36 Questions
What is the primary goal of accounting classification?
To maintain the fundamental accounting equation
What is the nature of the accounting standard-setting process?
A political process driven by interest groups
What is the relationship between debits and credits in accounting?
Debits portray one classification, credits portray another
What is the impact of accounting information on society?
It has an impact on the welfare of various groups in society
What is the purpose of accounting standards?
To provide a framework for financial reporting
What is the nature of the demand for accounting information?
It is a derived demand
What is the main role of the Securities Act of 1933?
Regulating the issuance of securities in the interstate markets
What is characterized by ad hoc solutions to urgent problems and controversies?
The intervention of management
What is the main provision of Section 13(b) of the 1934 Securities Exchange Act?
To prescribe accounting guidelines or forms for reports
What was the SEC's message to the profession on April 25, 1938?
To use its mandate and develop accounting principles
What was the focus of most accounting techniques during the early days?
The determination of taxable income and the minimization of income taxes
What is one of the consequences of the dependence on management initiative?
The lack of theoretical support for most accounting techniques
What is the basic principle of capitalism?
Economic initiative should come from individuals rather than the government
What is one of the reasons that explain the role of double entry in economic expansion?
It contributed to a new attitude toward economic life, i.e., the goal of substance is replaced by the capitalistic goal of profits
What is the main function of the independent bodies established under the Financial Reporting Act 1997?
To develop the capital market in Malaysia
What is the primary purpose of the Financial Reporting Act 1997?
To enforce financial reporting standards
Which of the following entities is required to comply with the Bursa Listing Requirements?
Listed companies
What is the primary responsibility of the Securities Commission?
To regulate the securities industry
What is the significance of February 2006 in the context of private entity reporting?
The announcement that private entities need not comply with FRSs
What is the primary purpose of the Private Entity Reporting Standards (PERS)?
To provide accounting standards for private entities
What is the role of the MASB in the context of financial reporting?
To develop financial reporting standards
What is the significance of the Bursa Listing Requirements in the context of financial reporting?
To provide guidelines for financial reporting by listed companies
What is the process of getting acceptance in a democratic society?
A highly complex and skilled marketing process in a political arena
What is the focus of the FASB's approach to formulating accounting principles?
Deductive and quasi-political
What is the goal of eliminating undesirable accounting techniques?
To codify acceptable accounting techniques
What is the limitation of accounting history?
It may be incomplete and conditional
What is the nature of accounting history?
Either narrative or interpretative, and conditional
What is the role of professional associations and agencies?
They contribute to the formulation of accounting principles
What is the goal of developing a theoretical framework for accounting?
To develop an accounting institution
What do historical inquiries of accounting events provide?
Probable factors affecting the event
What is the purpose of accounting?
To allocate the cost of resource usage against revenue
How were future accountants trained in the past?
By being apprenticed to a practicing accountant
What is the nature of Assets, Liabilities, and Owners' Equity in accounting?
They are residual from the process of allocating costs against revenue
What is the objective of Positive Accounting Theory?
To explain and predict real-world accounting phenomena
What is the approach used in accounting development?
Inductive approach
What is the characteristic of accounting information according to the text?
Descriptive, inferential, and objective
Study Notes
Accounting and Politics
- Accounting standards are products of a political process, influenced by various groups that lobby for their own interests.
- The SEC plays a significant role in the development of accounting principles, with the authority to prescribe accounting guidelines or forms for reports submitted to it.
Classification and Double Entry
- Debit portrays one classification, while credit portrays another.
- The value of increment is offset by an equal value of decrement in double entry accounting.
Economic Initiative and Capitalism
- The basic principle of capitalism is that economic initiative should come from individuals rather than the government.
- Double entry accounting contributed to a new attitude towards economic life, replacing the goal of substance with the capitalistic goal of profits.
Limitations of Accounting History
- Historical inquiry may be incomplete and conditional, and may not reveal the cause of an event with certainty.
- History can, however, indicate probable factors affecting an event.
Financial Reporting Regime
- The Financial Reporting Act (FRA) 1997 provides enforcement authority to the standards issued by the Malaysian Accounting Standards Board (MASB).
- Companies listed on Bursa Malaysia must comply with the Bursa Listing Requirements and the Financial Reporting Act (FRA) 1997.
- Private entities need not comply with Financial Reporting Standards (FRSs), but can choose to apply Private Entity Reporting Standards (PERS).
Accounting Theory and Practice
- The purpose of accounting is to allocate the historical cost of resource usage against revenue.
- Assets, Liabilities, and Owners' Equity are residual from the accounting process, and do not measure or indicate value or financial situation.
- Positive Accounting Theory (PAT) aims to explain and predict real-world accounting phenomena, and is based on observed behavior of accountants.
This quiz covers the impact of accounting information on various groups and the political process of standard setting in accounting.
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