5. Accounting Assumptions KAL1013 BBA EXEC.(T.HAJI) Monetary Unit assumption Separate business Entity assumption Enables accounting to measure economic events. The activities of the owner and the company should be kept separate.
6. Accounting Assumptions KAL1013 BBA EXEC.(T.HAJI) Going Concern assumption Time period assumption The business will continue For the conceivable future. Final accounts are prepared at regular intervals. Known as accounting period /financial year.
7. Accounting Principles KAL1013 BBA EXEC.(T.HAJI) Historical Cost Principle Revenue Recognition Principle All assets must be recorded at cost. Revenue is recognized only after the goods have been delivered or service rendered to customers.
8. Accounting Principles KAL1013 BBA EXEC.(T.HAJI) Matching Principle Full Disclosure Principle Profit is recognized by matching the income of the period with all expenses incurred in earning such income. Financial statements should provide sufficient / relevant information to influence users decision making.
9. Accounting Constraints KAL1013 BBA EXEC.(T.HAJI) Materiality Principle Conservatism Principle An item is said to be “material” if it is sufficiently important to affect our judgment of the true position of the firm. When in doubt, choose the solution that will be least likely to overstate assets and income.
14. Purpose of Financial Statements KAL1013 BBA EXEC.(T.HAJI) FRS 101 2004 : To provide information about the financial position , 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 stewardship of the resources entrusted to it.
15. Income Statement KAL1013 BBA EXEC.(T.HAJI) Jannah Company Income Statement For The Year Ended …….. Sales Revenue xxxxx Less: Expenses (xxxx) Profit xxxx
16. Owner’s Equity Statement KAL1013 BBA EXEC.(T.HAJI) Jannah Company Statement of Owner’ Equity For The Year Ended …….. Opening capital xxxxx (+/-) Profit / Loss xxx Additional Capital xxx xxxxx (-) Drawings (xxxx) Ending Capital xxxxxx
17. Balance Sheet KAL1013 BBA EXEC.(T.HAJI) Jannah 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
18. Cash Flow Statement KAL1013 BBA EXEC.(T.HAJI) Jannah 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
19. Transaction & Accounting Equation KAL1013 BBA EXEC.(T.HAJI) Transactions Economic events Eg: Sell goods to customers. Pay utility bills Receive cash from sales of good Pay dividend to shareholders
20. Cont… KAL1013 BBA EXEC.(T.HAJI) The Accounting Equation: Assets = Liabilities + Owner’s Equity Resources that are expected to be of benefit in the future Claims held by the owners Economic obligations (debts) payable to outsiders
21. Cont… KAL1013 BBA EXEC.(T.HAJI) Increase and decrease in owner’s equity Owner’s Equity Investment Revenues Expenses Withdrawals
22. Transaction Analysis KAL1013 BBA EXEC.(T.HAJI) Owner started the business with RM 40,000 cash. Assets = Liabilities + Owner’s Equity = RM 40,000 RM 40,000 + RM0 RM40,000 RM40,000
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