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Chapter 1

Management Accounting 1

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Siti Nur Aida
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4 views

Chapter 1

Management Accounting 1

Uploaded by

Siti Nur Aida
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CHAPTER 1

INTRODUCTION TO
ACCOUNTING
DEFINITION OF ACCOUNT

Art of classifying, recording and summarizing of transaction


❖ Interpreting the result so obtained

1. Classifying which involve sorting


out the mass of accounting data into
orderly and meaningful categories
(Example: receipt, payment,
purchase, sale, ECT...)
2) Recording; where the transactions are
recorded in the books of business.
(Example: journal, ledger)

3) Summarizing ; where periodically the


accounting data are summarized in the form
of financial statement
(Example: Trading and Profit and Loss
Account and Balance Sheet)
◼ Interpreting where the financial data are
analyzed and used as guides to decision
making.
ACCOUNTING CYCLE
DEVELOPMENT OF
ACCOUNTING
FUNCTIONS OF FINANCIAL
STATEMENT.
1. To record and control business transaction
2. To maintain accuracy in recording
3. To meet the requirements of the law
4. To present final accounts to the owners of the
business
5. To present other financial report and analyses
6. To facilitated the efficient allocation of
resources
USERS OF FINANCIAL
STATEMENT/ ACCOUNTING
INFORMATION
USERS

Internal users External users


Those who work Those who are not
in organization directly involved with
1.Owner the organization
2.Managers 1.Creditors/bankers
2.Prospective investors
3.Employees 3.Government
4.Public
Internal Users…
Users Uses/ Purposes
Owners i. To evaluate the financial status of the business
ii. To be able to evaluate their interest in the business

Managers i. To evaluate the financial status of the business


ii. To have the information necessary to make sound
business decision

Employees i. To evaluate the firm’s ability to pay salary


ii. To get an idea of their employment prospects
External users…

Users Uses/ Purposes


Creditors i. To determine the firm’s ability to repay the loans
Prospective investors i. To evaluate the financial position of business
ii. To evaluate whether the business is a good investment or not

Government i. To determine the taxable income of the business


ii. To make better financial decision for the company

Others i. For academic purpose


ii. For planning of projects
TYPES OF BUSINESS
ORGANISATION

Company
Sole trader /
Sole
Partnership
proprietorship
Sole trader..
Characteristics Sole Trader
Registration With business registrar under the Business Registration
Act 1957
Capital By owner from savings
Ownership One person (owner)

Management and control The owner with the help from his family and workers
Characteristics Sole Trader
Liability Unlimited liability
Profit or Loss Belong to owner
Books and Accounts No legal obligation to keep the books and prepare the
accounts
Formation Easy to form
Partnership…
Characteristics Partnership
Registration With business registrar under the Business Registration Act 1957

Capital By partners according to their agreement


Ownership 2 - 20 partners but professional partners 2 - 50 persons

Management and Partners or board which consists of a few partners


Characteristics
control Partnership
Liability Unlimited liability
Profit or Loss Share according to their profit sharing ratio
Books and Accounts No legal obligation to keep the books and prepare the accounts

Formation Easy to form with bigger capital than sole trader. Easy to dissolve
(dies/bankrupt/quit)
Company…
Characteristics Company
Registration With Registrar of Companies under the Companies Act 1965

Capital By shareholders through buying of shares


Ownership Private Co: 2 - 50 shareholders.
Public Co: min 2 shareholders
Management and control
Characteristics Board of Directors appointed by the shareholders
Company
Liability Limited liability
Profit or Loss Paid to shareholders in the form of dividend
Books and Accounts Proper books of account and annual account must be sent to
ROC

Formation Hard to incorporated. Need to file the Memorandum &


Articles of Association to the ROC/CCM
END OF
CHAPTER 1

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