bba ust topic1 accounting environment

7/30/2019 BBA UST Topic1 Accounting Environment

1/24

Accounting Environment

Topic 1


2/24

Introduction

Accounting is widely used in business to explain the nature

of business transactions in any organization. It is widely

used by the managers of the organization, the owners,

investors, bankers, lawyers, estate agent, share brokers. The

initial stage of accounting record is usually referred to as

book-keeping. However, accounting is not merely book-

keeping, it is far more than that, emphasizing on use of

information, analyzing and interpreting of the accountinginformation. The accountant must be able to scrutinize the

relationship between the results available in the financial

period and relate to the events that lead to such results.


3/24

Definition of Accounting

Accounting is

a) Collecting and recording economic data relating to

a business enterprise

b) Processing this data to produce useful economic

information (often referred to accounting information)

c) Communicating or reporting this accounting informationto interested parties and, if necessary, interpreting if for

their benefit.


4/24

Definition of Accounting

To determine profit

a) Collecting and recording data about the income and

expenditure of the business during the year

b) Processing this data to calculate the profit for the year

c) Reporting this information to the owner of the businessand to others who need to be aware of it

(e.g. tax authorities, bankers, investors)


5/24

Managerial Accounting

Financial Accounting

Fields of Accounting

Types of Accounting


6/24

]

Financial Accounting is concerned with

providing information to stockholders,

creditors and others outside the organization.Recording and reporting of financial

transactions, including the origination of the

transaction, its recognition, processing, andsummarization in the financial statements.


7/24

Managerial Accounting

Managerial Accounting is concerned with

providing information to managers, i.e. people

inside the organization. In Management Accountingthe term cost is used in many different ways. Each

different use of cost data demands classification &

definition of costs. For example, preparation of

external Financial Report requires the use ofhistorical data, where as decision-making requires

current cost data.


8/24

Financial Accounting Vs

Managerial AccountingManagerial Accounting provides essential

data with which organizations are actually

run, whilst Financial Accounting providesscorecard by which a companys past

performance is judged.

Both financial & managerial accounting rely

on the same financial data


9/24

Other Types of Accounting

Auditing

Taxation

Financial Management

Fields of Accounting


10/24

Professional Accountancy Bodies

The Institute of Chartered Accountants in England andWales (ICAEW)

The Institute of Chartered Accountant in Scotland (ICAS)

The Institute of Chartered Accountants in Ireland (ICAI)

The Chartered Institute of Management Accountants(CIMA)

The Association of Chartered Certified Accountants

(ACCA) The Chartered Institute of Public Finance and Accountancy

(CIPFA)

United Kingdom


11/24


12/24

Financial Accounting and Reporting

Failures

Eg. Enron, worldCom, Tyco, Xerox

Financial Accounting Standards Board(FASB)

Business Ethics & Regulation


13/24

Regulatory requirements in

Malaysia Incorporation and Companies Regulation

are provided under the Companies Act 1965

At least 2 members to sign on the

Companys Memorandum

Present the Companys Memorandum to

CCM (Companies Commission ofMalaysia) with the Articles of the Company

together with other relevant forms, such as

Form 6, Form 48A, etc.


14/24


Malaysia(contd) Contents of M&A of a company:

Name of company (ends with Sdn Bhd or

Berhad)

Registered Address, Companys Objective,

Capital of Company

Articles - Shares, Proceedings at General

Meeting, Directors Appointment, Power

Duties of Directors, Accounts, Dividends,

etc


15/24


Malaysia(contd) Regulation of Accounts & Audit is stated in

the Companys Act 1965 under Part V1

Division 1 & Division 2 Section 167 (1) of Companies Act 1965:

Requirement by every company and the

directors and managers to keep accountingrecords and such that will sufficiently

explain transactions and financial position

of the company- true and fair P&L and B/S


16/24


Malaysia(contd) Section 169 of the Companies Act 1965:

Not later than 18 months after the

incorporation and subsequently once a yearto lay at its annual general meeting a Profit

& Loss Account & Balance Sheet; must be

audited first Penalty: Imprisonment for five years or

thirty thousand ringgit


17/24


Malaysia(contd) Section 169 of the Companies Act 1965:

Not later than 18 months after the

incorporation and subsequently once a yearto lay at its annual general meeting a Profit

& Loss Account & Balance Sheet; must be

audited first. Requirements to follow NinthSchedule (Schd. 9)

Penalty: Imprisonment for five years or

thirty thousand ringgit


18/24

Types of Businesses

Manufacturing Business

e.g.. Sony, Honda, Coca Cola, Adidas

Merchandising Business

e.g.. Wal-Mart, Amazon. COM,

Servicing Businesse.g.. Tadamon Bank, Sabafon, Marriot Hotel


19/24

Types of Business Organisation Proprietorship

- Owned by individual

Partnership

- Owned by two or more individuals

Corporation (Legal Entity)

- Owned by individuals or businesses

Limited Liability Corporation

- Owned by individuals

- Liability is limited to capital contribution

- Attributes of a partnership (taxed as a partnership) and acorporation


20/24

UnderstandabilityRelevance

ReliabilityComparability and

Consistency

Characteristic of Qualitative

Accounting Information

That makes What Makes Accounting Information Useful?


21/24


22/24

Questions Can you identify some internal and

external users of accounting

information?

Why do each of the user groups

identified need financialinformation?


23/24

Users of Accounting Information

Internalusersmake decisions

forthe entity.

Business Owner

Management

Employees


24/24

Users of Accounting Information

External usersmake decisions

aboutthe entity.

Investors

Banks and Lenders

Suppliers

Customers

Competitors

The Government

The General Public

bba ust topic1 accounting environment

Documents