Acc chapter 1 as at 15052012

BASIC FINANCIAL ACCOUNTING

MGT 2304MOHD ZARIR YUSOFF

IDENTIFYING ECONOMIC ACTIVITIES

•One must identify that the transaction will affecting the company’s economic condition.

E.G payment of staffs’ salaries

RECORDING•After identified the transaction, it must be record in

accordance to certain sequence or system

COMMUNICATING•The activity of reporting the identified and

recorded information to potential users.

USERS OF ACCOUNTING

CREDITORS

PUBLIC

UNIONS

INVESTORSEXTERNAL USERS

INTERNAL USERS

DIRECTORS

EMPLOYEES

MANAGERS

GOVERNMENT

Sole proprietorship is a business owned by one person who is involved in running and managing the business for profit. The law does not recognize sole proprietorship as a legal entity.

Advantages Disadvantages•Easy to establish and dissolve.•The owner has sole control over the business.•No profit sharing.•Flexible regulations compared to other types of business.

•Difficult to expand due to limited skill and capital.•The risk is solely on the owner.•Unlimited liability

Partnership exists when two or more (2 - 20) individuals share the ownership of a single business for profit. Contractual relationship can be formed through written or verbal agreement. The details of the agreement normally cover the management of the business such as capital contributions and how profits/losses are to be shared. In Malaysia, this type of business is registered under the Partnership Act 1961.

Legally, partnership is not a separate entity. Partners are jointly responsible for their business. This means that anyone with outstanding payment from the company can claim payment from any or all of the partners. Each of the partners is liable towards the partnership’s debt.

Advantages Disadvantages•Larger capital as the owner is more than one.•Partners with skills and abilities can strengthen the business.•Not bound by requirement on disclosure of business information to public as imposed on limited company.

•Unlimited liability.•Possible clashes among the partners that can affect the stability of the management.•Problem on business continuity arising from the death of a partner.

ADVANTAGES AND DISADVANTAGES OF

PARTNERSHIP