Introduction to accounting

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 INTRODUCTIONTO ACCOUNTING

DIPLOMA IN BUSINESS STUDIES (BUSINESS ADMINISTRATION)

Table of Content

Plagiarism Statement Declaration Form..………………………………………………..3

Safe Assign Report……………………………………………………………………….4

Marking Scheme…………………………………………………………………………..5

1. Introduction…………………………………………………………………………..7

2. Content………………………………………………………………………………..7

2.1 Accounting Equation…………………………………………………………….7

2.2 Profit Determination……………………………………………………………..8

2.3 Accounting Cycle………………………………………………………………...9

2.4 Users of Accounting Information……………………………………………......9

2.5 Type of Business in Malaysia…………………………………………………...10

2.6 Financial Statements……………………………………………………………..10

3. Conclusion……………………………………………………………………………11

Reference…………………………………………………………………………………..18

Plagiarism Statement Declaration Form

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Date: _____________________

Decription

Excellent

Good

Average

Poor

Very Poor

(A) Source

Documents /

Information

(10 marks)

Identify and collect

appropriate source

documents /

information from

various sources

including text,

journals, websites

etc. where

appropriate.

(9 – 10 marks)

Demonstrate excellent

collation of source

documents and

information that is

relevant and

appropriate for the type

of business selected.

Minimum relevant

reference were 20 from

text, journals, websites

etc.

7 – 8 marks)

Demonstrate good

collation of source

documents and

information that is

relevant and

appropriate for the type

of business selected.

Minimum relevant

reference were 15 from

text, journals, websites

etc.

(5 – 6 marks)

Demonstrate average

collation of source

documents and

information that is

relevant and

appropriate for the type

of business selected.

Minimum relevant

reference were 10 from

text, journals, websites

etc.

(3 – 4 marks)

Demonstrate poor

collation of source

documents and

information that is

relevant and

appropriate for the type

of business selected.

Minimum relevant

reference were 5 from

text, journals, websites

etc.

(1 - 2 marks)

Demonstrate very poor

collation of source

documents and

information that is

relevant and

appropriate for the type

of business selected.

Minimum relevant

reference were less

than 5 from text,

journals, websites etc.

Sub Total (A)

(B) Report,

presentation &

referencing

(30 marks)

Adequate research

done to support the

report. References

were clearly labeled

and listed in the

table of contents,

with the page

numbers easy to

follow through by

tutor.

(25 – 30 marks)

Demonstrate excellent

report writing skills

that is concise simple,

accurate and complete.

Researches were

thorough and complete

that answer ALL

requirements stated on

the coursework. There

were thorough write

ups of relevant and

complete definition

where appropriate.

References were clearly

labeled and in accordance to Havard

referencing standard.

Table of contents, with

the page numbers were

easy to follow through

by tutor. Format were

original and creative.

(19 – 24 marks)

Demonstrate good

report writing skills

that is quite concise

simple, accurate and

complete. Researches

were thorough and

complete that answer

ALL requirements

stated on the

coursework. There

were thorough write

ups of relevant and

complete definition

where appropriate.

References were clearly labeled and in

accordance to Havard

referencing standard.

Table of contents, with

the page numbers were

easy to follow through

by tutor. Format were

original and creative.

(13 – 18 marks)

Demonstrate average

report writing skills

that is somewhat

concise, simple, with

some inaccurate and

incomplete passages.

Researches were not

that thorough and

complete and fail to

answer some

requirements (at least

one) stated on the

coursework. There

were not so thorough

write ups of relevant and complete definition

where appropriate.

References were

sometimes not

completely written or

in accordance to

Havard referencing

standard. There were

at least 2 mistakes from

the table of contents,

with the page numbers

and difficult for tutor to

follow through. Format

were similar to samples

and not that creative.

(7 – 12 marks)

Demonstrate poor

report writing skills

that is not concise,

simple, with some

inaccurate and

incomplete passages.

Researches were not

that thorough and

complete and fail to

answer more than half

of the requirements

stated on the

coursework. There

were not so thorough

write ups of relevant and complete definition

where appropriate.

References were

sometimes not written

or in accordance to

Havard referencing

standard. There were

at least 5 mistakes from

the table of contents,

with the page numbers

and difficult for tutor to

follow through. Format

were similar to samples

and not that creative.

(1 – 6 marks)

Demonstrate very poor

report writing skills

with lots of

grammatical error and

inaccurate information.

Most of the passages

were incomplete.

Researches do not care

about the coursework

and was not that

thorough. They fail to

answer almost 75% of

the requirements stated

on the coursework.

There were no write ups of relevant and

complete definition

where appropriate.

References were mostly

written and not in

accordance to Havard

referencing standard.

There were more than 5

mistakes from the table

of contents, with the

page numbers and

difficult for tutor to

follow through. Format

were similar to samples

and not that creative.

Sub Total (B)

GRANDE TOTAL (A+B)

Comments by tutor (for marks in Excellent or Very Poor bracket):

Comments by tutor (for marks in Excellent or Very Poor bracket):

1.Introduction of Accounting

Accounting as an information system is the process of collecting, recording, summarizing, and communicating the economic information of an organization. Accounting also provides users with financial information to guide them in making decisions concerning how to allocate money among different and competing project. Users of accounting information need the information to make decision. It identifies transaction and events of a specific entity. Accounting is not same as bookkeeping. Bookkeeping is only a part of accounting but accounting goes much further than just keeping records.

2.CONTENT 2.1 Accounting Equation Assets = Liabilities +Equity Equity = Assets – Liabilities Profit = Revenue – Expenses

Equity increase by owner invest into business and Business Profit. On the other hand, Equity decrease by withdrawal from owners and Business Losses.

Assets – The resources inside the business for running the business .The more the assets a business has, the bigger the business. There are two types of assets:-

  • Non current assets - Non current assets for continuing use over a lone period time such as building, office equipment, motor vehicles, etc.
  • Current asset – Current assets are likely to change in short term and that are within one year For example, receivables, deposits, bank and cash balances, etc.

Equity – Equity are the resources that provided by the owner for use in their business. The equity will reduces because withdrawals by the owner for personal use and that are called Drawings. Company’s resources that can be in the form of cash or non cash items it is refers by Capital

Liabilities - Liabilities are the amount owning to outsiders. The given by Bank it is amount owning to the Bank and the purchases goods with credit to the suppliers it is amount owning to the suppliers. And it is called payables. Furthermore, there are two types of liabilities.

  • Current liabilities -The current liabilities are owning within one year such as payables, bank overdraft, etc.
  • Non current liabilities -The Non Current Liabilities are owning over one years. Such as Bank Loan, Mortgage Loan. When the business repays the loan or repays amount owing to suppliers then the liabilities will reduce.

2.2 Profit Determination

Profit is the money gain by a business when the price of product sold is higher than the cost to produce. The greater the profit makes, the profitable the business is. All the profit that is gained is belong to the business’s owner.

Profit is calculated by using the profit determination equation:

Profit is derived when the revenue is higher than expenses. Howerer, if expenses is higher than revenue, the business will makes a loss.

For example, if the business earned RM120000 and spent RM80000 on inventories and taxes, RM80000 is deduced from RM120000, RM40000 is leaving as the profit.

2.3 Accounting Cycle

Accounting cycle also refer to accounting process which are collecting process, recording process, summarising process and communicating process. It starts with source documents which used to recording a transaction. The 7 Books of Prime Entry is record daily business transaction based on the first step. This includes Cash Book, Petty Cash Book and 6 specialised journal. The next step is posted to the ledger by using double entry system. The 3 ledgers are General Ledger, Sales Ledger and Purchased Ledger. Entries are checked by a draft trial balance to see the total amount debit and credit items. It is also used to complete double entry system. At the end of the accounting period, adjusting entries have been summarized in the financial statements. There have two types of financial statements, the Statement of Profit or Loss and also the Statement of Financial Position. Closing entries are made at the end of an accounting cycle.

2.4 Users of accounting information

Accounting information helps users to make better financial decisions. Users of financial information may be both internal and external to the organization.

  • Internal users

Management : decision making, planning, control and coordination of business activities.

Employees : payment of salary, other benefits, career growth, secured employment.

Accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts and financial statements.

  • External users

Shareholders/Investors : company’s future plans and dividends.

Customers : long-term supply of goods to ensure supply is secured

Suppliers : ability of company to pay its debts within the credit period given

Finance providers : ensure its financial stability and ability to repay the amount borrowed and pay interests.

Government : assess tax payable, compile statistical data for economic analysis

Public : protection of environment, fair trade, responsible business, community service, provision of job opportunities, researchers.

2.5 Type of Business in Malaysia

There are three types of business engage for profit such as manufacturing that is use raw materials to product into finished goods. Eg. Lam Eng Rubber factory, Produa car Dealers, Bursa Malaysia, trading is buy or sell goods at a higher price to customers. Eg. Panasonic, is to provide a good survices to our customers. Eg. AirAsia Airline, Maybank, Zurich Insurances.

3.6 Financial Statement

Statement of Comprehensive Income of EE Trading for the year ended 31 December 2011

RM

RM

RM

Sales

112,080

Less:

Return Inwards

1,680

Discount Received

4,813

(6,493)

Net Sales

105,587

Less:

Cost of goods sold

Opening Inventories

70,000

Purchases

51,350

Less: Return Outwards

1,200

Discount Allowed

2,920

(4,120)

47,230

117,230

Less: Closing Inventories

(60,000)

(57,230)

Gross Profit

48,357

Add:

Income

Commission received

600

48,957

Less:

Expenditure

Donation

3,850

Insurance

3,200

Stationery

1,300

Salary

6,000

Motor Expenses

3,420

Depn:Motor Vehicle

1,600

Depn: Furniture

1,125

Depn: Office Equipment

500

Promotion

500

Bad debts

1,807

Rent

4,700

Utility

2,300

(30,302)

Net Profit

18,655

RM

RM

RM

Non Current Assets

Premises

350,000

Motor Vehicles

150,000

Less:

Acc Depn

(55,600)

94,400

Furniture

90,000

Less:

Acc Depn

(28,125)

61,875

Office Equipment

60,000

Less:

Acc Depn

(12,500)

47,500

553,775

Current Assets

Inventories

60,000

Trade Receivable

36,140

Less:

Allowance for doubful debts

(1,807)

34,333

Bank

100,781

Cash

6,380

Stationery stock

2,000

203,494

Less:

Current Liabilities

Trade Payable

50,000

Other Payable

32,000

Bank Overdraft

24,614

(106,614)

Net current assets

96,880

650,655

Financed by:

Capital as at 1 January

400,000

Add: Additional Capital

34,000

434,000

Add: Net Profit

18,655

452,655

Less: Drawing

(2,000)

Capital as at 31 December

450,655

Non-Current Liabilities

Bank Loan

150,000

Mortage Loan

50,000

200,000

650,655

4. Conclusion

Accountant is very important tools in a company. All sales, purchases, expenses, financial condition and operating results must be recorded. So that we can clearly understand all the expenses that we use or the profit we earn. So, accounting can helps a company to make more profit if we make true decision. This is assured a necessary subject to give us became a successful business person.

Reference

1. Wood, F. and Sangster,A.2012. Business Accounting Volume 1. 12th Edition. Financial Times, Prentice Hall.

2. Leong,A and Wong, S.V.2010. Business Accounting. 3rd Edition. Pearson

http://accounting-simplified.com/financial/users-of-accounting-information.html

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