What is accounting?
The systematic process of classifying, recording, summarizing, analyzing, and interpreting business transactions in monetary units to support decisions.
What is bookkeeping?
The part of accounting concerned with recording transactions.
How are users of accounting information divided by their relationship to an organization?
Internal users work in the organization; external users are indirectly involved with it.
Which groups are internal users of accounting information?
Business owners, management, the finance department, and employees.
Which groups are external users of accounting information?
Banks, suppliers, potential investors, customers, auditors, tax authorities, the public, and employee unions.
Which records do accountants maintain?
Journals, ledgers, and other financial records.
What do accountants reconcile?
Bank statements and accounts.
Which financial statements do accountants prepare?
Balance sheets, income statements, and cash flow statements.
Which reporting periods do accountants cover in financial reports?
Interim and annual periods.
How do accountants support budgeting and forecasting?
They create budgets and forecast future revenue and expenses.
Which five fields make up the main areas of accounting?
Financial accounting, management accounting, cost accounting, tax accounting, and auditing.
What does financial accounting report, and what period does it focus on?
It reports financial transactions through financial statements, focusing on historical performance.
Which organization defines management accounting as providing information for high-level business decisions?
The Chartered Institute of Management Accountants (CIMA).
Which users receive financial accounting information, compared with management accounting information?
Financial accounting serves internal and external users; management accounting serves internal users only.
Which accounting reports are legally required?
Financial accounting reports are legally required; management accounting reports are not.
Which Malaysian body issues accounting standards?
The Malaysian Accounting Standards Board (MASB).
What are Malaysia’s two approved accounting standards?
Malaysian Financial Reporting Standards (MFRS) and Malaysian Private Entities Reporting Standards (MPERS).
Which entities does MPERS apply to?
Private entities.
Which bodies regulate the Malaysian accounting profession?
MASB, MIA, SSM, and IRBM.
What standards does MASB develop and promote?
High-quality accounting and financial reporting standards consistent with international best practices.
Under which law was MIA founded as a statutory body?
The Accountants Act 1967.
What does SSM do to support business registration and corporate compliance?
It incorporates companies, registers businesses, provides public information, and monitors and enforces compliance.
Which three groups contain basic accounting concepts?
Principles, assumptions, and constraints.
At what amount does the historical cost concept record a transaction?
Its original or acquisition cost, supported by initial documents.
How does the matching concept determine a period’s profit?
By matching that period’s revenue with the expenses incurred to earn it.
What does the objectivity concept require as the basis for financial records?
Verifiable evidence and transaction details from supporting source documents.
Which six assumptions are listed in the basic accounting concepts?
Consistency, accrual, going concern, money measurement, business entity, and periodicity.
What does the consistency concept require of accounting methods across periods?
The same methods and procedures must be used from period to period.
When does the accrual concept record revenue and expenses?
Revenue is recorded when earned and expenses when incurred, regardless of cash timing.
How does the periodicity concept enable business reporting?
It divides a business’s indefinite life into fixed periods.
Which constraints are listed among the basic accounting concepts?
Prudence and materiality.
How does the prudence concept treat expected losses and unrealized gains?
It reports expected losses but recognizes gains only when realized.
What does the prudence concept aim to avoid overstating?
Profit and assets.
What information must the materiality concept disclose?
Information that could seriously affect users’ decisions.
What helps determine whether an error is material under the materiality concept?
Its effect on profit.
Which business documents are used for classification?
Receipts, invoices, debit notes, credit notes, and cash bills.
Where are business transactions recorded?
In the cash book, journals, and ledger.
How are accounting data for a period summarized?
In financial statements comprising the Statement of Comprehensive Income and the Statement of Financial Position.
What do owners assess using financial statements?
Business performance, profitability, and stability.
What organizational decisions do managers make using accounting information?
Investment, financing, and pricing decisions.
What do finance departments assess using financial information?
The organization’s ability to pay its business debts.
What do employees learn from accounting information about their company?
Its performance, job prospects, income, and other benefits.
What do banks assess using borrowers’ accounting information?
Creditworthiness and ability to repay loans.
What tax filings do accountants prepare and submit?
Tax returns.
What do accountants check during compliance reviews?
Compliance with organizational policies and regulatory standards.
How do accountants support management decisions about profitability?
They advise on profitability.
What does cost accounting assign to cost objects?
Accumulated costs.
What is the main purpose of tax accounting?
To calculate and report taxpayers’ tax liabilities accurately.
What does auditing independently examine?
Financial activity and whether transactions follow applicable rules and standards.
What do generally accepted accounting principles (GAAP) regulate?
The details and legalities of business and corporate accounting.
Which organization issues GAAP in the United States?
The Financial Accounting Standards Board (FASB).
When did MPERS take effect?
1 January 2016.
Which internationally recognized standard may foreign companies listed in Malaysia use?
International Financial Reporting Standards (IFRS).
Under which law was MASB established?
The Financial Reporting Act 1997.
What role does the Financial Reporting Foundation have regarding MASB?
It is a trustee body overseeing MASB’s operation.
Which designation does MIA award to chartered accountants in Malaysia?
CA (M).
How did Fajar Nadim Enterprise record its shop unit after its market price rose?
At its RM300,000 purchase cost.
What may historical cost fail to reflect during rising prices?
An asset’s market value.
In which year was the RM1,500 sofa sale matched with its RM450 cost?
2018.
Which documents can verify transactions under the objectivity concept?
Vouchers, bills, receipts, invoices, bank statements, debit notes, and credit notes.
How did Y2B Express Bhd violate the consistency concept?
It changed its depreciation method without advising shareholders.
How much of the sofa delivery was recorded as 2018 sales?
RM1,000.
What does the going concern concept assume about a business?
It will operate for a long period of time.
What accounting periods may businesses use, and what must each report state?
A month, half a year, or a year; each report states the period it covers.
How does prudence value closing stock costing RM6,000 with a market value of RM6,500?
At RM6,000.
Why is omitting a RM100 sale from RM6 million of sales immaterial?
It has no serious effect on decision-making.
Why is recording RM40,000 of sales as expenses against RM3 million of sales material?
It changes reported profit into a loss.
Which reporting frameworks may Malaysian private entities choose under MPERS?
The MPERS framework or the Malaysian Financial Reporting Standards framework.
In what year was SSM formed?
2002.
Answer 30 questions on Introduction to Accounting.
1. Which process uses monetary information about business transactions to help users make decisions?
2. A clerk records sales transactions in the journal, while another employee classifies, summarizes, analyzes, and interprets the resulting data. Which activity is bookkeeping?
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