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Topic 1 (Introduction)

The document provides an overview of the accounting process. It discusses key topics such as the definition of accounting, the accounting cycle, bookkeeping principles, T-accounts, financial accounting statements including the income statement, balance sheet, and cash flow statement. It also covers accounting concepts and standards such as GAAP, IFRS, and the Malaysian MFRS. The accounting equation of assets equaling liabilities plus equity is explained.

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Suba Chalu
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60 views20 pages

Topic 1 (Introduction)

The document provides an overview of the accounting process. It discusses key topics such as the definition of accounting, the accounting cycle, bookkeeping principles, T-accounts, financial accounting statements including the income statement, balance sheet, and cash flow statement. It also covers accounting concepts and standards such as GAAP, IFRS, and the Malaysian MFRS. The accounting equation of assets equaling liabilities plus equity is explained.

Uploaded by

Suba Chalu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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TOPIC 1: OVERVIEW

OF THE
ACCOUNTING
PROCESS
PREPARED BY:
MOHD SHARIL BIN MAT
NAYAN
ACCOUNTING
Definition of accounting
 Process of summarizing, analyzing and reporting the
financial transactions (standard format).
 Accounting is required whenever money involved.
 Classified into two categories;
I. Financial Accounting
 primarily concerned with the preparation of financial
statements
II. Managerial Accounting
 covers areas such as interpretation of financial
statements, cost accounting, etc.
Accounting Cycle
Bookkeeping
 Bookkeeping is based on two basic principles:
I. every debit must have an equal credit
II. all accounts must balance, follows from the first.
 The process of bookkeeping involves four basic
steps:
I. analyzing financial transactions and assigning
them to specific accounts
II. writing original journal entries that credit and
debit the appropriate accounts
III. posting entries to ledger accounts
IV. adjusting entries at the end of each accounting
period.
T Account / Ledger
T Account / Ledger
Financial Accounting
 Involving a process of recording, summarizing,
and reporting the myriad of transactions resulting
from business operations over a period of time.

 Consists of:
I. Income statement
II. Balance sheet
III. Cash flow statement

 External use
Income Statement

Basic Format
Sales/Revenue (jualan)
(-) Cost of Goods Sold (CoGS)
Gross Profit
(-) Operating Expenses
Earning before Interest & Tax Expenses (EBIT)
@ Operating Income
(-) Interest Expenses
Earning before Tax (EBT)
(-) Tax Expenses
Net Profit/Income
Income Statement
Balance Sheet

Assets Liabilities & Equities


Current Assets Short Term Liabilities
Fixed Assets Long Term Liabilities
Equities
Total Assets Total Liabilities & Equities

** Value of Total Assets and Total Liabilities & Equities must


be the same (balance)

Kereta (Asset) = modal (equity) + hutang (liability)


40,000 = 10,000 + 30,000
Cash Flow Statement
The main components of the cash flow statement
are:
I. Cash from operating activities
II. Cash from investing activities
III. Cash from financing activities
IV. Disclosure of noncash activities is sometimes
included
Cash Flow Statement
Accounting Equation
Accounting Concepts / Standards
 Refer to a common set of accounting principles,
standards, and procedures.
 The important of Accounting Concepts
I. maintain transparency and trust in the global
financial markets and the companies who list their
shares on them.
II. IFRS also helps investors analyze companies by
making it easier to perform “apples to apples”
comparisons between one company and another
and for fundamental analysis.
The generally accepted accounting concepts.
 Generally Accepted Accounting Principles (GAAP)
- Issued by the Financial Accounting Standards
Board (FASB).
- Public companies in the United States must follow GAAP
when their accountants compile their financial statements.
 International Financial Reporting Standards (IFRS)
- Issued by the International Accounting Standards Board
(IASB).
- IFRS is followed in over 120 countries, including those in
the European Union (EU).
Differences between IFRS & American Standard
I. Financial Ratio calculations
- i.e.: IFRS is not as strict on defining revenue
II. Requirements for expenses
- i.e.: IFRS do not required development or an investment for the
future reported as expenses
III. The way inventory is accounted for
- i.e.: IFRS prohibits LIFO
Malaysian Accounting Standard
 The Malaysian Financial Reporting Standards (MFRS)
framework was introduced by the Malaysian Accounting
Standards Board (MASB) and came into effect on 1
January 2012.
 It is fully compliant with the International Financial
Reporting Standards (IFRS) framework
The impact of Balance sheet on business transaction.
I. Liquidity
 Working Capital = Current Assets – Current Liabilities
II. Profitability
 Account receivable is to high.
III. Cost of goods sold
 The end of year inventory number is a key determinant in a
company’s cost of goods sold
IV. Company Valuation
 The value for the assets
V. Company Debts
 Level of debts
The Accounting Equation
 company’s assets must be equal to the sum of its
liabilities and equity
 Assets = Liabilities + Equity @ owners capital
 What is Assets?
- Assets is the company’s possession that can be valued in
currency
- Divided into two:
I. Tangible (ada fizikal)
II. Intangible (tiada fizikal)
- Consist of current (cash and assets that can be or
intentionally transform into cash within one year) & fixed
assets (assets that not intentionally for sell or hold for more
than one year)
 What is Liabilities?
- Company’s debts or liabilities
- Consist of current/short term liabilities (payment that need
to be made in one year) & long term liabilities (payment that
need to be settled in long term period)

 What is Equity @ Owner’s Capital


- The fund allocated by the owner/s of the company and
Retained Earning (allocation from company’s profit)

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