Acct 16300 Introduction Of Accounting

Acct 16300 Introduction Of Accounting

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DIPLOMA IN BUSINESS (ACCOUNTING)
YEAR 1 – SEMESTER 1 (2014/2015)
COURSEWORK 1

1.  CONTENT

1.1Accounting Equation

The accounting equation can be expressed as
ASSETS = LIABILITIES + EQUITY

For example: A student buys a smartphone for RM1, 000. This student borrowed RM400 from his friend and spent another RM600 earned from his part-time job. Assets (RM1, 000) = Liabilities (RM400) + Equity (RM600) Assets (what it owns) – A company’s resources of things owns by company. Examples of assets include inventories, accounts receivable, cash balances, bank balances, deposits, land, building, office equipment, fixture and fittings, and motor vehicles. Liabilities (what it owes to others) –A company’s obligations of amount owes by company. Example of liabilities include bank loan, bank overdraft, loans payable, salaries, mortgage loan, and interest payable. Equity (the difference between assets and liabilities) – A company’s resources that are provided by the owner into the business for use in the business. Examples of equity include drawings, capital, and profit. 

You are required to suggest: 

ACC 100 Introduction of Accounting 

ACC 101 Introduction to Financial Accounting 

ACC 201 Financial Accounting

1.2 Accounting Cycle

There are 7 steps to form an accounting cycle. The first step is source documents. Source documents are the documents that have record all the business transaction and we keep it as an evidence. Next is the 7 books of prime entry. The 7 books of prime entry is record the daily business transaction based on the source documents, we will record all the transaction business into cash book which is on cash term and we will also record all the credit term into journal entries .The third step is the 3 ledgers. It is using the concept of double entry system and transfer all the accounts from the books of prime entry to get a summarised. There are 3 type of ledgers where is general ledger where is record others than trade payables account and trade receivables account. Then, trade receivables we can find it in sales ledger, on the other hand, trade payables we can find it in purchases ledger. We can prepare draft trial balance & financial statements after finish month-end posting. Trial balance is can let us check the accurate of the double entry. Therefore, the total amount of the debit(Dr) sides must equal to the total amount of the credit(Cr) sides. There are two types of financial statements, the statement of profit or loss and the statement of financial position. After that, we have to do adjustments thought the source document(memo), and general journal. After we finish the adjustments we have to prepare the adjusted trial balance & financial statements. The final step is closing entries, which is close all the accounts in the 3 ledgers. We have to balancing off all the accounts with carried down (c/d) at the end of the accounting period. The balance of carried down (c/d) will bought down (b/d) to the next month.

1.3 Users of accounting information

Nowadays, people in the world are using the accounting information to determine the business operations and evaluate their benefits from financial statements. There are many main users such as investor, financial providers, general public, government and so on. What is the reasons and the purposes that the users need to received accounting information? First and foremost is the management (i.e. manager). They used accounting information to analyse and appraise operations of organising and controlling organisation of firm. These financial statements enable them to make decision, planning , control and coordination of business activities. Second, the employees. From the result of those financial statements, employees can find out the payment of salary, company and career growth, secured employment, other benefits and they can discovered their own employment prospects. Besides, customers is also the main users of accounting information. Customers need the accounting information to ensure the long-term supply of goods in secured. In addition, suppliers are interested to know whether the company is able to pay on its debts with the credit period given. Meanwhile, competitors need financial statements for strategic purposes, the can evaluate their position and the desirability of any such move. They also get information on the benefits and downsides of their competition from this accounting information. The other users are shareholders and investors. They interested about the ability of management of a firm, financial strength of business, company’s future plan and dividends and the business present and future earning capacity. They can communicate with the results from financial statements to decide the allocation and apportion of the profits. Moreover, the financial providers. The example of financial providers are banks and financial institutions who lend money to the business. They need accounting information to determine the financial stability and ability of a firm to repay the amount borrowed and pay interest creditworthiness. Furthermore, general public able to get information about the environment protection, community services, fair trade, provision of job opportunities, etc. through the accounting information. Government also one of the main users of accounting information. They received the information to make better financial decision for country economy, assess tax payable and collect statistical data for economics analysis. Other users such as students are using accounting information for academic purpose and also study the general status of business.

1.4 Types of business ownership in Malaysia

There are many forms of business ownership can be found in Malaysia. It can be categorized into three types, namely sole proprietorship, partnership and also company.

First and foremost, sole proprietorship. Sole proprietorship can be also called as sole trader. This business is simplest and cheapest to be set-up. This types of business entity is actually owned by single or sole owner. It was usually assisted by owner's family members. Owner in sole proprietorship has the power to manage and control the business operations. Personal names can be used as business names. For example, Ali Mini Market. Owner received all the profits when business is earning but in vice versa, as the business fails, sole proprietor has to address all the debts personally.

Another types of business ownership in Malaysia is partnership. Partnership is such an extension of sole proprietorship. This business is carried out by at least 2 individuals but not exceeding 20 persons. However, professional partnership such as lawyers and doctors can have a maximum 50 persons in this type of business entity. There are two types of partnership, that is general partnership and limited partnership. The business is jointly managed by partners. The agreement was set among the partners either by oral or writing. Both of the partners are liable to jointly settle all the debts and loans if the business fails or incurred losses.

Lastly, company. Company is the most complex form of business. This types of business ownership is owned by at least 2 persons, maximum can be up any numbers of persons. The owners known as shareholders. Company can be either a private limited company, known as “Sendirian Berhad”( Sdn. Bhd.) or public limited company (Berhad). Private limited company cannot sell the shares to general public but public limited company can sell the shares to others in order to raise the company’s capital. It is professionally managed by a board of directors that elected by shareholders. If the business incurred losses or fails, shareholders are not liable to settle the business debts. They have limited liabilities. It means that the owners of a business liable for its losses only up to the amount they invest in this business. 

CONCLUSION

Based on our research, we realized that accounting information is important because it plays the important role in each firm. It provided the financial information for all businessman and businesswomen to reduce the losses. Financial information can help the business to make financial adjustment and financial allocation. The financial information act as the incentives to increase business profit

It will important to read out following chapters: 

FIN 200 Corporate Financial Management 

FNCE 20000 Business Finance

REFERENCES

Riss Corporate Service, Type of Business Entities in Malaysia, .

Type of Business Entities in Malaysia .

Jim Riley, updated Sunday 23 September, 2012, .

Fortes Hilary, 2011, Accounting Simplified, Ashford Colour Press Ltd, Gosport.

KEITH E.J.FARMER BA FCA, 2010, Basic Accounting-Malaysia Version-Volume 1, MingPieMan Pte.Ltd., Singapore.

Andrew Leong Fook Chee, Wong Sei Van, 2010, Business Accounting Third Edition, Pearson Malaysia Sdn.Bhd., Malaysia.

Roshayani Arshad, Laily Umar, Siti Maznah Mohd Arif, Kamaruzzaman Muhammad, 2009 Financial Accounting (3rd edition) McGraw-Hill(Malaysia)Sdn Bhd. Malaysia

Harold Averkamp, Introduction to the Accounting Equation, .

Frank Wood, Alan Sangster,2012,Business Accounting 1(12th Edition),Pearson Education Limited, Italy