarizing and interpreting business transactions”

What are the purpose of Accounting

Purpose of Accountingi. Planning how you are going to use your

moneyii. Recording accounting data.iii. Keeping specific records of information

in specific manual.iv. Enabling circulating information.v. Use accounting data to make decision.

Accounting Vs Finance

AccountingSystematic recording of informationInvolves:1) Analyzing2) Classifying3) Summarizing4) Interpreting business transaction.

Accounting Vs Finance

Finance“A process involved in an attempt to

obtain and allocate financial resources effectively and efficiently to achieve the firm’s goal: that is to maximize the shareholder’s wealth by maximizing the share price”.

Accounting Vs FinanceThe management of the firm has the

primary goal of maximizing the wealth of its shareholders by maximizing the common stock share price

i. Maximization of profitii. Ensuring the firm’s survival in the long

run-Time Horizon-Timing of Returns-Distribution of Returns-Risk orientation

Sub field of Accounting

Accounting can be sub-classified as to:

Financial Accounting Management Accounting Auditing Taxation

Activities within an organizations

EXECUTI VE MANAGEMENT Overall Strategy

Motivation Final Decision Making Public Accountability

Owner Relations

MARKETING Sales

Advertising Pricing

New Product Design Distribution

FI NANCE I dentification analysis of

alternative sources of f unds

Analysis of investments

HUMAN RESOURCES Employee Screening Employing benefi ts Payroll Management

PRODUCTION Process design

Materials and Labor Planning

Materials handling Quality Control

RESEARCH AND DEVELOPMENT

Research into new technologies and processes Developing products f rom

research

Users of Accounting Information Internal-Internal users comprise various

management and supervisory staff within the organization. EG: EMPLOYEE AND MANAGEMENT.

External-External users comprise investors (present

and future), lenders, suppliers, customers, government and public at large.

The internal and external roles of accounts

Please refer attachments:

INTERNAL

EXECUTIVE MANAGEMENT

Financial statements, budgets and performance reports

MARKETING FINANCESales reports, cost reports Cash flow information

ACCOUNTING

Production reports, internal controls Payroll informationPRODUCTION HUMAN RESOURCE

Cost reports

RESEARCH AND DEVELOPMENT

EXTERNAL

External Decision Makers

Financial reports(Including the statements)

Executive Management

Financial Statements

Accounting

The difference between Accounting and Bookkeeping

Discussion in class and notes given to students with the handouts.

Accounting Information Systems (AIS)

Discussion in class and notes given to students with the handouts.

Types and activities of Accountants

Fields of Accounting

Types of Accountants Financial Accounting Managerial Accounting Tax AccountingPrivate Accountants Preparing Financial statements General Accounting Prepare Tax Returns

Cost Accounting PlanningBudgetingInternal Auditing

Public Accountants Auditing financial statements Providing management advisory services Preparing Tax ReturnsPlanning

Government Accountants Preparing Financial statements General Accounting Reviewing Tax returnsReviewing fisnancial repor Cost Accounting Assisting taxpayersWriting regulations Budgeting Writing regulationsAssisting companies Internal Auditing Investigating violationsInvestigating violations

Form of Business

Sole Proprietor/Sole Trader Partnership Companies Co-operativeShort Assignment

1.Briefly explain for all stated form of business.

Sole Proprietor or Sole Trader Business ownership is a single business carried

on by individuals and owned by individual full. Business owner have a power to control the

business operations. Owners and business is referred to as one of

the same entity. No separation between them. Owners will received all the profits and bear

for all losses from business. Unlimited liabilities

Advantages

Easy to set up. The owner has absolute power to

control the business. Fast decision make by the owner of

the business. Individual Tax. No need the complex financial

reports.

Disadvantages Difficult to grow because of the limited

capacity of capital Difficult to get capital financing from the

financial institution because they need a strong assurance from the business.

Liability is unlimited. Business will disband itself if the owner

died.

Partnerships A partnership is defined as the relationship that

exist between person carrying on business. These person agree to combine some or all their property, labor and skill. This relationship is based on contract.

Business owned by minimum of two persons and maximum of 20 persons.

Professional service partnerships consist of maximum 50 persons.

There are two types of partnerships:-Active partner-Sleeping partner

Partnerships Strictly follow the Partnerships Act 1961

and partnerships contract of agreement for profit and loss distribution.

Liability for partnerships is unlimited except for the limited partnerships.

General partners have unlimited liability for partnerships debts, and the partnerships terminates when a general partner wishes to sell out or dies.

Advantages

Partnerships allow for a greater amount of money, skill and other resources to be pooled.

They are relatively easy to organize.

They are subject to limited government regulations and do not face high tax rates.

Disadvantages Partnerships have a limited life. Each partner is subject to unlimited

liability. This means that if the company fails, creditors can take action against both the partnership and the persons who are in it.

Partners have mutual agency. This means that one partner can make decisions without consulting to other(s).

Co-operative

It is a business organization owned and operated by a group of individuals for their mutual benefits.

A community based business Eg: Bank Rakyat, Koperasi

Angkatan Tentera Malaysia and Angkasa.

Corporation A business created as a distinct

legal entity composed of one or more individuals or entities.

In Malaysia, corporations are follow strictly under Company Act 1965.

Corporation are divide into two-Private Limited-Public Limited

Corporation Private limited can be held by minimum of 2 and

maximum of 50 shareholders. There is no maximum shareholders for Public

limited company. Shareholders will received their profit in the

form of dividend. Corporation managed by Board of Director that

appointed by shareholders in AGM. Liability of shareholders is limited base on the

paid up capital. Tax is paid, base on company profit. Eg: Tenaga Nasional Berhad, Safeguard

Securicor Sdn Bhd.

Financial Information One of the accounting functions is to provide

information about the enterprise. The financial information generated must be useful to users. In order to be useful, the information must have the following basic characteristics:

  Understandability Relevance Reliability Comparability

The meaning of ethics

Ethics are the “principles that determine the rightness or wrongness of particular acts or activities. “Ethics are also “accepted standards of good behavior”