akaun chapter 2
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KE1013: Chapter Two 1
CHAPTER TWO
ACCOUNTING CONCEPT AND
PRACTICE
KE1013: Chapter Two 2
OUTLINE
• Generally Accepted Accounting Principles– Accounting assumptions– Accounting principles– Accounting constraints
• Financial Statement
• Transaction & Accounting Equation
KE1013: Chapter Two 3
Generally Accepted Accounting Principles
AccountingAssumptions
Accounting Principles
AccountingConstraints
KE1013: Chapter Two 4
Accounting Assumptions
MonetaryUnit
assumption
EconomicEntity
assumption
Enables accounting tomeasure economic events.
The activities of the ownerand the company should be kept separate.
KE1013: Chapter Two 5
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.
KE1013: Chapter Two 6
Accounting Principles
Hitorical Cost
Principle
RevenueRecognition
Principle
All assets must be recordedat cost.
Revenue is recognized only afterthe goods have been delivered orservice rendered to customers.
KE1013: Chapter Two 7
Accounting Principles
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.
KE1013: Chapter Two 8
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.
KE1013: Chapter Two 9
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.
KE1013: Chapter Two 10
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.
KE1013: Chapter Two 11
Income Statement
Exwyezack CompanyIncome Statement For The Year Ended ……..
Sales Revenue xxxxx
Less: Expenses (xxxx)
Profit xxxx
KE1013: Chapter Two 12
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
KE1013: Chapter Two 13
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
KE1013: Chapter Two 14
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
KE1013: Chapter Two 15
Transaction & Accounting Equation
Transactions Economic events
Eg: Sell goods to customers.
Pay telephone bills
Receive money from debtors
Pay creditors
KE1013: Chapter Two 16
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
KE1013: Chapter Two 17
Cont…
Increase and decrease in owner’s equity
Owner’sEquity
Investment
Revenues Expenses
Withdrawals
KE1013: Chapter Two 18
Transaction Analysis
Owner started the business with RM20,000 cash.
Assets = Liabilities + Owner’s Equity
=RM20,000 RM20,000+RM0
RM20,000 RM20,000
KE1013: Chapter Two 19
Transaction Analysis
Purchase office equipment with cash RM10,000.
Assets = Liabilities + Owner’s Equity
=RM20,000
RM20,000+RM0
RM20,000 RM20,000
(-) RM10,000(+) RM10,000
KE1013: Chapter Two 20
Transaction Analysis
Purchase motor vehicles on credit RM40,000.
Assets = Liabilities + Owner’s Equity
=RM20,000
RM20,000+RM40,000
RM60,000 RM60,000
(+) RM40,000
KE1013: Chapter Two 21
Transaction Analysis
Receive cash from customer for service rendered RM3,000.
Assets = Liabilities + Owner’s Equity
=RM60,000 RM20,000
+RM40,000
RM63,000 RM63,000
(+) RM3,000 (+) RM3,000
KE1013: Chapter Two 22
Transaction Analysis
Pay utility bills for RM250.
Assets = Liabilities + Owner’s Equity
=RM63,000 RM23,000
+RM40,000
RM62,750 RM62,750
(-) RM250 (-) RM250
KE1013: Chapter Two 23
Transaction AnalysisReceived invoice from advertising company for the advertisement made, RM3,500. No payment made.
Assets = Liabilities + Owner’s Equity
=RM62,750RM22,750
+RM40,000
RM62,750 RM62,750
(+) RM3,500 (-) RM3,500
KE1013: Chapter Two 24
Transaction AnalysisReceived loan from bank RM50,000.
Assets = Liabilities + Owner’s Equity
=RM62,750 RM19,250
+RM43,500
RM112,750 RM112,750
(+) RM50,000 (+) RM50,000
KE1013: Chapter Two 25
Transaction AnalysisPay part of the amount owed to creditor for motor vehicle purchased RM20,000.
Assets = Liabilities + Owner’s Equity
=RM112,750 RM19,250
+RM93,500
RM92,750 RM92,750
(-) RM20,000 (-) RM20,000
KE1013: Chapter Two 26
Transaction AnalysisOwner took out RM10,000 for his own use.
Assets = Liabilities + Owner’s Equity
=RM92,750 RM19,250
+RM73,500
RM82,750 RM82,750
(-) RM10,000 (-) RM10,000
KE1013: Chapter Two 27
Thank You
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