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KE1013 Chapter One 1

CHAPTER 1: ACCOUNTING

ENVIRONMENT

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KE1013 Chapter One 2

Outline

Definition

Purposes, Fields, Professional Bodies, Ethics and

Regulations

Types of Business

Characteristics of Qualitative AccountingInformation

Users of Accounting Information

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KE1013 Chapter One 3

Learning objectives: Define what is accounting?

Describe the role of accounting?

Describe the profession of accounting & theaccounting professional/governing body?

Explain the importance of ethical conduct

Explain types of business.

State the characteristics of qualitative accountinginfo.

State the users of accounting?

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KE1013 Chapter One 4

Definition of Accounting Kieso and Weygandt (1996) process of

identifying, recording and communicating

economic activities of the organization to theusers of the information.

Generally accepted definition: accounting is the

process of identifying, measuring, summarizingand communicating economic information topermit informed judgments and decisions byusers of the information.

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KE1013 Chapter One 5

Accounting: Definition

Measuring Identifying

Recording Reporting

Interpreting Analyzing

Bookeeping

Designing Information

Provide useful

information

to users

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KE1013 Chapter One 6

Purpose of Accounting

Provide useful information to users.

Provide assistance in decision making.

Performance evaluation tools.

Controlling purposes.

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Fields in Accounting

Accounting

Financial

Accounting

Management

Accounting

Auditing

Tax

Public Sector

Accounting

and Non-Profit

Organization

Accounting Information

System

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Accounting Professional Bodies

MICPA MIA

MASB FRF

MALAYSIA

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Ethics in Accounting

Integrity

Objectivity

Independence

Confidentiality

Professional competence and due care Compliance with technical standards

Professional behavior

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Regulations in Accounting Companies Act 1965

S: 167

S: 169

Ninth Schedule

Financial Reporting Act 1997

Accounting Standards (FRSs)

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Types of Business Organization

Perniagaan tunggal (Sole proprietor)

Perniagaan perkongsian (Partnership)

Syarikat berhad. (Limited companies)

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Difference between businessesSole

Proprietor

Partnership Public

Company

Management Owner Partners BOD

Liability Unlimited Unlimited Limited

Profit Unlimited According to

agreement

Dividend on

shares.

Tax Owners

income tax

Partners

income tax

Tax based on

the profit of the

co.

Regulation None Agreement,

Partnership

Act 1961.

Companies Act

1965, MA, AA

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Characteristics of Qualitative

Accounting Information

Timeliness (ketepatan masa)

Relevance (relevan)

Reliable (boleh dipercayai)

Comparable (boleh dibandingkan)

Easy to understand (boleh difahami)

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Users of Accounting Information

Users

Internal External

ManagersDirect

Interest

Indirect

Interest

Investors

Potential Investors

Creditors

Regulatory Agencies

Inland Revenue Dept.

Customers