Joey Leong Kah Jie (Tutorial 1)

1. What are the processes involved in financial accounting?
Firstly, financial accounting has to identify the transaction that used in financial activity,
economic activity or event. Whether there are used for business activity purpose.
Secondly, financial accounting must measure and record. It records the financial activities that
is applicable to business activity in a source of documents. It measured the source of
documents in terms of monetary value.
Thirdly, financial accounting has to classify the transaction like assets or liabilities and record
according to the nature of their similarity.
Fourthly, financial accounting has to summarize the information into a clear viewing financial
statement.
Fifthly, the person who do financial accounting must communicate to the management and
other interested users about the financial statement that how a business performance.
2. What are the four types / branches of accounting?

There are four types of accounting which are financial accounting, cost accounting,
management accounting and taxation.
Firstly, financial accounting can trace the record of a company’s financial transaction by using
accepted general accounting rules and standards. After make a record, financial accounting
has to produce financial statements for external users.
Secondly, cost accounting is used by a company’s internal users to identify all variable and
fixed costs associated with the production process.
Thirdly, management accounting is used by a company’s internal users, managers to analyse
and communicate the financial data. Manager has to manage the activity by involves
identifying, presenting, evaluating data for formulation strategy, activity planning and control,
decision making and allocate the use of resources wisely.
Fourthly, taxation use financial accounting information to check profit and determine the tax
returns and tax payments. It is for external users.
3. Explain three (3) external users and internal users of financial reports.
There are three internal users of financial reports who are owners, managers and employees.
Owners are known as shareholders of the firm. They have invested money into a company by
using their personal funds. They are keenly interested in financial information to check the
profit or loss. Managers are the one who prepare the financial reports. They wanted to check
whether the company is operating welly under their guidance and make improvement in
company operating process. Employees are concerned about the information of the business
whether it is stability and continuing profitability. Since employment prospects and
maintenance of pension funding and retirement benefits are important to them. They are also
interested in top management’s compensations and perks.
There are three external users who are public, suppliers and government. Suppliers need to
know the financial strength of an entity, so that they can extend credit for goods accordingly.
They are always anxious to determine the capability of the company to meet its debts as and
when they fall due. Government needs to plan financial and industrial policies by knowing
how the economy now is performing. Government use the financial information for tax
authorities that how much a business has to pay. Public can be potential investors. They might
want to evaluate how the entity affects the local economy, environment and community. They
are also interested in how a business can bring effect to the public by running corporate
responsibility programs.
4. Compare and contrast between a private company and public company.

Firstly, private company can be 2 to 50 shareholders only, but public company can be 2 to
unlimited shareholders. Secondly, private company’s share can only sell to other individuals
by invitation, but public company can be sold to anyone in the public. Thirdly, private
company cannot be listen in Bursa Malaysia but public company can. Fourthlly, privte
company carries the word Sendirian Berhads in the name, and public company carries the
word Berhad in the name.
5. Discuss the strengths and weaknesses of the sole proprietorship.

The strength of sole trader is can make decision easy and faster since there is only one no
need to make discussion with others. Sole trader can lower down the cost of organizing since
he or she no need hire so many employees. There is also no requirement to appoint auditor,
company secretary or tax agent. Sole trader can just hire agent enough for the submission.
The weakness of sole trader is unlimited liabilities. If the company bankrupt, sole trader is
responsible to carry the debt by himself or herself. Sole trader who owned business by one
individual has limited financial resources. Since it is difficulty in borrow fund from the bank.
6. What are the main purposes of financial statement preparation? Explain your answer.
The main purpose of preparing financial statement is to see the performance of the company
whether loss or gain by looking at the result of information. It also can check on the financial
position of a company. The higher value of the company, the more money investors can invest
into the firm. It also can keep track and record the cash flow of organization like whether the
money is applicable to the business activities and whether there are any financial challenges.
After make a record, the financial statement can be provided for external users like
stakeholders, investors and others. They are interested in the profitability and operational
efficiency of the company.
7. What are accounting concepts? Provide and elaborate four accounting concepts.
Accounting concept is referring to the fundamental presumptions, guidelines and concepts for
source of document and provide financial statement. Firstly, historical cost concept is look at
the back which record history about how much that the company use during that time. It
records according to the historical cost idea like assets must be showed at cost price.
Secondly, money measurement concept is using the accounting information to present in
traditionally. For example, Digi centre need to estimate the amount for their package which
included service fees, product fees and others. Thirdly, business entity concept is applied to
the affairs of a business. There are categorized into business activities of its owners and non-
business activities of its owner. For example, a proper way for withdrawal need to have a
reasonable reason for business activities. Fourthly, dual aspect concept must be assets and
liabilities. In this concept, we might use the formula of “Asset = Capital + Liabilities”.
8. How to ensure that accounting information meets the requirement of good quality?
Firstly, the accounting information need to be relevance according to the useful of financial
information to users and how it affects their decision making and in time to influence those
decisions. The decisions must be made between options that are mutually exclusive, the
option chosen should maximize the relevance of the information, or, in other words, be the
most useful for making economic decisions .Secondly, the accounting information must be
preparing according to the timeliness which can provide predictive and confirmatory value.
Predictive value can let users to evaluate the past, present or future events of how the firm
might be going through. Confirmatory value can let users to make sure about the firm past
evaluation or assessments. Thirdly, accounting information must be consistency that the
accounting methods and policies used by an entity never change. It can avoid the frequent
changes in accounting treatment would lead confusion and reduce the comparability of
financial reports over time.

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1. What are the processes involved in financial accounting?

2. What are the four types / branches of accounting?

4. Compare and contrast between a private company and public company.

5. Discuss the strengths and weaknesses of the sole proprietorship.

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