Introduction to Accounting

Study Notes

Accounting involves identifying, recording, classifying, summarizing, communicating, and interpreting business transactions, aiding users in decision-making.

Internal Users include:
- Management: Requires information for operational planning, organization, and control.
- Board of Directors: Interests include profitability, financial stability, and business growth.
- Internal Auditors: Ensure compliance with accounting standards, providing management recommendations.
External Users include:
- Existing Investors: Decide on buying or selling shares based on financial performance.
- Potential Investors: Assess profit potential and dividend distributions.
- Creditors (Suppliers, Bankers): Evaluate business repayment ability for loans and outstanding accounts.
- Government Agencies: Determine tax liabilities.
- Customers: Interested in the company's sustainability.
- Labour Unions: Seek information on the company’s capacity to raise wages.

Bookkeeping: Focuses on recording daily transactions, acting as a preliminary step in accounting.
Accounting: A comprehensive information system involving reporting, analyzing, and interpreting financial data.

Financial Accounting: Provides financial information for external and internal users.
Management Accounting: Focuses on internal financial information for decision-making.
Cost Accounting: Monitors and controls operational costs.
Auditing: Examines accounts to ensure fairness and accuracy.
Public Sector Accounting: Handles public assets and mandatory reporting.
Taxation: Addresses individual or business tax calculations for assessments.
Forensic Accounting: Investigates accounting irregularities and fraud.

Sole Proprietorship:
- Single owner, unlimited liability, limited life span.
- Governed by the Businesses Act 1956.
Partnership:
- Owned by 2-20 partners, unlimited liability, limited life.
- Governed by the Partnership Act 1961.
Company:
- Multiple shareholders (2-unlimited), limited liability, indefinite life span.
- Governed by Companies Act 1965.

Statement of Comprehensive Income: Reports financial performance over a period, showing net profit or loss.
Statement of Changes in Equity: Details changes in owner’s equity from net income and withdrawals.
Statement of Financial Position (Balance Sheet): Lists assets, liabilities, and owner’s equity.
Statement of Cash Flows: Tracks cash inflows and outflows across operating, investing, and financing activities.

Malaysian Accounting Standards Board (MASB):
- Issues and reviews accounting standards under the Financial Reporting Act 1997.
Malaysian Institute of Accountants (MIA):
- Regulates members' qualifications and offers training per the Accountants Act 1967.
Malaysian Institute of Certified Public Accountants (MICPA):
- Focuses on advancing accountancy practices, established in 1958.

Integrity: Avoid conflicts of interest.
Objectivity: Maintain impartial judgment.
Professional Competence and Due Care: Ensure knowledge and skills are up to date.
Confidentiality: Protect sensitive financial information.
Professional Behavior: Abide by professional standards and regulations.

Public Accounting: Careers in auditing, taxation, and consulting.
Private/Corporate Accounting: Roles in cost accounting and information systems.
Governmental Accounting: Positions in public sector agencies.
Forensic Accounting: Investigates fraud and financial crimes.