BA (Topic 2)

• Accounting Concept and Practice: Accounting in Malaysia is based on Generally Accepted Accounting Principles (GAAP), which are developed by the Malaysian Accounting Standards Board (MASB).
• Financial accountants follow generally accepted accounting principles (GAAP) in preparing reports.
• An account receivable is a claim against a customer, which is an asset.
• Revenue from the sale of merchandise is recorded as sales.
• Revenue from providing services is recorded as fees earned.
• Other examples of revenue include rent, which is recorded as rent revenue, and interest, which is recorded as interest revenue.
• Items such as supplies that will be used in the business in the future are called prepaid expenses, which are assets.
• The liability created by a purchase on account is called an account payable.
• Within the U.S., the Financial Accounting Standards Board (FASB) has the primary responsibility for developing accounting principles.
• The Securities and Exchange Commission (SEC), an agency of the U.S. government, has authority over the accounting and financial disclosures for companies whose shares of ownership (stock) are traded and sold to the public.
• Many countries outside the U.S. use generally accepted accounting principles adopted by the International Accounting Standards Board (IASB).
• Accounting principles and concepts are developed from research, practices, and pronouncements of authoritative bodies such as the Malaysian Accounting Standards Board (MASB).
• The standard framework of guidelines for financial accounting used in any given jurisdiction is known as accounting standards or standard accounting practice.
• These accounting standards include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements.
• Recognition, Measurement, and Disclosure Concepts explain how companies should recognize, measure, and report financial elements and events.
• Economic entity assumption states that a company keeps its activity separate from its owners and other business units.
• Going concern assumption states that a company will last long enough to fulfill its objectives and commitments.
• Monetary unit assumption states that money is the common denominator.
• Periodicity assumption states that a company can divide its economic activities into time periods.
• On November 5, 2017, NetSolutions paid RM20,000 for the purchase of land as a future building site.
• The resources owned by a business are its assets.
• The equation Assets = Liabilities + Owner’s Equity is called the accounting equation, which expresses the relationship between what is owned and what is owed by an entity.
• At the end of its accounting period, December 31, 2017, You’re A Star has assets of RM800,000 and liabilities of RM350,000.
• The accounting equation is the basis upon which the double entry accounting system is constructed.
• Owned = Owed.
• Financial Statements include the Statement of Profit or Loss, the Statement of Owner’s Equity, and the Statement of Financial Position.
• Using the accounting equation, determine the following amounts: Owner’s equity as of December 31, 2017, and Owner’s equity as of December 31, 2018, assuming that assets increased by RM130,000 and liabilities decreased by RM25,000 during 2018.
• A business transaction is an economic event or condition that directly changes an entity’s financial condition or its results of operations.
• On November 1, 2017, Ismail Idris deposited RM25,000 in a bank account in the name of NetSolutions.
• Joe Nga is the owner and operator of You’re A Star, a motivational consulting business.
• The rights of the owners are called owner’s equity.
• The rights of creditors are the debts of the business and are called liabilities.
• Accrual basis of accounting assumption states that transactions are recorded in the periods in which the events occur.
• Going Concern Assumption states that financial statements are prepared under the assumption that the entity will continue to operate for the foreseeable future.
• The entity will continue to operate at least long enough to carry out its existing commitments under the Going Concern Assumption.
• The capital of Adam Che Lini was RM80,000 on May 1, 2017.
• The statement of owner’s equity reports the changes in the owner’s equity for a period of time.
• The cash flows from financing activities section of a statement of cash flows reports the cash transactions related to cash investments by the owner, borrowings, and withdrawals by the owner.
• The statement of owner’s equity is prepared after the statement of profit or loss because the net income or net loss for the period must be reported in this statement.
• Adam Che Lini, the owner, invested an additional RM50,000 in the business and withdrew cash of RM30,000 for personal use during the year.