ACCOUNTING ENVIRONMENT

TOPIC 1

INTRODUCTION TO ACCOUNTING

Definition of Accounting

Accounting is a process to identify, measure, record and present the economic information of and entity to the user in order to help them make evaluation or economic decision Internal users

Users of accounting Information

Direct access to the company involved in the management of the entity management of the company

External users

Parties who do not direct access to the resources of the company and not involved in the management of the company

INTRODUCTION TO ACCOUNTING

Branches of Accounting
Financial Accounting Management Accounting Auditing Taxation

INTRODUCTION TO ACCOUNTING

Difference between Financial Accounting and Management Accounting

Financial Accounting Management Accounting
Preparation of financial and non-financial information that are required by parties in the company for planning, evaluating and controlling purposes of the operations of an entity Report is produced at any time based on requirement and is not subject to any standard or format

Preparation of report

Preparation of financial reports of an entity for external and internal users but focus is given to the external users.

Standard or Format

Financial reports produced are periodically and in accordance to specified standard or format.

INTRODUCTION TO ACCOUNTING

Professional Accounting Bodies in Malaysia

Malaysia Institute of Accountants (MIA)

To set the required qualification in order to become member To provide training and education for practitioners or those who are interested becoming accounting practitioners To control accounting practices in Malaysia To protect accounting interest in Malaysia

The Malaysian Institute of Certified Public Accountants (MICPA)

To advance the accounting theries and practies in all aspects To train and evaluate the competent members To ensure the independence of professional accountant To oversee the practices and professional conducts of its members

INTRODUCTION TO ACCOUNTING

Professional Accounting Bodies in Malaysia (cont)

Malaysian Accounting Standard Board ( MASB)

To set and approved new accounting standard To revise or accept the usage of existing standard as approved accounting standard To develop the conceptual accounting framework

Financial Reporting Foundation (FRF)

To provide opinion to MASB on matters to be implemented To evaluate the performance of MASB To be responsible for the overall funding of the operation of MASB including to approve its budget

FUNDAMENTAL ACCOUNTING CONCEPT

Qualitative Characteristics of Accounting Information

Qualitative characteristics of accounting information refer to the characteristics that must be present in the accounting information to make it useful

Primary Relevance
Feedback Value Forecast Value Timeliness Reliability Verifiable Objective Trustworthy

FUNDAMENTAL ACCOUNTING CONCEPT

Qualitative Characteristics of Accounting Information (cont)

Secondary

Comparability Consistency

Accounting Assumptions
Assumption of Separates Entity Assumption of Going Concern Assumption of Monetary Unit Assumption of Accounting Period

FUNDAMENTAL ACCOUNTING CONCEPT

Basic Principle of Accounting

Principle of Historical Cost Principle of Income Recognition

Percentage of Completion method Cash Basis Method First step Second step

Principle of Matching

Principle of Full Disclosure

Accounting Constraints
Cost-Benefit Relationship Materiality