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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”