ACC60104

Introduction To Accounting
Mr Kwong
D9.02, Suite B, Ext. 5420
Tutors:
Mr Mahathir, E9 Wing A, Ext. 5658,
MahathirBin.MohamedIsmail@taylors.edu.my
Ms Corrina Wong, C5 Wing B,
TseLing.Wong@taylors.edu.my
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 1 or 2 sessions of 2 hrs each

• Only 2 or 4 hrs a week…

• 2 hrs Lect, 2 hrs Tutorial
• So u don’t really have to
see my ugly face all the
time…

Make sure ur TIMeS 2is accessable – all info

COMMUNICATION WITH MR KWONG
Consultation hours:
• Monday: 12.00pm - 2.00pm
• Tuesday: 10.00am - 12.00pm
• By appointment via Ext. 5420

Can ring Mr Kwong via intercom phones located in

level 9. Otherwise, Whatsapp in our group.
• Or else, get class rep to comm with me.
garrett.kwong@taylors.edu.my
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Ground Rules during lecture & tutorial:
1. Come to lecture on time, try not too late...
2. If late, please inform. If not, u’ll be marked as absent.
3. Come to class with an open mind, learn to unlearn.
4. If you don’t understand, don’t wait, ask ASAP.
5. Use smartphones only at OUTSIDE of the LT for social
media networking & games please.
6. Phones ringing in classroom or sms or whatsapp or
wechat tone --- NO PLEASE. Parents exempted.
7. Sleeping in class --- NO PLEASE but it depends
8. Attire. Male & female – NO short pants & NO slippers
9. Do HW and NO vulgar words #@*XyZ please!
10. Talking is ok but NOT while Mr Kwong is talking too.
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 1 Module Core Text, 1 book as below
Brenda Mattison, Ella Mae Matsumura & Tracie Miller-Nobles (2016).
Hongren’s Accounting, The Financial Chapters, Global Edition (11th Ed.)
England, Pearson/Prentice Hall

Tracie Miller-Nobles, Brenda Mattison & Ella Mae Matsumura (2016).

Hongren’s Accounting, The Managerial Chapters, Global Edition (11th
Ed.) England, Pearson/Prentice Hall

•[Compiled by Ong Fong Yew, Business Accounting (2017), Taylor’s

Business School, Taylor’s University, Pearson/Prentice Hall (11th
Edition).
•Please obtain your copy at EMO Bookshop at Commercial block.
•Each student must get 1 copy each as there are ACCESS code that
comes together with each book for exam purposes.
 Module Assessment
Modes of Assessment Weighting Due Date
Quiz 5% Week 4
Online Mid-semester Test 15% Week 8
Group Assignment 30% Week 12

Final Examination 50% Exam period

To PASS the module:

50% Overall
40% in Coursework
40% in Final Exam
 ACC60104
Introduction to Accounting
Lecture 1:
Introduction to Accounting & The
Accounting Equation

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 Learning Objectives…

1. Define what is accounting

2. Describe the users of financial information.
3. Describe the accounting profession in Malaysia
and the organisations that govern it.
4. Explore the different types of business
organisations and their distinctive characteristics.
5. Apply the entity concept.
6. Explain the accounting process.
7. Define the accounting equation and its elements.
8. Illustrate accounting for business transactions.
 What is Accounting?
Accounting, often called the language of business, is
an information system.

•…a way of recording, analysing and summarising transactions of an entity

1. • Measures business activity

2. • Processes data into reports
3. • Communicates results to decision makers

• It is the system of recording & summarizing business & financial

transactions & analyzing, verifying, & reporting the results;
• It is the measurement, processing, & communication of financial
information about economic entities eg. businesses & companies.
• Identifying
– Observe which events are economic activities
relevant to business
– Such events are known as “Transactions”
– External and Internal transactions
– External – One entity and another entity
– Internal – Entirely within one entity

• Measuring
– Expressed in common measurement
– So that effects of transactions can be combined
– Money – measure of value
• Recording
– Provides history of transactions
– Maintain files of all transactions
– Classified – place into meaningful groups
– Summarize – reports and financial statements

• Communicate
– Prepare and distribute accounting reports to users
of information
– Then they are able to analyze and interpret
The Accounting Process…
Who are interested in our business & why?
“Users” of accounting info / “Stakeholders” of a business:
Owners / Shareholders –maximum profits with minimum costs
Management & Employees – better performance , higher
salaries & benefits
Customers – accessibility to highest quality of goods at
minimum costs
Debtors - maximum credit with minimum interest
Suppliers – Minimum credit with maximum interest
Bankers – collateral, security for loans facilities
Government & Statutory Bodies – tax authorities , statute
Competitors – share of market & developments
Investors/Venture Capitalists – maximum returns
within minimum time
Entrants into business, general public, etc
In short everybody is a busy body 
 Financial vs. Managerial Accounting

Financial Accounting Managerial Accounting

Provides information for

Provides information for
external decision makers
internal decision makers
Investors
Managers
Creditors Shareholders, business
owners

Taxing authorities
Financial Acct vs Mgmt Acct

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 Key Governing Organisations…
The Companies
The government agency that regulate all
Commission of
business and companies in Malaysia
Malaysia (CCM)

The Malaysian The technical body responsible for the

Accounting Standards development, review and the empowerment to
Board (MASB) issue accounting standards in Malaysia

The International The technical body responsible for the

Accounting Standards development of international accounting
Board (IASB) standards

Malaysian Institute of The professional accounting body formed

Certified Public under the Companies Ordinances by members
Accountants (MICPA) of the accounting profession

The statutory accounting body established to

Malaysian Institute
regulate and develop the accountancy
of Accountants (MIA)
profession in Malaysia
Types of Business Organizations…

Sole
Partnerships
Proprietorships

Limited
Corporations Liability
Companies
 Types of Business Organizations…

Sole
Proprietorship Partnership Corporation LLC

Owners Sole Proprietor – Partners - Two Stockholders – Members

Only one owner or more usually many

Life of Limited by owner’s Limited by Indefinite Indefinite

Organization choice or death owner’s choice
or death

Liability of Owner is personally Partners are Stockholders are Members are

owners for liable personally liable not personally not
business (unlimited liability) liable personally
debts liable
 Sole Proprietorships
Distinguishing Characteristics & Organization

What distinguishes a proprietorship from

other types of business organizations?
 Characteristics of Corporations…

1. Incorporators obtain charter from the state

2. Charter authorizes corporation to:
• issue stock
• conduct business in accordance with state law and the
corporation’s bylaws
3. Corporations begins to exist when stock is issued

What are the advantages of corporations?

Structure of a Corporation…

Shareholders

Board of Directors

Top Management
(CEO, CFO, COO, etc)
 Sole Proprietor vs LLP vs General
Partnership vs Company in Malaysia
• The following are the common forms of business
organization in Malaysia:-
• By an individual operating as Sole Proprietor
• By two or more (but not more than 20) persons
in Partnership, or
• By two or more persons in Limited Liability
Partnership, or
• By a locally incorporated Company or by a Foreign
Company registered under the provisions of the
Company Act 1965
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 The Business Entity Concept

• one of the basic accounting concepts used by accountants

when preparing accounting information and reports.
• accountants assume that a business entity is separate and
distinct from its owners and from other business entities
• other principles include:
• cost principle
• stable monetary unit concept
 The Accounting Equation

Measures the resources at the disposal of the business + claims

to those resources

Assets = Liabilities + Owner’s Equity

Economic Claims to Economic

Resources Resources
Resources : what Resources : where did
they are = the assets came from
[what the biz has] [Owner and Borrowings]
What the biz OWNS What the biz OWES
 Assets

• An asset is a resource controlled by the entity/business as a

result of past events from which future economic benefits
are expected to flow to the entity.
• Economic resources that have a future benefit (e.g.
generate future cash inflows, or reduce/prevent future cash
outflows)
• Examples?
 Claims to Assets
• Liabilities
– Present obligations arising from past events, the settlement of
which is expected to result in an outflow from the entity of
resources embodying economic benefits
– Economic obligations/Debts payable to outsiders
– Examples:
• Accounts payable • Capital/Owners’ equity
• Bank loans – Owners’ claims to the
• Taxation owed assets of the business
– Capital/Owner’s equity
= Assets Less Liabilities
 The Accounting Equation

Sole Proprietorship

Assets = Liabilities + Owner’s Equity

Capital
 The Accounting Equation
Sole Proprietorship

Beginning Capital Revenues

+ Net income
- Expenses
- Withdrawals*

= Ending Capital

*Appropriation of Profits
 Revenues & Expenses

Revenues
= Amounts earned by delivering goods or services to customers
• Sales revenue
• Service revenue
• Interest revenue
• Dividend revenue

Expenses
= Outflows of assets or increasing liabilities in the course of delivering goods
or services to customers
• Salary expense
• Rent expense
• Utilities expense
• Interest expense
 Accounting Equation
Once business commences, there will be income [revenues minus
expenses and gains minus losses] and perhaps additional capital
contributions (increase in capital) and withdrawals (drawings).
At the end of a reporting period, these will impact Owners Capital
as follows:
Assets = Liabilities + Capital
Impact on Owner's Capital
Revenue increase
Expenses decrease
Gains increase
Losses decrease
Contributions
/additional Capital increase
Drawings/taking
out cash/goods for
private use decrease

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 Accounting Equation
A summary of the impact of revenues, expenses , gains, losses,
additional capital contributions and withdrawals (drawings) are
shown below.
Assets = Liabilities + Capital
[+ Revenues
- Expenses
+ Gains
- Losses
+ Contributions
- Withdrawals ]

Additional items are tracked until end of accounting period at which

time they are closed to owners’ equity
[Note : + indicates increase and
- Indicates decrease ]
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 The Accounting Equation: Example 1

Assets Liabilities Owner’s Equity

Cool Café $? $25,000 $43,000

Klean Laundry 85,000 ? 54,000

Fresh Grocer 102,000 49,000 ?

 Accounting for Business Transactions

Transaction
•An event that affects the financial position of a particular entity
•Can be recorded reliably
•Every transaction impacts at least two items
•The accounting equation balances before and after each transaction
 Example 2…
Sandra owns and operates an advertising firm called Awesome Ads. The following
amounts summaries her business on 30 June 2017:
Assets Liabilities Owner’s Equity
Accounts Accounts Sandra,
Date Cash Receivable Supplies Land Payable Capital

Bal 2,500 1,500 0 13,000 4,000 13,000

During July 2017, the business completed the following transactions:

a) Sandra invested cash of $10,000
b) Performed service for a client and received cash of $1,100
c) Paid off the beginning balance of accounts payable
d) Paid office rent for $1,000
e) Purchased supplies on account, $700.
f) Sandra sold her personal car for $15,000
g) Sandra withdrew $2,200

Required:
Analyze the effects of the above transactions on the accounting
equation of Awesome Ads.
 The Accounting Equation: Example 2

Assets Liabilities Owner’s Equity

Accounts Accounts Sandra,
Date Cash Receivable Supplies Land Payable Capital

Bal 2,500 1,500 0 13,000 4,000 13,000

Liabilities & Equity =

Assets = $17,000
$17,000
 Example 2 (continued)
a) Sandra invested cash of $10,000

Assets Liabilities Owner’s Equity

Accounts Accounts Sandra,
Date Cash receivable Supplies Land payable Capital

Bal 2,500 1,500 0 13,000 4,000 13,000

(a) 10,000 10,000

Bal 12,500 1,500 0 13,000 4,000 23,000

Liabilities & Equity =

Assets = $27,000
$27,000
 Example 2 (continued)

b) Performed service for a client and received cash of $1,100

Assets Liabilities Owner‘s Equity

Accounts Accounts Sandra,
Date Cash receivable Supplies Land payable Capital
12,500 1,500 0 13,000 4,000 23,000
Bal
(b) 1,100 1,100

Bal 13,600 1,500 0 13,000 4,000 24,100

Liabilities & Equity =

Assets =$28,100 $28,100
 Example 2 (continued)
c) Paid off the beginning balance of accounts payable

Accounts Accounts Sandra,

Date Cash receivable Supplies Land payable Capital
13,600 1,500 0 13,000 4,000 24,100
Bal

(c) (4,000) (4,000)

Bal 9,600 1,500 0 13,000 0 24,100

Liabilities & Equity =

Assets =$24,100
$24,100
 Example 2 (continued)
d) Paid office rent for $1,000

Accounts Accounts Sandra,

Date Cash receivable Supplies Land payable Capital
9,600 1,500 0 13,000 0 24,100
Bal
(1,000) (1,000)
(d)
8,600 1,500 0 13,000 0 23,100
Bal

Assets = $23,100 Liabilities & Equity

=$23,100
 Example 2 (continued)
e) Purchased supplies on account, $700.

Accounts Accounts Sandra,

Date Cash receivable Supplies Land payable Capital
8,600 1,500 0 13,000 0 23,100
Bal
700 700
(e)
Bal 8,600 1,500 700 13,000 700 23,100

Assets = $23,800 Liabilities & Equity =

$23,800
 Example 2 (continued)
f) Sandra sold her personal car for $15,000

Accounts Accounts Sandra,

Date Cash receivable Supplies Land payable Capital

Bal 8,600 1,500 700 13,000 700 23,100

(f)

Bal 8,600 1,500 700 13,000 700 23,100

Assets = $23,800 Liabilities & Equity =

$23,800
 Example 2 (continued)
g) Sandra withdrew cash $2,200

Accounts Accounts Sandra,

Date Cash receivable Supplies Land payable Capital

Bal 8,600 1,500 700 13,000 700 23,100

(g) (2,200) (2,200)

Bal 6,400 1,500 700 13,000 700 20,900

Liabilities & Equity

Assets =$21,600
=$21,600
 Example 3…
Activity - Mike Phonie decides to open a smart phone (sp) repair
shop
To get started he rents some shop space, buys initial stock of sp parts
and opens the shop for business.
Below is a listing of transactions that occurred in month 1 (Apr)
Date Transactions
Apr 1 Owner contributes RM7500 in cash to capitalize the business
Apr 8 Purchased RM2500 in sp parts on credit, payable in 30 days
Apr 15 Paid first months shop rent of RM1000
Apr 17 Repaired sp for RM1100, collected RM400 cash; billed customers for
the balance of RM700 (debtors)
Apr 18 RM275 in sp parts were used
Apr 25 Collected RM425 from customers (debtors paid)
Apr 28 Paid RM500 to suppliers (creditors) for parts bought earlier in the
month
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Show how transactions affect accounting equation
 Example 3 (continued)
Mike Phonie – SP Repair shop – cont’d
ASSETS = LIABILITIES + OWNERS EQUITY
Capital Revenue
Date Cash + SP Parts + Debtors = Creditors + +
(Phonie) (Expenses)
April

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 Accounting Equation Summary
Summary of effect of typical transactions upon assets, liabilities and capital

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 The Financial Statements

After analyzing/recording all transactions – total assets equals total liabilities plus
capital/owner’s equity
How should people make use of such information? Is the company profitable? Will it
be able to pay off a loan?
In order to address these & to aid effective decision-making – financial statements
must first be derived – summary of transaction data
Financial statements
• business documents that report on a business in monetary terms
1. Income statement/Profit and Loss Account
2. Statement of Owner’s Equity
3. Statement of Financial Position/Balance Sheet
4. Statement of Cash Flows
 Example 3 (continued)
The Accounting Equation is expressed in a financial position statement
called the balance sheet.
The financial position is expressed AS AT a particular point of time
eg as at 31 Dec 2017.

Therefore, as at 30 Apr 2017, Mike Phonie’s transactions above would be

expressed as follows

Mike Phonie’s Balance Sheet / SOFP as at 30/4/17

Assets Liabilities
Creditors 2000
Debtors 275
Financed by
Stock (sp parts) 2,225 Capital 7,500
Cash 6,825 Loss for period (175)
9,325 9,325

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 Components of A SOFP / Balance Sheet
Assets
Non Current assets XX
Current Assets XX
Liabilities
Current Liabilities (XX)
Working Capital (Net current assets/(Liabilities)) XX
XXX
Non Current Liabilities (XX)
Total Net Assets YYY

Financed By
Capital (Share Capital / Capital Introduced) XX
Retained Earnings XX
Total Capital & Earnings 53 YYY
 Example 3 (continued)
For our learning purposes, we shall be using the vertical format rather than the
horizontal format.

Therefore, as at 30 Apr 2017, Mike Phonie’s SOFP should look like below:

Mike Phonie’s SOFP as at 30/4/2017

Assets
Debtors 275
Stock (bike parts) 2,225
Cash 6,825
9,325
Liabilities
Creditors (2000)
7,325
Financed by
Capital 7,500
Loss for period (175)
7,32554
 Tutorial Questions, kindly refer our
study guide…

Short Exercises Questions: S1-1, S1-3, S1-6,

S1-7, S1-8, S1-9, S1-10

Exercises: E1-19, E1-21, E1-26, E1-27

Problems: P1-40A, P1-45A (Part 1), P1-46A

(Part 1) 0102723912 Gregory
01128188585
See you next lecture
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