Basic accounting

• Accounting is an information system that provides reports to users about the economic activities and condition of a business.
• The process by which accounting provides information to users is as follows: Identifying, Recording, Communicating.
• Accounting provides information to help users make better/informed decisions.
• The stakeholder is a person or entity having an interest in the economic performance and well-being of a business.
• Economic planners forecast economic activities.
• Customers observe whether a company continues to maintain product quality and warranty and then decide whether to continue supporting its products.
• Security Commission (SC) is responsible for ensuring that a company operates within the prescribed rules.
• Labour union wants to know whether a company can afford to give pay raises or benefits.
• Fields of accounting include Managerial Accounting and Financial Accounting.
• Managerial accounting, or management accounting, is the area of accounting that provides internal users with information.
• Managerial accountants employed by a business are employed in private accounting.
• Financial accounting is the area of accounting that provides external users with information.
• The objective of financial accounting is to provide relevant and timely information for the decision-making needs of users outside of the business.
• General-purpose financial statements are one type of financial accounting report that is distributed to external users.
• Financial accounting format has to follow established standards of reporting format.
• Financial accounting is external as the information (report) is meant for external users such as investors, creditors, and Government agencies like LHDN, Bursa Malaysia.
• Managerial accounting is intended for the management of the entity, making it internal to the business.
• Types of accountants include Private Accountants and Public Accountants.
• Private Accountants are accountants employed by a business firm or a not-for-profit organization.
• Public Accountants are accountants and their staff who provide accounting & auditing services on a fee basis, such as the Big 4, medium and small size accounting firms.
• Malaysian Institute of Accountant (MIA) aims to promote and regulate professional and ethical standards, enhance competency through continuous education and training, meet the challenges of the global economy, enhance the status of members, lead research and development for the enhancement of the profession, and enhance the status of members.
• Accountants’ actions are watched and judged as right or wrong, honest or dishonest, and fair or bias.
• Guidelines for behaving ethically follow: Identify an ethical decision by using your personal ethical standards of honesty and fairness, identify the consequences of the decision and its effect on others, consider your obligations and responsibilities to those who will be affected by your decision, and make a decision that is ethical and fair to those affected by it.
• Describe the types of business and forms of business organization.
• Failure of individual character and culture of greed and ethical indifference are factors that lead to accounting and business frauds.
• Malaysian Institute of Certified Public Accountant (MICPA) aims to advance the theory and practice of accountancy in all its aspects, recruit, educate, train and assess by means of examination or otherwise a body of members skilled in these areas, preserve at all times the professional independence of accountants in whatever capacities they may be serving, maintain high standards of practice and professional conduct by all its members, and do all such things as may advance the profession of accountancy in relation to public practice, industry, commerce, education and the public service.
• Malaysian Accounting Standards Board (MASB) was established under the Financial Reporting Act 1997 (the Act) as an independent authority to develop and issue accounting and financial reporting standards in Malaysia.
• Financial Reporting Federation (FRF) was established under the Financial Reporting Act 1997 (Act), as an independent body that comprises representation from all relevant parties in the standard setting process, including preparers, users, regulators and accountancy profession.
• Service Businesses include entities like Malaysia Airlines System (MAS) which provide transportation services.
• The Conceptual Framework consists of a set of agreed fundamental concepts / principles, which is a basis of financial accounting and provides a theoretical ground for the development of standards.
• Proprietorship is a type of business organization owned by one individual, making up more than 70% of business organizations in Malaysia.
• The primary purpose of the Conceptual Framework is to provide the IASB with concepts and principles to inform the standard setters when they develop standards so that they use consistent concepts in various standards.
• Proprietorships are easy and low cost to organize, have limited financial resources, and are commonly used by small businesses such as hardware stores, laundries, restaurants, and grocery shops.
• Corporation is an entity organized under state or federal statutes as a separate legal taxable entity, generating 90% of the total dollars of business receipts received and comprising only 20% of the business organizations in Malaysia.
• Limited liability company (LLC) combines attributes of a partnership & a corporation, is organized as a corporation, can elect to be taxed as a partnership, and is a popular alternative to a partnership.
• The secondary purpose of the Conceptual Framework is to provide guidance to management when deciding how to report on transactions for which there is no relevant IFRS /IAS developed and to assist other parties in understanding and interpreting existing IFRSs or interpretation specifically applies to a particular transaction /event.
• Partnership is a type of business organization owned by two or more individuals, making up about 10% of business organizations in Malaysia.
• Partnerships combine the skills and resources of more than one person, and small local businesses such as automotive repair shops, music stores, beauty salons, and clothing stores may be organized as partnerships.
• Ownership in a corporation is divided into shares of stock, sold to shareholders, and it is used only by large businesses.
• The process by which accounting provides information to business stakeholders involves identifying stakeholders, assessing stakeholders’ information needs, designing the accounting information system to meet stakeholders’ needs, recording economic data about business activities and events, preparing accounting reports for stakeholders, and adhering to the Conceptual Framework.