akaun chapter 2

KE1013: Chapter Two 1

CHAPTER TWO

ACCOUNTING CONCEPT AND

PRACTICE


OUTLINE

• Generally Accepted Accounting Principles– Accounting assumptions– Accounting principles– Accounting constraints

• Financial Statement

• Transaction & Accounting Equation


Generally Accepted Accounting Principles

AccountingAssumptions

Accounting Principles

AccountingConstraints


Accounting Assumptions

MonetaryUnit

assumption

EconomicEntity

assumption

Enables accounting tomeasure economic events.

The activities of the ownerand the company should be kept separate.


Accounting Assumptions

Going Concern

assumption

Time Interval/ Periodicityassumption

The business will continueFor the conceivable future.

Final accounts are preparedat regular intervals. Known as accounting period /financial year.



Hitorical Cost

Principle

RevenueRecognition

Principle

All assets must be recordedat cost.

Revenue is recognized only afterthe goods have been delivered orservice rendered to customers.



MatchingPrinciple

Full DisclosurePrinciple

Profit is recognized by matching the income of the period with allexpenses incurred in earning such income.

Financial statements should providesufficient / relevant information to influence users decision making.


Accounting Constraints

MaterialityPrinciple

ConservatismPrinciple

An item is said to be “material”if it is sufficiently importantto affect our judgment of the true position of the firm.

When in doubt, choose the solutionthat will be least likely to overstateassets and income.


Financial Statement

Income Statement – A summary of revenue and expenses for a specific period of time / to show bus. performance

Owner’s Equity Statement – A summary of the changes in the owner’s equity as of a specific date.

Balance Sheet – A list of assets, liabilities and owner’s equity as of specific date/ to show position.

Cash Flow Statement – A summary of cash receipts and cash payments for a specific period of time.


Purpose of Financial Statements

MASB 1 : To provide information about the financialposition , performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions.

Show the results of management’s stewardshipof the resources entrusted to it.


Income Statement

Exwyezack CompanyIncome Statement For The Year Ended ……..

Sales Revenue xxxxx

Less: Expenses (xxxx)

Profit xxxx


Owner’s Equity Statement

Exwyezack CompanyStatement of Owner’ Equity For The Year Ended ……..

Opening capital xxxxx

(+/-) Profit / Loss xxx

Additional Capital xxx

xxxxx(-) Drawings (xxxx)

Ending Capital xxxxxx


Balance SheetExwyezack Company

Balance Sheet As At ……..

Fixed Assets xxxxxx

Current Assets xxxxx

Less: Current Liabilities (xxxx)

Working Capital xxxx

Net Assets xxxxxx

Financed by:Owner’s Equity xxxxx

Long Term Liabilities xxxxx

xxxxx


Cash Flow StatementExwyezack Company

Cash Flow Statement For The Year Ended ……..

Cash From Operating Activities xxxx

Cash From Investing Activities xxxx

Cash From Financing Activities xxxx

Net increase in cash xxxxx

Opening balance xxx

Closing balance xxxxx


Transaction & Accounting Equation

Transactions Economic events

Eg: Sell goods to customers.

Pay telephone bills

Receive money from debtors

Pay creditors


Cont…The Accounting Equation:

Assets = Liabilities + Owner’s Equity

Resources that are expected to be

of benefit in the future/Owned by business

Claims held by the owners

Economic obligations (debts) payable to outsiders


Cont…

Increase and decrease in owner’s equity

Owner’sEquity

Investment

Revenues Expenses

Withdrawals


Transaction Analysis

Owner started the business with RM20,000 cash.


=RM20,000 RM20,000+RM0

RM20,000 RM20,000



Purchase office equipment with cash RM10,000.


=RM20,000

RM20,000+RM0

RM20,000 RM20,000

(-) RM10,000(+) RM10,000



Purchase motor vehicles on credit RM40,000.


=RM20,000

RM20,000+RM40,000

RM60,000 RM60,000

(+) RM40,000



Receive cash from customer for service rendered RM3,000.


=RM60,000 RM20,000

+RM40,000

RM63,000 RM63,000

(+) RM3,000 (+) RM3,000



Pay utility bills for RM250.


=RM63,000 RM23,000

+RM40,000

RM62,750 RM62,750

(-) RM250 (-) RM250


Transaction AnalysisReceived invoice from advertising company for the advertisement made, RM3,500. No payment made.


=RM62,750RM22,750

+RM40,000

RM62,750 RM62,750

(+) RM3,500 (-) RM3,500


Transaction AnalysisReceived loan from bank RM50,000.


=RM62,750 RM19,250

+RM43,500

RM112,750 RM112,750

(+) RM50,000 (+) RM50,000


Transaction AnalysisPay part of the amount owed to creditor for motor vehicle purchased RM20,000.


=RM112,750 RM19,250

+RM93,500

RM92,750 RM92,750

(-) RM20,000 (-) RM20,000


Transaction AnalysisOwner took out RM10,000 for his own use.


=RM92,750 RM19,250

+RM73,500

RM82,750 RM82,750

(-) RM10,000 (-) RM10,000


Thank You

akaun chapter 2

Education

owners equity resources

cash xxxxx

accounting concept

list of assets

rm0 rm20

cash rm10

transaction analysis

current liabilities