1. KE1013 Chapter One 1 SUCCESS…….. SUCCESS IS A LADDER, NOT TO CLIMB WITH YOUR HANDS IN THE POCKET..

2. KE1013 Chapter One2 CHAPTER 1: ACCOUNTING ENVIRONMENT

3. KE1013 Chapter One 3 Outline Definition Purposes, Fields, Professional Bodies, Ethics and Regulations Types of Business Characteristics of Qualitative Accounting Information Users of Accounting Information

4. KE1013 Chapter One 4 Definition of Accounting Kieso and Weygandt (1996) “ process of identifying, recording and communicating economic activities of the organization to the users of the information.” Generally accepted definition: “accounting is the process of identifying, measuring, summarizing and communicating economic information to permit informed judgments and decisions by users of the information.”

5. KE1013 Chapter One 5 Accounting: Definition MeasuringIdentifying Recording Reporting InterpretingAnalyzing Bookeeping Designing Information Provide useful information to users

6. KE1013 Chapter One 6 Purpose of Accounting Provide useful information to users. Provide assistance in decision making. Performance evaluation tools. Controlling purposes.

7. KE1013 Chapter One 7 Fields in Accounting Accounting Financial Accounting Management Accounting AuditingTax Public Sector Accounting And Non-Profit Organisation Accounting Information System

8. KE1013 Chapter One 8 Accounting Professional Bodies MACPAMIA MASB FRF Malaysia

9. KE1013 Chapter One 9 Ethics / Professional behaviors in Accounting profession  Integrity – not breaching the public/private trust in the profession, be straightforward, honest and sincere in practicing his professional work.  Objectivity – fair and not prejudice or bias or influenced of others.  Independence – be and appear to be free  Confidentiality – shall not disclose any such information to a third party without specific authority.  Professional competence and due care – shall not undertake professional work which he/she is not competent for it.  Compliance with technical standards  Professional behavior

10. KE1013 Chapter One 10 CONT’D MICPA (Malaysian Institute of Certified Public Accountant) – To advance the theory and practice of accounting, to provide education, training and examination to accountants. MASB (Malaysian Accounting Standard Boards) – To develop accounting standards for Malaysian companies. FRF (Financial Reporting Foundation) – Oversees MASB performance, financial and funding requirement, and review proposed standard by MASB. MIA (Malaysian Institute of Accountants) – To develop, support and monitor quality and expertise, consistent with global practice in accounting profession.

11. KE1013 Chapter One 11 Regulations in Accounting Companies Act 1965 S: 167 S: 169 Ninth Schedule Financial Reporting Act 1997 Accounting Standards

12. KE1013 Chapter One 12 Types of Business Organizations A business is normally organized in three forms:- Perniagaan tunggal (Sole proprietor) – owned by one individual. Perniagaan perkongsian (Partnership) – owned by two or more individuals. Syarikat Berhad dan Sdn Bhd ( companies/Corporations) – owned by shareholders or stockholders.

13. KE1013 Chapter One 13 There are five main areas to differentiate the forms of businesses:- Sole ProprietorPartnershipPublic Company Management OwnerPartnersBOD Liability Unlimited Limited Profit UnlimitedAccording to agreement Dividend on shares. Tax Owner’s income tax Partners’ income tax Tax based on the profit of the co. Regulation NoneAgreement, Partnership Act 1961. Companies Act 1965, MA, AA Difference between form of businesses

14. KE1013 Chapter One 14 The Objectives of Businesses  Businesses are normally operated for profit purposes.  Profit: amount received from customers for goods and services provided and the amount paid for the input to provide the goods and the services. (Revenue – cost)  However, there are some businesses operated not for profit maximization, called nonprofit organization  Although, there are profit and nonprofit businesses, same concepts and principles of accounting applied to both.

15. KE1013 Chapter One 15 Role of Accounting Accounting is an information system that provides reports to stakeholders about the economic activities and condition of a business. Stakeholders mean users. It consists of internal users and external users. Internal users are like owners, managers and employees. External users are like customers, creditors and governments. Thus, accounting should provide information which are needed by the stakeholders in order for them to make an economic decision (decision that give benefits to the users). E.g : the cash position so that the creditors is able to identify the ability of the business to pay debt.

16. KE1013 Chapter One 16 CONT’D In order to fulfill the stakeholders’ needs, there are qualities that should be reflected in the accounting information in order to make it more useful for decision making purposes.

17. KE1013 Chapter One 17 Characteristics of Qualitative Accounting Information Timeliness (ketepatan masa) – accounting information is available when it is needed. Relevance (relevan) – accounting information is relevant if it is capable of making difference in a decision. Reliable (boleh dipercayai) – To be reliable, accounting information must posses three key characteristics. There are:- - Verifiable : similar results is obtained by using the same measurements when independent measures is demonstrated. - Representational faithfulness : information represent what really existed or happened. - Neutrality : information is reasonably free of error and bias/ no conflict of interest

18. KE1013 Chapter One 18 CONT’D Comparable (boleh dibandingkan) – accounting information is considered comparable when the real similarities and the differences in economic phenomena could be identified. Easy to understand (boleh difahami)

19. KE1013 Chapter One 19 Users of Accounting Information Users Internal External Managers Direct Interest Indirect Interest Investors Potential Investors Creditors Regulatory Agencies Inland Revenue Dept. Customers

20. KE1013 Chapter One20 Thank You