SCHOOL OF BUSINESS

Subject : Principles of Financial Accounting

Code : ACC1014
Tutorial : Accounting and business

Chapter 1

Discussion Questions

1. Why should managers understand accounting?

2. Discuss the main purposes of accounting.
3. A university will also need to prepare their accounting information. Will there be
any users for this accounting information? List down the users and explain for
what purposes would the different user need information.

Exercise Questions

3. Is it true that Financial Accounting is concerned with reporting accounting and cost
information to internal users only?

Chapter 2

Exercise Questions No. 1

Match each of the numbered descriptions with the accounting principle or

assumption that it best reflects. Enter the letter for the appropriate accounting
principle or assumption in the blank space next to each description.

A. Measurement principle
B. Matching principle
C. Separate entity assumption
D. Revenue recognition principle
E. Going concern assumption
F. Time period assumption
G. Full disclosure principle
H. Monetary unit assumption

______ 1. Bengkel Huat is accounted for separately from its owner.

______ 2. A company records the expenses incurred in order to generate the

revenue reported.

______ 3. Simond Hair Saloon records the amount received from providing hair
services to customers at transaction date.
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_____ 4. Financial statements prepared by accountants reflect the assumption that

the business will continue in operation indefinitely.

______ 5. Good Grocer prepares financial statements at the end of each reporting
period.

______ 6. A company is required to report additional details in the financial

statements that would have an impact on the decision making of users.

______ 7. Revenue is recorded only when the earnings process is complete.

______ 8. Farmasi Penyayang uses Ringgit Malaysia (RM) to measure the

transactions in its financial statements.

Problem Questions No. 1

Identify how each of the following separate transactions affects the financial
statements. For the Statement of Financial Position, analyse how each transaction
affects the total assets, total liabilities and total equity. For the Statement of Profit or
Loss, identify how each transaction affects net profit. For the Statement of Cash
Flows identify how each transaction affects cash flows from operating activities, cash
flows from financing activities and cash flows from investing activities.  

For increases, place a “+” in the column or columns. For decreases, place a “-“ in  the
column or columns. If both increase and decrease happens, place a “+/-“ in the
columns or columns. The first transaction is shown as an example.  

  Statement of Financial Statement Statement of Cash Flows 

Position  of Profit or
Loss 
  Transactions  Total  Total  Total  Net   Operating  Financing  Investing 
Assets  Liabilities  Equity  Profit  Activities  Activities  Activities 
1  Owner invests cash +    +      +   
into the business 
2  Buys vehicle for the              
business for cash  
3  Paid cash for              
employees’ salaries 
4  Borrow cash by              
signing long term
loan with the bank 
5  Bought goods on              
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credit from
supplier  
6  Sold goods to              
customer on credit  
7  Owner withdraws              
cash  
8  Collect cash on              
receivable from (6) 
9  Paid cash for              
advertising
expense  
10  Buy land by signing              
a bank loan