Studying this chapter should provide you with the overview ofbasic accounting, which this knowledge needed to: ◦ Distinguish between the different types of business organization ◦ Define, explain and differentiate the terms bookkeeping and accounting ◦ Identify the users and the uses of the accounting information ◦ Describe the accounting cycle
Particular Sole Partnership Companies Proprietorship Public Private (Bhd) (Sdn Bhd)Own by 1person 2-20 persons 2-based on ASC 2-50 membersContribution of Owner Partner Through issue Through issueCapital by -Cash or Property based on of shares of shares their -i.e motor van agreementControl and Owner or get help Partners or BOD appointed BOD appointedmanage by from family by board by shareholders by shareholdersLiability Unlimited Unlimited Limited LimitedLegal No legal requirement Partnership Govern by Govern byrequirement for its formation Agreement Companies Act Companies Act 1965 1965Profit/losses Belong to the owner Shared Paid to Paid to based on shareholders in shareholders in sharing ratio form of form of dividend dividend
Particular Accounting BookkeepingDefinition - The art of 1classifying, - It is the mechanical 2 recording, 3summarizing of aspects of accounting transactions and business such as classifying, events in monetary terms and recording, summarizing 4 interpreting the results to of transactions interested parties to enable systematically in them to make decision. accordance with certain principles or rules.Explanation & Involve 4 stages; - Only a part ofDifferences a) Classifying – sorting out to accounting category i.e sales,payments - The needs of recording b) Recording-ledger,journal transactions c) Summarizing- TB,TPL,BS systematically give rise to the double entry d) Interpreting- analyzed FS principles
Particular Users UsesInternal Owner Interested in the profits earned from their investment in the business and theUsers & Uses financial stability.-work directly inthe organization Manager To guide them in planning,organizing, and controlling the organization and analyzing the operations of the business. Employees Business ability to progress and expand and other monetary benefits that are gained from a financially stable business
Particular Users UsesExternal Creditors/ Interested to know whether the business can Bankers pay the amount owing to them.Users & Uses-indirectlyinvolved with the Current & Requires information regarding theorganization Potential solvency and financial strength of the investor business, its present and future earning capacity. Government For tax purposes Consumers Establishments of cost accounting controls. When there is reduction on cost production, there is reduction of the prices of goods they purchase.