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Definition:
Process of identifying, measuring, recording
and communicating economic information
about an entity to allow informed judgments
and decisions by users of the information.
Measuring
Transactions can be
measured in financial
term (RM)
4
Provide information
• Information on the financial status of the business, whether
the business is making profit/loss, corrective actions to be
taken.
Decision making
• Management may analyze the information to assist them to
make decision. Example whether or not to open up another
restaurant outlet
Performance evaluation
• Accounting information can be used by potential investors to
determine whether or not to invest in the business or not
1. Owners: Interested in
profit earned from
investments, financial
stability & growth of
business
2. Management: As a
Internal guidance in planning,
organizing and controlling
Users the operation
3. Employees: Interested
in business ability to
progress and expand (focus
on employee benefit)
External
Users
Government Bankers/
How much tax they are going
1. Creditors/ Bankers: To to pay us???
know the ability of the
business in repaying the
amount owed to them
LO 2
3. TYPES OF BUSINESSES
SOLE PROPREITOR PARTNERSHIP COMPANIES
Restoran Ali
a) Sole Kedai Kek Suraya Enterprise
Penjual Alat Ganti KT Lim Auto Spare
Proprietorship Kedai Runcit Pak Abu
Ah Long Trading
2. From the legal point of view, the type of business organization that has a separate legal entity from
its owners and where the owners are not personally liable for the debts of business is
a. Limited company
b. Sole proprietorship
c. Partnership
d. None of the above
(1 mark)
3. Which of the following is FALSE in explaining the users of accounting information:
a. Bankers need accounting information to evaluate the business ability to pay debts on time.
b. Investors use the accounting information for planning, controlling and organising the business.
c. Government needs accounting information for tax purposes.
d. Employees needs accounting information to ensure steady employment.
(1 mark)
4. All of the followings are considered as business transactions and will be recorded in the business’s account
EXCEPT:
a. Received RM500 cash from Johan, a customer for the sales made.
b. Purchased motor vehicle on credit worth RM4,000 for business purposes.
c. Paid housing loan of RM900 monthly from a personal credit card.
d. Withdrew RM700 cheque from business’s account for personal use.
(1 mark)
Overview of the Accounting Cycle
( REFER TEXT BOOK, PAGE 6 )
TRANSACTIONS