TOPIK 1- Introduction.ppt

7/27/2019 TOPIK 1- Introduction.ppt

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Objectives:

Define what is accounting

Briefly describe history and development of accounting

List prospect of accounting profession & professionalbodies in Malaysia

Outline the development of accounting standard

Discuss the function of accounting Outline the components of financial statements and their

function

Accounting principle, assumption and conventions


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What is accounting?

Accountingis an information systemthat provides quantitative, financial

information to stakeholders about theeconomic activities and condition of a

businessso that they can make

business/economicdecisions.


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Accounting System

The procedures and processes used by abusiness to analyse transactions, handle

routine bookkeeping tasks, and structureinformation so it can be used to evaluate

the performance and health of the

business


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What are the functions of anaccounting system?

Analyze business events todetermine if informationshould be captured by theaccounting system.

Analysis

Day-to-day keeping track ofthings.

Bookkeeping

Use summary information toevaluate the financial healthand performance of thebusiness.

Evaluation


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1. Analyzebusiness event

Describe The AccountingCycle

2. Record,

3. Classify, and

4. Summarize

transaction

5. Report

summaries

Balance sheet,Income statement,Statement of cash

flows

Account, amount,classification

Investment,purchase, sale, or

transaction


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The Accounting Cycle


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The different between accounting andbookkeeping:

Accounting:

a process of identifying, recording, classifying and

summarizing in a significant manner and in termsof money, transactions and events which are, in

part at least, of a financial character, and

interpreting the result thereof (AICPA, 1961)

Bookkeeping:

only involves activities of collecting and recording

financial data


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What is the Nature of Accounting?

Deals with numbers.Quantitative

Focused on the financial

dimension of business.Financial

Past information can onlybe useful if it impactsdecisions about the future.

Decision Making


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3 PHASES OF ACCOUNTING

DEVELOPMENT

Stewardship accounting

Financial accounting and reporting

Management Accounting


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Stewardship accounting

The accounting activity concerned with simplerecord keeping and the discharge of stewardship.

Wealthy men employed stewards to managetheir property.

These stewards will provide periodical accountof their management of the resources to theirmaster

It involves the orderly recording of businesstransaction

Based on the concept of give and take.


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Financial accounting and reporting

Started from the Industrial Revolution (IR) in Britain

The size of business has increase and more complex

Results to the need for more sophisticated methodsby which business was financed. (Large amount of capital

is needed)Led to the introduction of the joint stock company(many people invest in one company) and also the UKsJoint Stock Companies Act (1844)

financial account must be audited before it ispresented to their owners (shareholder) and creditor


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The age of scientific accounting

Industrial Revolution

Professional Society

Large Scale Business

Large Capital

Various Sources

of Capital

(Owner + SH)

Reporting

failure SH Trust

Creative accounting

New accounting practice

Recognition

MeasurementAccounting concepts

Fixed Asset

Capital vs Expenses

depreciation

Research


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Management accounting

Associated with the introduction of industrialrevolution (IR) in 18th century.

Business more concern to reduce cost

delopment of cost accounting technique and use as aguide to management decisions.

The introduction of management accounting showsthe ability and capacity of accounting to develop and

meet changing socio-economic needs


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Definition: FRS 101 (MASB 1)

Financial statement is a structuredfinancial representation of thefinancial position of an enterprise and

the transaction undertaken by anenterprise

Introduction to FinancialStatements


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Objectives and purposesof Financial Statement

1. Provide information about the financialposition, performance and cash flow of an

enterprise2. Show the results of managements stewardship

of the resources entrusted to it

3. Assists users in predicting the enterprisesfuture cash flow and the timing and certaintyof the generation of cash and cash equivalents.


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Components of FS

1. Balance Sheet2. Income Statement

3. A statement showing:

All changes in equity

Changes in equity other than those arisingfrom capital transaction with owners and

distribution with owners4. Cash Flow Statement, and

5. Accounting policies and explanatory notes


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Primary Financial Statements

These financial statements answerbasic questions:What is the companys current

financial status?What were the companys operating

results for the period?

How did the company obtain and usecash during the period?


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Sometimesreferred to as a

Statement ofFinancialPosition

What are the resou rces

of the company?

What are the companys

exist ing obl igations?

What are the companys

net assets?

Summary of the financialposition of a company ata particular date.

The Balance Sheet

Assets: cash, accountsreceivable, inventory,land, buildings,equipment, and intangibleitems.

Liabilities: accounts

payable, notes payable,and mortgages payable.

Owners Equity: net

assets after all obligationshave been satisfied.


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Balance Sheet

Hershey Foods CorporationBalance SheetDecember 31, 2001

(in thousands)

Assets

Cash $ 134,147Accounts receivable 361,726Inventories 512,134Prepaid expenses 62,595

Property, plant, and equipment 1,534,901Intangibles 429,128Other assets 212,799Total assets $3,247,430

Continued

Note that the date

is a specific point

in time


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LiabilitiesAccounts payable $ 133,049

Accrued liabilities 462,901Notes and other debt 1,245,939Income taxes 258,337Total liabilities $2,100,226

Stockholders EquityCapital stock $ 183,213Retained earnings 2,755,333Repurchased stock and other equity items (1,791,342)Total stockholders equity $1,147,204Total liabilities and stockholders equity $3,247,430

Matches total assets


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Assets recorded athistorical value.

Only recognizesassets that can beexpressed inmonetary terms.

Owners equity isusually less than thecompanys marketvalue.

Describe Three Balance SheetLimitations.


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Sometimesreferred to

as a

Statement ofEarnings

What goods w ere sold o rserv ices performed thatprov ided revenue for thecompany?

What costs were incu rred inno rmal operat ions togenerate these revenues?

What are the earnin gs orcompany prof it?

Shows the results of acompanys operationsover a period of time.

The Income Statement

Revenues

Assets (cash or AR)created throughbusiness operations

Expenses

Assets (cash or AP)consumed throughbusiness operations

Net Income or (Net Loss)

Revenues - Expenses


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Income Statement

Hershey Foods CorporationIncome Statement

For the Year Ended December 31, 2001

Revenues:

Sales $4,557,241Expenses:Cost of sales $2,665,566Selling and administrative 1,269,964

Other expenses 209,077Interest 69,093 4,213,700Net income $ 343,541(-)Income taxes (136,385)Net income after tax 207,156


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Statement of Cash Flows

Reports the amount of cash collectedand paid out by a company in the

following three types of activities:1. Operating activities

2. Investing activities

3. Financing activities

H h F d C ti

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Hershey Foods Corporation

Statement of Cash FlowsFor the Year Ended December 31, 2001

(in thousands)

Net cash flows from operating activities $ 706,405Cash flows from investing activities:

Investments in property, plant, and equipment $(187,029)Proceeds from sale of property, plant, and equipment 63,042Net cash flows used in investing activities $(123,987)Cash flows from financing activities:

Cash receipts from financing activities, including debt $ 30,589Dividends paid to stockholders (154,750)Repurchase of stock (40,322)

Other, including repayment of debt (315,757)Net cash flows used in financing activities $(480,240)Net increase in cash during 2001 $ 102,178Cash as of January 1, 2001 31,969

Cash as of December 31, 2001 $ 134,147

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Limitations of FinancialStatements

1. Limited to information which can be

expressed in quantitative terms.

2. Largely confined to an analysis ofpast events.

3. Accounting is not an exact science.

4. Most information expressed in

monetary units


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Role of Accounting?


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Accounting role in business

As business language use accounting knowledge to interpret accounting

number

to understand financial information of a business

As an information systemAcctg. gather information and communicate them

to the userBusiness transaction will be processed and

analyzed to make it useful to the user

From raw data financial statement


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Accounting role in business

As a decision making toolWe use accounting information to make decision.

Each user will have different decision and will

used different type of accounting information.

As a planning and control tool

Manager are important users of financialinformation

Accounting help them to plan and control

business activities


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Business Stakeholders

A business stakeholderis a person

or entity that has an interest in theeconomic performance and well-

being of a business.

Their interest is on the report

produce by a business before theycan make sound decision


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What are the Two Types of Reports

from Accounting Information?

Internal Reports(Management Accounting)

External Reports(Financial Accounting)

Management

Lenders

Investors

Suppliers/CustomersEmployees

Competitors

Government Agencies

The Press


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What Are Accounting Reports

Used For?

Used by management for

planning

implementing plans

controlling costs

making decisions

Used by external partieswho have an economicinterest in the firm.

Balance sheet

Income statement

Statement of cash flows


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User Information Requirements


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Overview of Financial and Management

Accounts


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Qualitative

Characteristic OfFinancial Information

- What are the

characteristics?


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Relevance

The information has predictive valuehelps users

to make decisions about the future

Has confirmatory valuehelps users to evaluatetheir past decisions

Reliability

Complete information and free from significant

error and bias

Qualitative Characteristic OfFinancial Information


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Comparability

The information can be comparable with:

Information produced in the previous year

Information produced by other businesses

Understandability

Means that the users should understand and

can make a good decision from such information

Timeliness

Cost effective and;

The information is ready when it is needed

Qualitative Characteristic OfFinancial Information


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Accounting Professionalbodies in Malaysia


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Established in 1965 under Company Act 1965.

Sole professional accounting body in Malaysia.

Function :

Provides training and sets professionalexaminations.

To become a member :

must pass all the examinations set by the body.

has relevant working experience. (http://www.micpa.com.my)

MICPA


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A regulatory body formed in 1969 under Sec 23Accountant Act 1967.

Functions :

To oversee development and growth of theaccounting bodies.

Sole body where the accountants must

register.

Conducts training and courses for membersto ensure they remain with developments in

the profession.

http://www.mia.org.my

MIA


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What is a CPA?

CPA: Certified Public Accountant

Has taken a minimum number of college-level

accounting classes. Has passed the exam administered by the MICPA.

Has met other requirements set by his/her state.

MICPA: Malaysian Institute of Certified Public Accountants

The national organization of CPAs in the Malaysia.

Not a government agency.


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A statutory body established under the Fin. Rep Act1997.

Functions :

To issue accounting standards.

To issue statements of principles for financial

reporting.

To review or to adopt existing accounting standards.

To issue technical pronouncements.

To develop conceptual framework.

To change the structure or contents of proposed

accounting standards.

(http://www.masb.org.my)

MASB


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A statutory body established under the Fin. Rep Act1997.

Functions :

Oversees MASB performance, financial & funding

requirement

Reviews proposed standard by MASB

FRF


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Accounting Professional Bodies

APB

FRF

MASB

MICPA

MIA

Oversees MASB performance, financialfunding requirement

Reviews proposed standard by MASB

Adopt international accounting standard

Develop new accounting standard

Advance the accounting theory & practic

Provide education, training & examinatio

to accountants

Adopt international accounting standard

Develop new accounting standard


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ACCOUNTANTS JOB SCOPE


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Accounting Opportunities

Industry

Government

or Nonprofit

Graduate

Education

PublicAccounting Auditor

Tax Consultant

ManagementAdvisoryServices

Consultant

Controller

Internal Auditor

FinancialExecutive

GovernmentAgencies: GAO,

IRS, FBI

State and LocalAgencies

Hospitals,Schools,Nonprofit

Organizations

J.D. (Law)

Ph.D.

M.Acc.

MBA


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Why Study Accounting?

Everyone makes financial decisions.

What types of decisions?

Budgeting

Investing


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Accounting Standard

Accounting Standard is a set of rules to guide the application of

accounting principles in a specific situation while preparing thefinancial statement.

(satu kerangka berkonsep dan aturan yang perlu dipatuhi oleh semua entitiperniagaan dan perakaunan)

Purpose:1. A guideline in preparing the financial statement.

2. To improve the quality of financial reporting

3. Define and explain the concept of reporting entity; which should

be reported and which is not.


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4. Identifying the common information needs of the various users offinancial reports.

5. Determine a qualitative characteristics of financial information.


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Leadingbusinessman

SEC

KLSE ROC

Accounting

Profession

Financial

Analysts

FRF

Senior membersAccounting Profession

Senior RepBNM

Financial Analysts Accountant

Finance Directors

MASB

Financial Reporting Act 1967


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OVERALL CONSIDERATION IN PREPARINGFINANCIAL STATEMENT:1. Fair presentation and compliance with MASB Standards.

- Fair presentationpresentation fairly the financial position,performance and cash flows of an enterprise by application of

appropriate MASB Standards.- Compliance with MASBcomply with all the MASB Standard and

other technical pronouncements issued by MASB.

- If departure from requirements to achieve fair presentation, anenterprise should disclose the four reasons outlined by MASB

(refer MASB 1 page 7 para 14).

a) that management has concluded that the FS fairly present the

enterprises financial position, financial performance and cash

flows;


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b) that it has complied in all material respects with applicable MASBStandards except that it has departed from a Standard in order toachieve a fair presentation;

c) the Standard from which the enterprise has departed, the nature ofdeparture, including the treatment that the Standard would require,

the reason why the treatment would misleading in the circumstancesand the treatment adopted; and

d) the financial impact of the departure on the enterprises net profitor loss, assets, liabilities, equity and cash flows for each periodpresented.


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2. Accounting Policies

- Management should select and apply an enterprises accountingpolicies so that its comply with MASB Standard.

- Definition:

Accounting policies are the specific principles, bases, convention,rules and practices adopted by the enterprise in preparing financialstatements.

- If there is no specific requirement management should developpolicies to ensure the financial statement is;

a) Relevant

b) Reliablerepresent faithfully, neutral, free of bias,prudent and complete.

3. Going Concern

- assuming that the business will continue to operate for theforeseeable future.


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4. Accrual Basis of Accounting

- transaction and events are recognized when they are occur (not as acash received or paid) and they are recorded in the accountingrecorded in the accounting record and reported in financialstatements of the period to which they are relate.

- Expenses are recognized on direct association basis between costand income (matching).

5. Consistency in Presentation

- presentation and classification of items should be appliedconsistently from one accounting period to another.

- Changes are allowed if;A significant change in the nature of the operation and the

changes could demonstrate more appropriate presentation ofevents or transaction.

A change is required by MASB Standard.


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6. Materiality and Aggregation

- the importance of a material item toward the overall financialinformation. (the item are material if its non-disclosure couldinfluence the economic decision of users).

- materiality depends on:

size of the items

nature of the items.

- material items;

presented separately in the financial statement.

- immaterial items;

aggregated with amount of a similar nature or function and neednot be presented separately.


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Example of questions on Accounting Standard:1. Apakah piawai perakaunan? Namakan badan yang bertanggungjawab dalam

penggubalan piawaian perakauanan di Malaysia. Bagaimanakah piawaiperakaunan digubal di Malaysia?

2. Berikan 2 fungsi Lembaga Piawaian Perakaunan Malaysia (MASB)?

3. General Purpose Financial Reports(Laporan kewangan untuk tujuan am) are

designed to satisfy the needs of many different type of users. Does this meanthe general purpose report will be of little used to individual users?

4. Di atas sebab-sebab yang tak dapat dielakkan, Amir Enterprise tidak dapatakur kepada salah satu piawaian perakaunan yang telah ditetapkan oleh MASB.Apakah maklumat-maklumat yang perlu Amir Enterprise dedahkan kepada

pengguna-2 maklumat perakaunan sepertimana yang dikehendaki oleh MASBdalam keadaan ini?

5. Mestikan persembahan penyata kewangan tekal (consistent)dari satu tempohke satu tempoh yang lain?Dalam keadaan bagaimanakah ia dibenarkan tidaktekal? Mengapakah penting andaian ini dipatuhi?


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Example of questions on Accounting Concept1. Berikut adalah beberapa situasi yang berasingan. Anda dikehendaki

mengkaji setiap situasi dan nyatakan samada anda bersetuju atau tidakdengan cara ianya direkodkan di dalam akaun, dengan merujuk kepadaandaian/prinsip/konsep/konvesyen perakaunan yang relevan.Jelaskan jawapan anda.

a. Perbelanjaan pembaikan Perniagaan XYZ termasuk belanjapembaikan rumah pengarah syarikatnya sebanyak RM12000 telahdirekodkan ke dalam akaun perniagaan XYZ.

b. Salmah telah membeli mesin kira yang berharga RM50 untkkegunaan pejabat yang dijangkana boleh digunakan untuk tempoh 4

tahun. Mesin tersebut telah direkod sebagai satu belanja.c. Perniagaan Selamat mempunyai pekerja yang mahir dan reputasi

yang baik dari segi penjagaan kualiti barangan yang dikeluarkannya.Maklumat ini walaubagaimanapun tidak direkodkan.


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d. Syarikat Hijau mempunyai 2 ekar tanah berdekatan dengan LitarFormula 1 Sepang, yang dibeli pada tahun 1980 pada harga RM20000

seekar. Disebabkan oleh kepesatan pembangunan nilai tanah ini telahmeningkat kepada RM110000 seekar. Harga pasaran baru ini telahdirekodkan di dalam penyata kewangan.

e. Seorang pelanggan yang berhutang sebanyak RM4500 denganPerniagaan Enak mungkin akan muflis. Usia hutang tersebut telahlebih daripada 90 hari. Wlaubagaimanapun maklumat ini tidakdimasukkan ke dalm penyata kewangan Perniagaan Enak.

f. Perniagaan Perabut Hasan telah menerima tempaha set meja makan

dari En. Khairil pada akhir bulan Januari 2001. Set meja makantersebut dihantar kepada pada bulan Februari dan ia membayarnyapada awal bulan Mac 2001. Urusniaga tersebut hanya direkod dalam

bulan Mac, 2001 apabila ianya dibayar.


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TOPIK 1- Introduction.ppt

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