Ch 1 introduction to accounting

1. Chapter 1
Introduction to Accounting

2. Studying this chapter should provide you with the overview of
basic accounting, which this knowledge needed to:
◦Distinguish between the different types of business
organization
◦Define, explain and differentiate the terms bookkeeping and
accounting
◦Identify the users and the uses of the accounting information
◦Describe the accounting cycle

3. Particular Sole
Proprietorship
Partnership Companies
Public
(Bhd)
Private
(Sdn Bhd)
Own by 1person 2-20 persons2-based on ASC2-50 members
Contribution of
Capital by
Owner
-Cash or Property
-i.e motor van
Partner
based on
their
agreement
Through issue
of shares
Through issue
of shares
Control and
manage by
Owner or get help
from family
Partners or
by board
BOD appointed
by shareholders
BOD appointed
by shareholders
Liability Unlimited UnlimitedLimited Limited
Legal
requirement
No legal requirement
for its formation
Partnership
Agreement
Govern by
Companies Act
1965
Govern by
Companies Act
1965
Profit/lossesBelong to the ownerShared
based on
sharing ratio
Paid to
shareholders in
form of
dividend
Paid to
shareholders in
form of
dividend

4. Particular Accounting Bookkeeping
Definition - The art of
1
classifying,
2
recording,
3
summarizing of
transactions and business
events in monetary terms and
4
interpreting the results to
interested parties to enable
them to make decision.
- It is the mechanical
aspects of accounting
such as classifying,
recording, summarizing
of transactions
systematically in
accordance with certain
principles or rules.
Explanation &
Differences
Involve 4 stages;
a)Classifying – sorting out to
category i.e sales,payments
b)Recording-ledger,journal
c)Summarizing- TB,TPL,BS
d)Interpreting- analyzed FS
- Only a part of
accounting
- The needs of recording
transactions
systematically give rise
to the double entry
principles

5. ParticularUsers Uses
Internal
Users & Uses
-work directly in
the organization
Owner Interested in the profits earned from their
investment in the business and the
financial stability.
Manager To guide them in planning,organizing,
and controlling the organization and
analyzing the operations of the business.
Employees Business ability to progress and expand
and other monetary benefits that are
gained from a financially stable business

6. Particular Users Uses
External
Users & Uses
-indirectly
involved with the
organization
Creditors/
Bankers
Interested to know whether the business can
pay the amount owing to them.
Current &
Potential
investor
Requires information regarding the
solvency and financial strength of the
business, its present and future earning
capacity.
Government For tax purposes
Consumers Establishments of cost accounting controls.
When there is reduction on cost production,
there is reduction of the prices of goods
they purchase.

7. Transactions
Source
Documents
JournalsLedgers
Trial Balance
Adjustments
Financial
Statements
Journalizing
Posting
Yes
No
1
2
3
4
5
6
6

9. Thank you

10. Thank you