Topic 1 Accounting Environment

7/28/2019 Topic 1 Accounting Environment

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INTRODUCTIONTOACCOUNTING

Definition of Accounting

Accounting is a process to identify, measure, record andpresent the economic information of and entity to the

user in order to help them make evaluation or economic

decision

Users of accounting Information

Internal users Direct access to the company involved in the management of the

entity management of the company

External users

Parties who do not direct access to the resources of the

company and not involved in the management of the company


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Branches of Accounting

Financial Accounting

Management Accounting

Auditing

Taxation


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Difference between Financial Accounting and


Financial

Accounting


Preparation of report Preparation of financial

reports of an entity for

external and internal usersbut focus is given to the

external users.

Preparation of financial

and non-financial

information that arerequired by parties in the

company for planning,

evaluating and controlling

purposes of the operations

of an entity

Standard or Format Financial reports produced

are periodically and in

accordance to specified

standard or format.

Report is produced at any

time based on requirement

and is not subject to any

standard or format


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Professional Accounting Bodies in Malaysia

Malaysia Institute of Accountants (MIA) To set the required qualification in order to become member

To provide training and education for practitioners or thosewho are interested becoming accounting practitioners

To control accounting practices in Malaysia

To protect accounting interest in Malaysia

The Malaysian Institute of Certified Public Accountants(MICPA) To advance the accounting theries and practies in all aspects

To train and evaluate the competent members

To ensure the independence of professional accountant

To oversee the practices and professional conducts of itsmembers


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Professional Accounting Bodies in Malaysia (cont)

Malaysian Accounting Standard Board ( MASB)

To set and approved new accounting standard

To revise or accept the usage of existing standard as approved

accounting standard To develop the conceptual accounting framework

Financial Reporting Foundation (FRF)

To provide opinion to MASB on matters to be implemented

To evaluate the performance of MASB

To be responsible for the overall funding of the operation of MASBincluding to approve its budget


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FUNDAMENTAL ACCOUNTING

CONCEPT

Qualitative Characteristics of Accounting

Information Qualitative characteristics of accounting information refer to the

characteristics that must be present in the accounting information to

make it useful

Primary

Relevance

Feedback Value

Forecast Value

Timeliness

Reliability

Verifiable

Objective

Trustworthy


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CONCEPT

Qualitative Characteristics of Accounting Information (cont)

Secondary

Comparability

Consistency

Accounting Assumptions Assumption of Separates Entity

Assumption of Going Concern

Assumption of Monetary Unit

Assumption of Accounting Period


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CONCEPT

Basic Principle of Accounting

Principle of Historical Cost

Principle of Income Recognition

Percentage of Completion method

Cash Basis Method Principle of Matching

First step

Second step

Principle of Full Disclosure

Accounting Constraints Cost-Benefit Relationship

Materiality

Documents

Topic 1 Accounting Environment