1 Intro to Acc & Buss

7/27/2019 1 Intro to Acc & Buss

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INTRODUCTION TO

ACCOUNTING & BUSINESS


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TYPES OF BUSINESS

Service businesses provide services

rather than products to customers.

ServiceBusiness ServiceThe Walt Disney Company Entertainment

Malaysia Airlines System (MAS) Transportation

Maybank Corporation Financial services

Marriott International Hotels Hospitality and lodgingKPMG Auditing


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MERCHANDISING BUSINESS

Merchandising Business ProductGiant General merchandise

Amazon.com Internet books, music, video

Toy R Us Toys

Panasonic Consumer electronics

Gap Inc. Apparel

o Merchandising businesses sell products they purchase from other

businesses to customers.o Merchandisers sell the goods that manufacturers produced.

o Merchandisers that sell exclusively to other businesses are called

wholesalers.

o Those that sell to customers are called retailers

o department stores, car dealers, supermarkets, drugstores, and hobby shops.


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MANUFACTURING BUSINESS

Buys raw materials, uses labor and machinery to

transform them into finished products, and sells thefinished products to individuals or other businesses.

Examples are shipbuilders, bakeries, and tire factories.

Manufacturing Business Product

General Motors Corporation Cars, trucks, vans

Nokia Cell phones

Dell Inc. Personal computers

Nike Athletic shoes and apparelF & N Company Beverages

Sony Corporation Stereos and televisions


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TYPES OF BUSINESS

ORGANIZATION

PROPRIETORSHIP

CORPORATION

PARTNERSHIP

LIMITED LIABILITY

COMPANY (LLC)


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PROPRIETORSHIP

owned by one individual,

more than70%of business organizations in

Malaysia are organized by proprietorships,

easy and low cost of organizing, financial resources are limited to the owners

resources, and

commonly used by small businessessuch ashardware stores, laundries, restaurants, and grocery

shop.

Joes


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ADVANTAGES & DISADVANTAGES

OF SOLE PROPRIETORSHIP

Easy to set up

All profits go to owner

Owner has total control

Few regulations to follow

ADVANTAGES

DISADVANTAGES

Limited expertise

Hard to raise money

Owner has all the risks

Hard to attract talented employees


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PARTNERSHIP

owned by two or more individuals,

about 10% of business organizations in Malaysia

are organized by partnerships.

combine the skills and resourcesof more than one

person.

Business partners usually enter into a written, legal

agreement - specifies each partners investment in money

or property, responsibilities, and percent of profits and

losses.

Like proprietorships, small local businesses such as

automotive repair shops, music stores, beauty salons, and

clothing stores may be organized as partnerships.

Joe and Martys


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ADVANTAGES & DISADVANTAGES

OF PARTNERSHIP

ADVANTAGES

DISADVANTAGES

Easy startup

Pooled skills and talents

More money available

Risk of partner conflict

Shared profits

Shared risks


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CORPORATION

organized under state or federal

statutes as a separate legal taxable entity

generates 90% of the total dollars of business receipts

received. comprises only 20% of the business organizations in

Malaysia.

ownership is divided into shares of stock, sold to

shareholders (stockholders)

able to obtain large amount of resources by issuing

stock.

is used only by large businesses.

J & M, Inc.


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LIMITED LIABILITY COMPANY

combines attributes of a partnership

and a corporation in that it is organized as a

corporation.

can elect to be taxed as a partnership

a popular alternative to a partnership has tax and

liability advantages to the owners

J & M, Inc.

Joe and Martys


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BUSINESS STAKEHOLDERS

A business stakeholderis a person orentity

having an interest in the economic performance

and well-being of a business.

A business stakeholderis a person or

entity having an interest in the

economic performance and well-beingof a business.


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CAPITAL MARKET

STAKEHOLDER

provide the major financing for

the business in order for the

business to begin and continue its

operations.

BANKS & OWNERS


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PRODUCT OR SERVICE

MARKET STAKEHOLDERS

Buyers of product or servicesand vendors to the business

CUSTOMERS & SUPPLERS


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GOVERNMENT

STAKEHOLDERS

Have an interest in the economic

performance of a business. City,

county, state, and federal governments

collect taxes from businesses within

their jurisdiction.

FEDERAL, STATE & LOCAL

GOVERNMENT


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INTERNAL STAKEHOLDER

Individuals employed by the business.

Managers have an incentive to maximize

the economic value of the business.Employees have an interest because their

jobs depend on it.

EMPLOYEES & MANAGERS


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ROLE OF ETHICS IN

BUSINESS Ethics is the moral principles that guide the

conduct of individuals.

Company Result

Enron Fraudulently inflated its financial

result

Bankruptcy. Criminal

charges against senior

executive.

WorldCom Misstated financial results by

nearly RM9 billion.

Bankruptcy. Criminal

conviction of CEO & CFO.

Example of companies caught in the midst of ethical lapses

that lead to fines, firings and criminal and/or civil prosecutions.


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WHAT IS ACCOUNTING?


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Aninformation system that provides reports to

stakeholders about the economic activities and

condition of a business.

Language of business accounting is the

means by which business information is

communicated to the stakeholders.

Who uses the accounting information?


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THE ROLE OF ACCOUNTING IN

BUSINESS

Accounting PROVIDES information

for MANAGERS to use in operating

the business.

Also provides INFORMATION to

other stakeholders to use in

assessing the economic performance

and condition of the business.


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INTERNAL USERS

Directly involved in managing and running anorganization.

They use the information to help improve the

efficiency and effectiveness of an organization.

E.g. Marketing managers, production supervisors,

finance directors, and company officers.

Need detailed information like financial comparison

of operating alternative, projection of income fromnew sales & forecast of cash needs for the coming

year on a timely basis in running the business.


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EXTERNAL USERS not directly involved in running the organization

Investorsto make decisions whether to buy, hold, or sell theirshare in the company.

Tax authoritycheck for companys tax compliance.

Security Commission (SC)to make sure that company is operating

within the prescribed rules. Customersobserve whether company continues to maintain

product quality and warranty and then decide whether to continue

supporting its products.

Labor unionwant to know whether company can afford to give

pay raises or benefits.

Economic plannersto forecast economic activities.


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The role of the accounting

profession in business and

specialized accounting fields


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Financial accounting is primarily

concerned with the recording andreporting of economic data and

activities for a business.

Managerial accounting uses both

financial accounting and estimated data

to aid management in running day-to-day operations and in planning future

operations.


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ACCOUNTING PROFESSION

PRIVATE

ACCOUNTING

Accountants employed by a

business firm or a not-for-

profit organization

PUBLIC

ACCOUNTING

Accountants and their

staff who provide

services on a fee basis


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ACCOUNTINGPROFESSIONAL

BODIES

MICPA MIA

MASB FRF


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Malaysian Institute of

Accountant (MIA) Established under the Accountants Act 1967.

Authoritative body regulating the accounting profession

Objectives:1. To promote & regulate professional & ethical

standards

2. To enhance competency

3. To enhance the status of members4. To lead research and development

5. To inculcate a high sense of social responsibility


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Malaysian Institute of Certified

Public Accountant (MICPA)

Objective:

1.To advance the theory and practice ofaccounting

2.To recruit, educate, train and assess members3.To preserve the professional independence of

accountants

4.To maintain high standards of practice and

professional conduct by all its members.5.Advancing the profession of accountancy in

relation to public practice, industry, commerce,education and the public service.


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Malaysian Accounting Standard

Board (MASB)

Established under the Financial Reporting Act 1997

Independent authority to develop & issue accounting &

financial reporting standards in Malaysia.

Functions and powers:

Issue new accounting standards

Issue statements of principles for financial reporting

Sponsor the development of accounting standards

Conduct public consultant as necessary Develop a conceptual framework for the purpose of

evaluating proposed accounting standards


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Financial Reporting Foundation

(FRF)

Established under the Financial Reporting Act

1997

Responsible for MASB's performance, financial

and funding arrangements.Functions and powers of the FRF:

To provide its views to the MASB

To review the performance of the MASB To be responsible for the financing

arrangements & operations of the MASB

To approve the MASB budget


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CHARACTERISTICS OF THE

QUALITATIVE ACCOUNTING

INFORMATION


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PRIMARY QUALITIES

RELEVANCE

Accounting

information has

relevance if it

makes adifference in a

decisionRELIABILITY

Information is free from

significant error and

bias; must beverifiable; must be a

faithful representation


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SECONDARY QUALITIES

CONSISTENCY

COMPARABILITY

Can be compared with

accounting information

about other enterprise;

should be comparable

from business to

business and period to

period

A company

uses the same

accounting

principle andmethods year

to year

Documents

1 Intro to Acc & Buss