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Accounting Concept and Practice: Accounting A Malaysian Perspective 5e
Accounting Concept and Practice: Accounting A Malaysian Perspective 5e
TOPIC
Accounting
A Malaysian
Perspective
5e
Learning Objectives
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Generally Accepted Accounting Principles
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Generally Accepted Accounting Principles
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Generally Accepted Accounting Principles
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Generally Accepted
Accounting Principles (GAAP)
6
5 Accounting Principles
Matching
Revenue
Full-disclosure
recognition
7
• Historical cost principle
requires companies to
account and report based
Historical cost on acquisition costs rather
than fair market value for
most assets and liabilities.
8
Cost Concept (slide 1 of 3)
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Cost Concept (slide 2 of 3)
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Cost Concept (slide 3 of 3)
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• financial and accounting
information needs to be
independent and free from
bias. This means that
Objectivity
financial reporting like a
company's
financial statements need
to be based on evidence
and not opinions.
• Expenses have to be
matched with revenues as
long as it is reasonable to
do so. Expenses are
recognized not when the
work is performed, or
Matching
when a product is
produced, but when the
work or the product
actually makes its
contribution to revenue.
• companies may not record
revenue until (1) it is
realized or realizable and
(2) when it is earned. The
Revenue flow of cash does not have
recognition any bearing on the
recognition of revenue.
This is the essence of
accrual basis accounting.
• It requires that all material
information has to be
disclosed in the financial
Full-disclosure statements either on the face
of the financial statements or
in the notes to the financial
statements.
4 Accounting Assumptions
Economic entity
Going concern
Time period
Monetary-unit
16
Economic entity
• a business or an
organization and its owners
are treated as two
separately identifiable
parties
• It is necessary to record the
business's transactions
separately, to distinguish
them from the owners'
personal transactions
Going concern
Conservatism Materiality
when in doubt on how to record or Report only those that are considered
report or when two different significant. Insignificant amounts need not
acceptable methods could be used, be recorded and reported
choose the one that won’t overstate
assets or profits
Not to overstate or give false Strong or impactful to change a
impression decision
20
Example Exercise Cost Concept
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part.
Financial Statements
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Example Exercise Statement of Profit or Loss (slide 2 of 2)
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part.
Statement of Owner’s Equity (slide 1 of 2)
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Example Exercise Statement of Owner’s Equity (slide 2 of 2)
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part.
Statement of Financial Position (slide 1 of 2)
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Example Exercise Statement of Financial Position
(slide 2 of 2)
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part.
Statement of Cash Flows
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Statement of Cash Flows: Cash Flows from
Operating Activities
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Statement of Cash Flows: Cash Flows from
Investing Activities
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Statement of Cash Flows: Cash Flows from
Financing Activities
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Example Exercise Statement of Cash Flows
(slide 1 of 2)
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part.
Example Exercise Statement of Cash Flows
(slide 2 of 2)
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Financial Statements Preparation Order
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Financial Statements—Statement of Profit or Loss
(continued)
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Financial Statements—Statement of Owner’s
Equity
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Financial Statements—
Statement of Financial Position
(concluded
)
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Financial Statement Interrelationships
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Business Transaction
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The Accounting Equation (slide 3 of 4)
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The Accounting Equation (slide 4 of 4)
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Example Exercise Accounting Equation (slide 1 of 2)
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part.
Example Exercise Accounting Equation (slide 2 of 2)
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part.
Business Transactions and the Accounting
Equation
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Transaction A
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Transaction B
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Transaction C
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Transaction D (slide 1 of 3)
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Transaction D (slide 2 of 3)
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Transaction D (slide 3 of 3)
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Transaction E (slide 1 of 2)
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Transaction E (slide 2 of 2)
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Transaction F
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Transaction G
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Transaction H
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Summary of Transactions for NetSolutions
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Types of Transactions Affecting Owner’s
Equity
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Example Exercise Transactions (slide 1 of 2)
Selva Delivery Service is owned and operated by Joe Salva. The following
selected transactions were completed by Salvo Delivery Service during
February:
1. Received cash from owner as additional investment, RM35,000.
2. Paid creditors on account, RM1,800.
3. Billed customers for delivery services on account, RM11,250.
4. Received cash from customers on account, RM6,740.
5. Paid cash to owner for personal use, RM1,000.
Indicate the effect of each transaction on the accounting equation elements
(Assets, Liabilities, Owner’s Equity, Drawing, Revenue, and Expense). Also
indicate the specific item within the accounting equation element that is
affected. To illustrate, the answer to (1) follows:
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part.
Example Exercise Transactions (slide 2 of 2)
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