INTRODUCTION

TYPES AND CHARACTERISTICS OF BUSINESS

ORGANIZATION
Sole proprietorship/

Partnership

Sole trader

Owned by a single or sole

owner.

Managed by its owner.

A business organization that is made up of

Company

Organizations which have

two or more individuals or owners, who

many owners called

jointly own the business.

shareholders or stockholders.

Partnership Act 1961- the relationship

Companies Act 1965 a

which subsists between persons carrying on

company becomes a legal entity

business in common with a view of profit.

that conducts its business apart

Members: min2 max20.

from its owners.

* Professional partnership (e.g. accountants,

doctors or lawyers): min2 max50.

Unlimited liability

Unlimited liability - Each partner is

Limited liability :

-Owner responsible for all

personally liable for the debts of the

i. Private company (Sdn Bhd)

the losses and liabilities

partnership.

ii. Public company (Bhd)

of the business.

NATURE, PURPOSE AND SCOPE OF

FINANCIAL ACCOUNTING
Accounting is the financial information systems that
provides relevant financial information to every person
who owns or uses economic resources or otherwise
engage in economic activity.
As a financial information system, accounting is the
process of identifying, measuring, recording and
communicating the economic events of an organization
to interested users of the information.

cont
Identification

: Economic events (transactions)

: Purchased some goods

amounted to RM3,500 and
paid by cheque.

Measurement

: Quantity (RM & sen)

: RM3,500.00

Recording

: Record, classify and summarize

: DR
CR

Communication

: Prepare accounting reports &

analyze and interpret

Purchase 3,500
Bank 3,500

: Prepare Financial statement

Scope of accounting
Public accounting the accountant offer expert service to the
general public. E.g. Auditing, Taxation and Management Consulting.
Private accounting the accountants are employees of business
enterprises. E.g. Cost Accounting, Budgeting, General Accounting,
Accounting Information System, Tax Accounting and Internal Auditing.

Government accounting accountants who are working in

government usually are employed by a federal agency, a state agency
or a local authority.
Education educating the public in the area of accounting and in
addition engage in research and publication. E.g. teachers and
lecturers

USERS AND USES OF THE ACCOUNTING

INFORMATION
Users
Owners

Uses/Purposes
To evaluate the financial status of the business.
To be able to evaluate their interest in the business.

Managers

To evaluate the financial status of the business.

To have the information necessary to make sound business decisions.

Creditors

To determine the firms ability to repay loans.

Investors

To evaluate the financial position of the business.

To evaluate whether the business is a good investment.

Employees

To evaluate the firms ability to pay wages.

To get an idea of their employment prospects.

Governments

To determine the taxable income of a business.

To make better financial decisions for the economy.

Others

For academic purposes.

For planning of projects.

Journalizing Identifying and

recording the transactions in the
journal
Preparation of the Financial
Statements.
Posting Making entries in the
ledger from the journal.
Balancing off the accounts in
the ledger.

Posting closing entries to the

ledger.

Steps in
accounting
cycle

Journalizing of closing
entries.

Extracting the balances of the

accounts in the ledger.

Preparation a pre-adjusted
Trial Balance.

Recording adjusting
journal entries.

Preparation of PostAdjusted Trail Balance.

Posting the adjusting

entries in the journal
Extraction of balances of
accounts