 ACCOUNTING ENVIRONMENT

 ACCOUNTING CONCEPT & PRACTICE

 THE RECORDING PROCESS
 COMPLETING THE ACCOUNTING CYCLE
 ACCOUNTING FOR MERCHANDISING BUSINESSES
 COMPANIES ANNUAL REPORT
 FINANCIAL STATEMENT ANALYSIS
 MANAGERIAL ACCOUNTING
 COST VOLUME PROFIT ANALYSIS (CVP)
 BUDGETING AS A TOOL FOR PLANNING &
CONTROLLING
 VARIANCE ANALYSIS & STANDARD COSTING
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 Definition of accounting.
 Purposes of accounting, fields of
accounting, accounting professional
bodies, ethics and regulations
 Types of business
 Characteristics of qualitative
accounting information
 Users of accounting information

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WHAT IS ACCOUNTING?

Accounting
Process of Identifying
Recording
Preparing
Reporting
Communicating Economic
Analysing Stakeholders:
activities
Auditing Internal
External

Definition of accounting

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 WHAT IS THE PURPOSES OF ACCOUNTING?

 Information on economic activity

Accounting provides basic information for any business
decision whether by internal or external parties.

 Financial position of an entity

Accounting can help stakeholders evaluate the company's
financial position through the financial statements.

 Planning
Organizations need to plan how they will allocate their limited
resources (such as cash, labour, materials, machinery and
equipment) towards the need to compete in the future.

 Making decisions
The main role of accounting is to provide information and
analysis for management decisions and controls.

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WHAT IS THE FIELDS OF ACCOUNTING?
Relating to the preparation,
summarization, analysis and reporting
Financial
of financial transactions through
Accounting
financial statements related to the
business.
Relating to the process to provide
detailed information of the costs
Management
required by the management to assist
and Cost
in the business decision-making
Accounting
process and plan for the future.

Relating to the systematic and

independent financial reporting
Auditing checks to ensure the extent to which
the reports show a true and fair view
in accordance with the law.
Relating to the accounting for tax
purposes. Taxes are mandatory
Tax financial charges or levies imposed on
Accounting taxpayers (individuals or business
entities) prescribed by a law of a
country.

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 TYPES OF ACCOUNTANTS

Chartered Certified
Chartered Professional Public
Accountant (CA) Accountant Accountant
(CPA) (CPA)

Certified Certified Certified

Practising Management Commercial
Accountant Accountant Professional
(CPA) (CMA) Accountant
(CCPA)

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ACCOUNTING PROFESSIONAL BODIES

Malaysian Institute
Malaysian Institute
of Certified Public
of Accountants
Accountants
(MIA)
(MICPA)
Accounting
Professional
bodies in
Malaysia
Malaysian
Accounting Financial Reporting
Standards Board Foundation (FRF)
(MASB)

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Malaysian Accounting Standards Board
(MASB) - established under the Financial
Reporting Act 1997 as an independent
authority to develop and issue accounting
and financial reporting standards in
Malaysia.

Financial Reporting Foundation (FRF) -

responsible for the oversight of the MASB's
performance, financial and funding
arrangements, and as an initial source of
views for the MASB on proposed standards
and pronouncements.
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Malaysian Institute of Accountants (MIA) - a
statutory body established under the
Accountants Act, 1967 to regulate and
develop the accountancy profession in
Malaysia.
Malaysian Institute of Certified Public
Accountants (MICPA) - was formed by 20
members under the Companies Ordinances,
1940 - 1946 as a professional body to
advance the theory and practice of
accountancy in all its aspects; recruit,
educate, train and a body of members skilled
in these areas, etc. 10
 ETHICS?
….. are the moral principles that
guide the conduct of individuals.
• right or wrong
• acceptable or not
• standards of good or bad behaviour

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 WHY ETHICS?
• our actions are watched and judged
as right or wrong, honest or
dishonest, and fair or bias.
• it has impact on society and others.
• communicate credible economic
information activities.

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 The objective of accounting is to provide
relevant, timely information for user
decision making.
 Accountants must behave in an ethical
manner so that the information they
provide users will be trustworthy and, thus,
useful for decision making.
 LIMITED LIABILITY COMPANY

TYPES OF BUSINESS
- combination of a partnership and a corporation
- can elect to be taxed as a partnership
- a popular alternative of a partnership
- has tax and liability advantages to the owners

Characteristics Proprietorship Partnership Corporation

Owner 1 2-20 partners Sdn Bhd:
2-50 shareholders;
Bhd: 2- no limit

Capital owner partners shareholders

Profit/loss owner depend on dividend to
agreement shareholders

Liabilities not limited not limited limited

Management owner active partner board of directors
Establishment easy easier than difficult
corporation

Tax owner (income partners (income business tax

tax) tax)
Example retail shop law firms financial institution such
traders as bank and factories
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 CHARACTERISTICS OF QUALITATIVE
ACCOUNTING INFORMATION

Reliable Relevant
Qualitative
(which can be (for planning,
Accounting
used with control and decision
Information
confident and making purpose)
certainty)

Comparable
(fair and easy in
contrasting Should be
organizations) understandable
too

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USERS OF ACCOUNTING INFORMATION

• Have direct relationship with

company (management and
operation)
• Example top management, INTERNAL USERS
managers, employees, internal
auditors, etc.

• Have indirect relationship with

company (limited access to
company’s activities)
EXTERNAL
• Example lenders, bankers,
USERS
governments, investors,
customers, competitors,
company registrar, external
auditors, etc.

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POP QUIZ:
1. Management accounting provides accounting
information for:

A. Lenders
B. Customers
C. External auditors
D. Internal auditors

2. What are the characteristics of qualitative

accounting information?

A. Relevant, accurate and timeliness

B. Reliable, relevant and accurate
C. Comparable, relevant and reliable
D. None of the above
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