Questions and Answers
What is the definition of accounting?
The process of identifying, recording, classifying, summarising, communicating and interpreting the results of business or economic transactions.
Who are considered internal users of accounting information?
Which of the following is a branch of accounting?
Bookkeeping and accounting are the same.
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What is the main function of the Malaysian Accounting Standards Board (MASB)?
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List two types of financial statements.
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___ accounting provides economic and financial information for internal users.
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Which profession uses accounting, auditing, and investigative skills for fraud investigations?
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What principle refers to accountants maintaining confidentiality of sensitive financial information?
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Match the following types of business ownership with their characteristics:
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Study Notes
Introduction to Accounting
- Accounting involves identifying, recording, classifying, summarizing, communicating, and interpreting business transactions, aiding users in decision-making.
Users of Accounting Information
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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.
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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.
Differences between Bookkeeping and Accounting
- 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.
Branches of Accounting
- 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.
Types of Business Ownership
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Sole Proprietorship:
- Single owner, unlimited liability, limited life span.
- Governed by the Businesses Act 1956.
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Partnership:
- Owned by 2-20 partners, unlimited liability, limited life.
- Governed by the Partnership Act 1961.
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Company:
- Multiple shareholders (2-unlimited), limited liability, indefinite life span.
- Governed by Companies Act 1965.
Types of Business Activities
- Services: Provide services without selling products (e.g., banks).
- Manufacturing: Transform raw materials into products (e.g., bakeries).
- Merchandising: Purchase and resell inventory (e.g., supermarkets).
Types of Financial Statements
- 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.
Professional Accounting Bodies in Malaysia
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Malaysian Accounting Standards Board (MASB):
- Issues and reviews accounting standards under the Financial Reporting Act 1997.
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Malaysian Institute of Accountants (MIA):
- Regulates members' qualifications and offers training per the Accountants Act 1967.
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Malaysian Institute of Certified Public Accountants (MICPA):
- Focuses on advancing accountancy practices, established in 1958.
Professional Ethics in Accounting
- 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.
Potential Careers in Accounting
- 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.
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Description
This quiz covers the fundamentals of accounting, including its definition, key users, and the distinction between bookkeeping and accounting. Explore various branches of accounting, types of business ownerships, financial statements, and insights into professional ethics and careers in the field. Perfect for students looking to understand the basics of accounting.
