BACHELOR IN BUSINESS

ADMINISTRATION

INTRODUCTION TO ACCOUNTING
(BBCA 1033)
ASSIGNMENT 1

PREPARED FOR
NURUL ATIQAH BINTI MOHD RAHIM
Question 1
Explain briefly the following basic accounting concepts
a . Business Entity

The business entity concept states that the transactions associated with a business

must be separately recorded from those of its owners or other businesses

Example :A business issues a $1,000 distribution to its sole shareholder. This is a

reduction in equity in the records of the business, and $1,000 of taxable income to
the shareholder.

b. Going Concern Concept

The going concern concept of accounting implies that the business entity will

continue its operations in the future and will not liquidate or be forced to discontinue
operations due to any reason. A company is a going concern if no evidence is
available to believe that it will or will have to cease its operations in foreseeable
future

Example: The National company is in serious financial trouble and cannot pay its
obligations. The government gives National company a bailout and a guarantee of all
payments to creditors. The national company is a going concern despite of its current
weak financial position.

c. Objectivity Concept

The objectivity principle is the concept that the financial statements of an organization

be based on solid evidence. The intent behind this principle is to keep the
management and the accounting department of an entity from producing financial
statements that are slanted by the opinions and biases of the company.

Example: If management believes that it will shortly be the beneficiary of a

massive payout from a lawsuit, it may accrue the revenueassociated with the
payout, even though the evidence states that such an outcome might not occur. A
more objective viewpoint would be to wait for more information to accrue before
making such a determination.

d. Money Measurement Concept

Money Measurement Concept means that only transactions and events that are
capable of being measured in monetary terms are recognized in the financial
statements.All transactions and events recorded in the financial statements must be
reduced to a unit of monetary currency.
Example:A high level of customer support will likely lead to increased customer
retention and a higher propensity to buy from the company again, which therefore
impacts revenues. or, if employee working conditions are poor, this leads to
greater employee turnover, which increases labor-related expenses.

e. Time Period Concept

The time period principle is the concept that a business should report the financial
results of its activities over a standard time period, which is usually monthly,
quarterly, or annually .

Example: For example, an income statement or statement of cash flows may

cover the "Eight Months ended August 31." However, the balance sheet is dated
as of a specific date, rather than for a range of dates. Thus, a balance sheet header
might state "as of August 31."

Question2

Identify the difference between Management Accounting and Financial Accounting

Management Accounting Financial Accounting

Management accounting is regulated and Financial accounting is regulated by
established by the entrepreneur,it is not law,it is standardization.
standardized.
Management accounting also uses future Financial accounting focuses on the
data and information,not only historical economic events of the past,the
data , for the purposes of planning. statements contain historical data.
The entrepreneur has no such The statements are regulated by law,this
obligations,he decides on the company’s is what called the reporting obligation.
operations by himself.
The time horizon is defined by the It basically focuses on the financial year.
company itself.
The frequency of coupling financial The compilation of financial statements
statements is defined by the company for the financial year is obligatory.
itself
Management accounting focuses on The financial statements show the
smaller units,so it draws attention to the company as a whole.
company’s organizations and products.
Besides value data,it basically provides The information in the financial
quantitative data. statements is mostly defined in financial
values.
Information is supervised by internal The information content of the published
auditors. financial statements is typically
supervised by an auditor.

Question 3 For each of the following transactions complete the table as the example.

Transaction Asset Liability Equity

Paid travelling expense by cash RM 350 -350 -350
Encik Amer started his furniture business +40,000 +40,000
and named Jaya Enterprise
+15,000
a. He brought RM 40,000 to the business
-15,000
and purchased a motor van amounting to
RM 15,000
b. Purchase of office equipment amounting +2,500
to RM 2,500
-2,500
c. Purchase inventories on credit +4,000 +4,000
amounting to RM 4,000
d. Encik Amer paid RM 2,000 for office -2,000 -2,000
rental
e. A debtor pays RM 2,600 by cheque +2,600 +2,600
f. Return goods cost RM600 to supplier -600 -600
whose bill we had not paid
g. He pays his creditor RM 2,100 by -2,100 -2,100
cheque
h. The owner put in RM5000 cash to the +5,000 +5,000
company
i. Purchased of additional equipment on +2,000 +2,000
credit amounting to RM 2,000
j. Owner took RM 2000 for personal use. -2,000 -2,000
Total 46,550 1300 45,250

Please complete and total all the transactions: ASSET = LIABILITY + EQUITY