ABAB 113

Business Accounting
Semester 1 2016/2017
TUTORIAL 1: INTRODUCTION
Question 1
Please complete the following sentences with the most appropriate accounting concepts.
a. Including private costs incurred in running a car-selling business would violate the
________________ concept.
b. The employees of ABC Bhd are remarkably prominent and experience. However, the
account executive is unable to show this attribute in the accounting records due to the
________________ concept.
c. According to the ________________ concept, the revenue is recognised when it is earned
but not when it is received. For example, we record sales in the books when the
transactions take place but not when we receive the actual payment.
d. ________________ concept is the presumption that a business will continue to trade for
the foreseeable future.
e. ________________ concept implies that the company need to record transactions based
on the same method, format and policies over different time period.
f. A giant company owns a small amount of stationery on hand at the end of the financial
year. However, the company does not make an effort to value it. This is consistent with
________________ concept.

Question 2
For each independent situation below, youre required to identify the related accounting concept
and conventions and state whether you agree or disagree with the accounting treatment.

Perniagaan Naqie thinks that costing inventory method of First In First Out
(FIFO) can be changed to Last in First Out (LIFO) at anytime needed.

Arissa Ltd is not sure whether to record or not to record an unpaid rental for
Dec 2009.

Harris Enterprise has miss recorded a purchase of an asset amounted RM50.

This asset was found not to have a useful life more than one year.

An - Qiyyah decides that there is a need to recognise an amount of booking

goods total RM2,500 as a revenue for the year 2009 from Mustaqim Ltd.

Adam & Aqeel Inc. bought a land at an invoice of RM175,000 in 2009. No

depreciation change on this asset. The account manager is not sure what
amount should be recorded.

Kedai Fittri owns an premise with the cost value RM50,000. A potential
buyer wants to buy the premise with the price of RM125,000. Alisha, the
account manager not yet recorded the gain from the transaction amounted
RM75,000.

Nurina, an accountant in Ains Ltd thinks that there is a need to assume that
business can be operate for only one year so that the business activity can be

Agree/

Accounting

disagree

concept

reported for one year only.

8

Jasmine felt that an item can be recognised and recorded in financial report
must be expressed by Ringgit Malaysia only.

An-Dhirah, withdrew RM25,000 to make additional investment in her

company; DiBo Ltd. She used RM500 from the cash to pay the tuition fee
for her daughter and asked the clerk to record as drawing.

10

Humaisya thinks that depreciation expenses should be charged and recorded

for businesss assets Furniture, Office Equipment and Motor Vehicle.
Question 3
Match each of the following statements with an appropriate accounting concept.

The revenue is recognized once the transactions are recorded; not when the actual

money is received.
When in doubt it is better to understate rather than overstate net income.

An entrepreneur has withdrawn RM5,000 from his businesss bank account and used
to pay his car maintenance and then has instructed his account clerk to record the

transaction as part of the business expenses.

Accounting reports are prepared for shorter time intervals than the natural life of the

business.
Mr Zaman, the new CEO for Sinar Ltd, comes with a very impressive sales record

but his talent cannot be written in the books as an asset.

February utilities costs are reported as expenses along with the February revenues.

The treatment of expenditure on paper clips as an expense even though many of the

paperclips will last for several years is an example of the ______________.

Once a particular accounting method is adopted, it is not changed from one period to
the next period.

Commission paid to the salesman on January 2010 was for December 2009 sales. The
expense was recorded as part of the business commission expenses for the month of

10

January 2010.
PCK Ltd purchased a building along Ramlee Road for RM100m in 1999. Now in
2009, the value of the land has appreciated to RM300m. However, PCK Ltd still
records the value of the building as RM100m.

Question 4
True and False Questions.
1. Accounting can be defined as the process of identifying, measuring and
communicating economic information about an entity to a variety of users.
2. A business transaction does not affect the financial position of a business.
3. We recognize only business transaction, not private transactions made by an owner in
an accounting system.
4. Forming a company is much more complicated than becoming a sole proprietor or
partnership.
5. An advantage of a company over a partnership is that its shares are easily
transferable.
6. Another name for the income statement is the statement of financial position.
7. The external claims on an entitys asset are referred to as liabilities.
8. Equity simply is defined as capital minus liabilities.

9. A potential investor could use a balance sheet to access the financial positions of the
entity.
10. Under accrual concepts, the reported profit figure is synonymous with cash.

Question 5
Please circle the most appropriate answer.
1. The accounting process involves all of the following except:
A. Identifying economic transactions that are relevant to the business
B. Communicating financial information to users by preparing financial reports
C. Recording non-quantifiable economic events
D. Analysing and interpreting financial reports
2. Which type of business organisation has the following characteristics?
i. Conducts business separate from its owners
ii. The owners have limited liability
iii. The organisation is a taxable entity
A. Sole proprietorship

B. Partnership
C. Company
D. None of the above
3. Which of the following statements is incorrect?
A. Under a sole trader, the owner is not responsible for the liabilities of the business
when the business goes bankrupt.
B. The minimum number of members of a partnership is two.
C. The partners of a partnership are responsible for the liabilities if the partnership is
bankrupt.
D. The liability of the shareholders of a limited company is limited to their
investment in the company.

4. Taka and Tako are brothers. They run a sport equipment shop in Muadzam Shah. They
hire an accounts clerk, Kako, to prepare their financial accounts.
Based on the above scenario, name the persons responsible for the management and
control of the sport equipment shop.
A. Taka, Tako and Kako
B. Taka and Kako
C. Tako and Kako
D. Taka and Tako
5. Ed Sdn Bhd purchased a piece of land on 1 January 2007 and paid RM 1,000,000 to the
seller. This land was reported in the balance sheet at a cost of RM1,000,000. During the
year ended 2009, the market value of the land increases to RM1,500,000. The land is still
reported at RM1,000,000 because of the application of the ________________ concept.
A. matching
B. materiality
C. historical cost

D. time interval
6. ________________ concept tells us that there is always a need for both debit and credit
entries of an equal amount to record each transaction. This is to keep the basic accounting
equation in balance.
A. Monetary
B. Dual aspect
C. Materiality
D. Time interval

Question 6
Briefly explain the users of accounting information and the importance of accounting
information to them.
Question 7
Saw is a sole proprietor, two of Saws friends, Sang and Sing are interested to join him as
business partners. Advice Saw by explaining TWO (2) advantages of changing his business from
a sole proprietorship to partnership.