Welcome
ABFA 1013
INTRODUCTION
Mode of Delivery:
2.0 hours lecture per week –Week 1 to Week 14
1.5 hours tutorial per week – Week 2 to Week 14
Course Assessment:
Coursework 50m
Final Exam 50m
Total 100m
INTRODUCTION
Coursework:
Group Assignment 50%
Mid Semester Exam 50%
Total 100% (Threshold: 50%)
Final Exam:100%
Part A:
10 multiple choice questions 25%
Part B:
3 structural questions 75%
100% (Threshold: 40%)
CONTACT INFORMATION
Office: B303
E-mail:
Office Hours:
Wednesday 11:00-13:00
Wednesday 15:00-17:00
Thursday 13:00-15:00
RULES IN LECTURE HALL
Be punctual
No ringing & usage of cell phones
Foods and drinks but not the rubbish
Silence during lecture
Do not skip lectures, as the lecture notes are NOT
complete (have to do note-taking during lectures)
SYLLABUS COVERAGE
Lecture Coverage
1 The Accounting Equation
2 Double Entry Bookkeeping
3 The Cash Cycle
4 The Sales Cycle
5 The Purchases Cycle
6 The Petty Cash
7 Trial Balance and Financial Statements
8 Accounting Concepts and Conventions
9 Accounting Concepts and Conventions
10 Accounting for Non-Current Assets
11 Accounting for Trade Receivables
12 Year End Adjustment
13 Finalized Financial Statements and Closing Entries
14 Finalized Financial Statements and Closing Entries
LEARNING OUTCOMES:
Upon completion of the course, students should be able to:
1. Explain accounting concepts and the procedures of
book-keeping.
2. Prepare adjustments for accruals & prepayments,
depreciations, allowance for doubtful debts.
3. Prepare simple financial statements for sole
proprietorship.
ABFA1013
INTRODUCTION TO
ACCOUNTING
Lecture 1: The Accounting Equation
LEARNING OBJECTIVES:
Explain the meaning of equity, assets and liabilities
Understand the accounting equation
Explain the meaning of profit, revenue and expenses
Understand the profit determination equation
THE ACCOUNTING EQUATION
Assets = Liabilities + Equity
Assets - Liabilities = Equity
Revenue – Expenses = Profit
1 Equity
Resources (e.g. money) provided by
the owner into the business for use
in the business
These resources belong to the owner
Transactions that affect Equity
Owner invest Withdrawal
into business from owners
INCREASES EQUITY DECREASES
Business Business
Profits Losses
EXAMPLE
Mr. Lee decided to start a business in repairing and servicing
vehicles, trading under the name of “Lee Workshop”. His father
gave him RM300,000 cash as injection of capital into the
business. Mr. Lee brought a computer (valued at RM3,000) and
some furniture (valued at RM1,000) from his home to be used in
his business. Due to urgent needs, Mr. Lee withdrew RM2,000
cash for personal use.
Business Owner
Lee Workshop Mr. Lee
Receive cash RM300,000
300,000 Injects capital RM300,000
300,000
Receive computer RM3,000
3,000 Injects capital RM3,000
3,000
Receive furniture RM1,000
1,000 Injects capital RM1,000
1,000
Less: Pay cash RM2,000 Less: Withdraw cash RM
2,000
Total assets = RM302,000 2,000
Total capital = RM302,000
302,000 302,000
2 ASSETS
resources that are inside the business
to be used for running the business
activities
the more assets a business have, the
bigger and stronger is the business
Non-Current
Assets (NCA)
ASSETS
Current Assets
(CA)
NON CURRENT ASSETS (NCA)
Assets bought for continuing use over a long
period of time (> 1 year)
** E.g. building, machine, office equipment
Not for resale
CURRENT ASSETS (CA)
Assets that are likely to change in short term (within a
year)
** E.g. inventory (stok barangan), receivables
(penghutang), cash & bank balances
NON-CURRENT VS. CURRENT ASSETS
Non-current assets Current assets
For continuing use Likely to change within a
E.g. year
Building E.g.
Machinery Inventory
Furniture Receivables
Officeequipment Cash & bank balances
Motor vehicle
3 LIABILITIES
**amount owing (hutang) to outsiders
**because of supply of resources by these
outsiders
Examples of Liabilities
Amount owing to BANK Amount owing to SUPPLIERS
When the business has insufficient When the business buy from
capital (money), the business will suppliers (pembekal), the business
borrow loan from bank. owe the suppliers money.
The business owe the bank money The business must pay these
and must repay the loan. suppliers.
So bank loan is a liability. So this is also a liability.
LIABILITIES
Non Current Liabilities Current Liabilities
(NCL) (CL)
- Payable for more than 1 - Payable within 1 year
year - Example:
- Example: Short-term loan,
Mortgage loan, bank bank overdraft,
loan trade payables (pemiutang)
EXAMPLE
Business Outsiders
Lee Workshop Bank / Suppliers
Receive cash RM 50,000 Loan RM 50,000
Receive tools RM 500 Supply tools RM 500
Receive equipment RM90,000 Supply equipment RM 90,000
Receive spare parts RM 5,000 Supply spare parts RM 5,000
145,500
Total assets = RM145,500 145,500
Total liabilities = RM145,500
Liabilities will reduce when the business repays the loan/
money
Business Outsiders
Lee Workshop Payables
Pay RM500 for tools Receive cash RM500
Pay RM90,000 for equipment Receive cash RM90,000
Pay RM5,000 for spare parts Receive cash RM5,000
Assets reduce by RM 95,500 Liabilities reduce by RM 95,500
The Accounting Equation
Assets Liabilities Equity
The assets (resources) in the business are provided by
i) the owner (equity) OR
ii) by outsiders (liabilities)
Illustration 1:
Elaine Tan started business on 1 May, operating a shop
“Sweet Bun” selling various types of buns, with her own
cash of RM30,000 and a 2-year loan from RHB Bank of
RM20,000. She opened a current account with RHB Bank
and deposited RM40,000 into it. During the month, she paid
the following by cheques:
Fixture and fittings RM8,000
Furniture RM7,000
Office equipment RM5,000
Inventories RM3,000
Illustration 1 (Cont’):
Calculate the cash and bank balances
Increase Decrease Balance
(RM) (RM) (RM)
Cash:
Capital injection by Elaine Tan 30,000
Loan from Bank 20,000
Deposited into the bank account (40,000) 10,000
Bank account:
Deposited into the bank account 40,000
Paid for fixture & fittings
Paid for furniture (8,000)
Paid for office equipment (7,000)
Paid for inventories (5,000) 17,000
(3,000)
Illustration 1 (Cont’):
Prepare a listing based on the accounting equation
Types Amount (RM)
Assets Cash 10,000
Bank 17,000
Fixture and fittings 8,000
Furniture 7,000
Office equipment 5,000
Inventories 3,000
50,000
Liabilities Loan 20,000
Equity Capital 30,000
50,000
PROFIT (UNTUNG)
Business makes a (gross) profit when selling price > cost
of the inventories
Profits made by business belong to the owner
So, profits will increase equity
However, losses will reduce equity
EXAMPLE
Lee Workshop sells 10 boxes of spare parts to a walk-in
customer at a total selling price of RM500. Lee Workshop had
purchased these spare parts from the supplier at a price of
RM20 per box (total = RM200):
Business
Lee Workshop
RM 300 RM 300
Sell inventories costing RM200
Assets = Liabilities + Equity
Receive cash RM500
Assets increase by RM300
Inventories
Cash Cost of inventories RM200
Profit
Selling price RM500
Profit increase by RM300
REVENUE (HASIL)
Is the income earned by the business from undertaking
business activities
2 types of revenue:
i) Sales – Income earned from selling goods and
services. E.g. selling ice-cream to customers, OR
providing counselling services to clients.
ii) Other income – Income earned that are not directly
related to the main business activities. E.g. rent
received, discount received.
EXPENSES (BELANJA)
Are the resources used up to make the sale of goods or
services to customers.
2 types of expenses:
i) Cost of Goods Sold – Cost of inventories sold to
customers.
ii) Expenses – Other resources that had to be spent in
order to run the business. E.g. salary to workers, shop
rental, electricity.
THE PROFIT DETERMINATION
EQUATION
Profit = Revenue – Expenses
If revenue > expenses, the business is making a profit.
If revenue < expenses, the business is making a loss.
ILLUSTRATION 2:
Continuing from Illustration 1 above, Elaine Tan’s “Sweet Bun”
business transactions during the month of June 2010 are as follows:
1. Purchases of inventories by cheque totalling RM5,000
2. Sales totalling RM20,000, all deposited into the bank account
(inventories sold were costing RM7,000)
3. Received a cheque RM200 being discount received from supplier
4. Paid staff salaries by cash RM2,000
5. Paid shop rental by cheque RM3,000
6. Paid electricity by cash RM500
7. Withdrew RM2,000 cash for personal use (drawings)
ILLUSTRATION 2 (CONT’):
Calculate the cash, bank and inventories balances.
Increase Decrease Balance
(RM) (RM) (RM)
Cash:
Balance from last month 10,000
Paid staff salaries (2,000)
Paid electricity (500)
Drawings (2,000) 5,500
Bank:
Balance from last month 17,000
Purchase of inventories
Sales (5,000)
Discount received 20,000
Paid shop rental 200 29,200
Inventories: (3,000)
Balance from last month 3,000
Purchases
Sales 5,000 1,000
(7,000)
ILLUSTRATION 2 (CONT’):
Prepare a listing based on the profit determination equation
Types Amount (RM)
Revenue Sales 20,000
Discount received 200
20,200
Expenses Cost of inventories sold 7,000
Staff salaries 2,000
Shop rental 3,000
Electricity 500
12,500
Profit Revenue - Expenses 7,700
ILLUSTRATION 2 (CONT’):
Prepare a listing based on the accounting equation
Types Amount (RM)
Assets Cash 5,500
Bank 29,200
Fixture and fittings 8,000
Furniture 7,000
Office equipment 5,000
Inventories 1,000
55,700
Liabilities Loan 20,000
Equity Capital 30,000
Drawings (2,000)
Profit 7,700
55,700
Q &A?
THANK YOU !!
