BBAW2103

Financial Accounting
Overview

Topics Assignment Final Exam

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Submission Online
online exam

MCQ
Format
 BBAW2103
Financial Accounting

Topic 1: Accounting
Environment
Learning Outcomes

• Meaning, Role and Importance of

accounting
• Users and Branch of accounting
• Professional Accounting Bodies in
Malaysia
• Qualitative characteristic of financial
information
• Assumptions, Principles and
Constraints in accounting.
Importance of Accounting

• Play important role whether Directly or

indirectly in daily life
• Provides valuable financial information
for better decision making
• Individuals or business
Definition of Accounting

• A system or a process that provides

economic transactions for users to make
better decision.
Accounting Activities
2. Measure and
1. Identifying Recording
Business Business
Activities Activities 3. Present Business
Activities
Users of Accounting Information

Internal Users

External Users

Managerial accounting provides

information needs for internal
decision makers.

Financial accounting provides

external users with financial
statements.
Users of Accounting Information

Internal Users

External Users

•Managers •Sales Staff

•Officers •Budget Officers

•Lenders •Consumer Groups •Internal Auditors •Controllers

•Shareholders •External Auditors

•Governments •Customers
Differences Internal and External

Internal External
Users Users

Help
Depend on
Types of planning
the types of
information and the
decision
entity

Information Use the Limited to

been status or the
obtained position availability
Branches of Accounting
Differences MA and FA

FA MA

Focus to Focus to
Preparation
external internal
of report
users users

Any time
Periodic and and not
Standard or follow subject to
Format standard and
and format standard or
format
Malaysian Institute of Accountant
(MIA)
❑ Objectives:
– To promote and regulate professional and ethical standards
– To enhance competency through continuous education and
training to meet the challenges of the global economy
– To enhance the status of members
– To lead research and development for the enhancement of
the profession
– To inculcate a high sense of social responsibility
Malaysian Institute of Certified Public
Accountant (MICPA)
❑ Objectives:
– To advance the theory and practice of accountancy in all
its aspects.
– To recruit, educate, train and assess by means of
examination or otherwise a body of members skilled in
these areas.
– To preserve at all times the professional independence of
accountants in whatever capacities they may be serving.
– To maintain high standards of practice and professional
conduct by all its members.
– To do all such things as may advance the profession of
accountancy in relation to public practice, industry,
commerce, education and the public service.
Malaysian Accounting Standards Board
(MASB)

• established under the Financial Reporting Act 1997

(the Act) as an independent authority to develop and
issue accounting and financial reporting standards in
Malaysia.
• Working with FRF to make up the new framework for
financial reporting in Malaysia, with representation
from all relevant parties in the standard-setting
process, including preparers, users, regulators and
the accountancy profession.
Financial Reporting Federation
(FRF)
❑ established under the Financial Reporting Act 1997
(Act), comprises representation from all relevant
parties in the standard setting process, including
preparers, users, regulators and accountancy
profession.
❑ oversight the MASB's performance, financial and
funding arrangements, and as an initial source of
views for the MASB on proposed standards and
pronouncements. It has no direct responsibility with
regard to standard setting. This responsibility rests
solely with the MASB.
Qualitative Characteristics of
Accounting Information

USEFUL
FINANCIAL
INFORMATION

RELEVANT RELIABLE
1. Forecast value 1. Verifiable
2. Feedback value 2. Objective
3. Timely 3. Trustworthy

COMPARABILITY CONSISTENTCY
Generally Accepted Accounting
Principles
Financial accounting practice is governed by concepts and
rules known as Generally Accepted Accounting Principles
(GAAP).

Relevant Affects the decision of

Information its users.

Reliable Is trusted by
Information users.

Comparable Is helpful in contrasting

Information organizations.
Accounting Assumptions

Going Concern
Reflects
assumption that
the business will
Separate Entity continue
The business is accounted for operating instead
separately from other business of being closed
entities, including its owner or sold

Monetary Unit Accounting Period

Express The economic life of
transactions business can be
and events in divided into artificial
monetary, or time period for the
money, units purpose of financial
reporting
Accounting Principles

Revenue
Recognition Historical
1. Recognize Cost
revenue when it Accounting
is earned. information is
2. Proceeds need based on
not be in cash. actual cost.

Matching
Expenses are matched
against revenues, Full Disclosure
and recorded in the Report enough information for
same period in users to make knowledgeable
which the related decisions about the company
revenues are earned
Accounting Constraints

Cost Benefit
Relationship

Materiality
Nature of Business
Types of Business

Proprietorship Partnership Corporation

Financial Statements

1. Income Statement
2. Statement of Owner’s Equity
3. Balance Sheet
4. Statement of Cash Flows
5. Notes to the account
Income Statement

Syarikat Megah
Income Statement Net income is the
For Month Ended 31 December 2019 difference between
Revenues and Expenses.
Revenues:
Consulting revenue $ 3,000
Less:Expenses
Salaries expense 800
Net income $ 2,200

The income statement describes a

company’s revenues and expenses along
with the resulting net income or loss over a
period of time due to earnings activities.
Statement of Owner’s Equity
Syarikat Megah
Income Statement The net income of
For Month Ended 31 December 2019
RM2,200 increases
Revenues:
Scott’s capital by
Consulting revenue $ 3,000 RM2,200.
Less Expenses:
Salaries expense 800
Net income $ 2,200
Syarikat Megah
Statement of Owner's Equity
The Statement of
For Month Ended 31 December 2019
Owner’s Equity
explains changes in
Johan, Capital, 1 Dec. 2019 20,000
equity from net Add: Investment by owner -
income (or net loss) Net income 2,200
and from owner Less: Withdrawals 500
investments and Johan, Capital, 31 Dec. 2019 $ 21,700
withdrawals for a
period of time.
Statement of Owner’s Equity
Syarikat Megah
Statement of Owner's Equity
For Month Ended 31 December 2019

Johan, Capital, 1 Dec. 2019 20,000

Add: Investment by owner -
Net income 2,200
Less: Withdrawals 500
Johan, Capital, 31 Dec.2019 $ 21,700

The Balance Sheet

describes a company’s
financial position at a
point in time.

Owner’s Equity in Balance Sheet

Balance Sheet
Syarikat Megah
Balance Sheet
31 December 2019

Fixed Assets:
Equipment $16,000

Current Assets:
Cash 9,700
Supplies 1,200
10,900
Less: Current Liabilities:
Accounts Payable 1,200
Notes Payable 4,000
Working Capital 5,700
21,700
Financed by:
Owner's Equity
Johan, Capital 21,700
21,700

From Statement of Owner’s Equity

Cash Flow Statement
Syarika Megah
Statement of Cash Flows
For Month Ended 31 December 2019

Cash flows from operating activities:

Cash received from clients $ 3,000
Purchase of supplies (1,000)
Cash paid to employees (800)
Net cash provided by operating activities $ 1,200
Cash flows from investing activities:
Purchase of equipment (15,000)
Net cash used in investing activities (15,000)
Cash flows from financing activities:
Investment by owner 20,000
Borrowed at bank 4,000
Withdrawal by owner (500)
Net cash provided by financing activities 23,500
Net increase in cash $ 9,700
Cash balance, 1 December 2019 -
Cash balance, 31 December 2019 $ 9,700

The Statement of Cash Flows identifies cash inflows and

cash outflows over a period of time.
Thank You
 BBAW2103
Financial Accounting

Topic 2: Basic Rules of

Accounting
Learning Outcomes

• Accounting Cycle
• Accounting Equation
• Chart of Accounts
• Format of Accounts
• Debit and Credit
Accounting Cycle
Identify
Closing
entry Analyse

Financial Journalise
Statements

Adjusted
Post
Trial Balance

Trial
Adjust
Balance
Account Classification : Assets

Accounts
Receivable

Land

Resources Vehicle
owned or
controlled by
a company
Building

Equipment

Cash
Account Classification : Liabilities

Notes payable

Accounts Payable

Bank Loan
Creditors’
claims on
assets
Bank Overdraft

Tax Payable

Salaries Payable
Account Classification : Equities

Revenue

Owner’s Expenses
claims
on
assets
Withdrawal

Investment
Accounting Equation

Assets = Liabilities + Equity

BUSINESS = SOURCE
RESOURCES FROM OWNERS
Expanded Accounting Equation

Assets = Liabilities + Equity

_ Owner _
Owner Capital
Withdrawals + Revenues Expenses
Transaction Analysis Equation

The accounting equation must remain in balance

after each transaction.
Transaction Analysis
Johan, the owner, contributed RM20,000 cash to start the
business.

The accounts involved are:

(1) Cash (asset)
(2) Johan, Capital (equity)

Assets = Liabilities + Equity

Accounts Notes Johan
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000

$ 20,000 $ - $ - $ - $ - $ 20,000

$ 20,000 = $ 20,000
Transaction Analysis
Purchased supplies paying RM1,000 cash.

The accounts involved are:

(1) Cash (asset)
(2) Supplies (asset)

Assets = Liabilities + Equity

Accounts Notes Johan,
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000
(2) (1,000) $ 1,000

$ 19,000 $ 1,000 $ - $ - $ - $ 20,000

$ 20,000 = $ 20,000
Transaction Analysis
Purchased equipment for RM15,000 cash.

The accounts involved are:

(1) Cash (asset)
(2) Equipment (asset)

Assets = Liabilities + Equity

Accounts Notes Johan,
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000
(2) (1,000) $ 1,000
(3) (15,000) $ 15,000

$ 4,000 $ 1,000 $ 15,000 $ - $ - $ 20,000

$ 20,000 = $ 20,000
Transaction Analysis
Purchased Supplies of RM200 and Equipment of RM1,000 on
account.

The accounts involved are:

(1) Supplies (asset)
(2) Equipment (asset)
(3) Accounts Payable (liability)

Assets = Liabilities + Equity

Accounts Notes Johan,
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000
(2) (1,000) $ 1,000
(3) (15,000) $ 15,000
(4) 200 1,000 $ 1,200

$ 4,000 $ 1,200 $ 16,000 $ 1,200 $ - $ 20,000

$ 21,200 = $ 21,200
Transaction Analysis
Borrowed RM4,000 from Bank Maya.
The accounts involved are:
(1) Cash (asset)
(2) Notes payable (liability)

Assets = Liabilities + Equity

Accounts Notes Johan,
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000
(2) (1,000) $ 1,000
(3) (15,000) $ 15,000
(4) 200 1,000 $ 1,200
(5) 4,000 $ 4,000
$ 8,000 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 20,000

$ 25,200 = $ 25,200
Transaction Analysis
Rendered consulting services receiving RM3,000 cash.

The accounts involved are:

(1) Cash (asset)
(2) Revenues (equity)

Assets = Liabilities + Equity

Accounts Notes Johan,
Cash Supplies Equipment Payable Payable Capital Revenue
Bal. $ 8,000 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 20,000
(6) 3,000 $ 3,000

$ 11,000 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 20,000 $ 3,000

$ 28,200 = $ 28,200
Transaction Analysis
Paid salaries of RM800 to employees.
The accounts involved are:
(1) Cash (asset)
(2) Salaries expense (equity)

Assets = Liabilities + Equity

Accounts Notes Johan,
Cash Supplies Equipment Payable Payable Capital Revenue Expenses
Bal. $ 8,000 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 20,000
(6) 3,000 $ 3,000
(7) (800) $ (800)

$ 10,200 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 20,000 $ 3,000 $ (800)

$ 27,400 = $ 27,400
Transaction Analysis
Johan withdrew RM500 from the business for personal use.
The accounts involved are:
(1) Cash (asset)
(2) J. Scott, Withdrawals (equity)

Assets = Liabilities + Equity

Accounts Notes Johan,
Cash Supplies Equipment Payable Payable Johan, Capital Withdrawal Revenue Expenses
Bal. $ 8,000 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 20,000
(6) 3,000 $ 3,000
(7) (800) $ (800)
(8) (500) $ (500)
$ 9,700 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 20,000 $ (500) $ 3,000 $ (800)

$ 26,900 = $ 26,900
Debits and Credits

A T-account represents a ledger account and is a tool used

to understand the effects of one or more transactions.

T- Account
(Left side) (Right side)
Debit Credit
Rules of Debits and Credits

Assets = Liabilities + Equity

ASSETS LIABILITIES EQUITIES

Debit Credit Debit Credit Debit Credit

+ - - + - +
Rules of Debits and Credits

Equity
Owner’s Capital _ Owner’s _
Withdrawals + Revenues Expenses

Capital Withdrawals Revenues Expenses

Debit Credit Debit Credit Debit Credit Debit Credit

- + + - - + + -
Normal Balance

Type of Account Normal Balance

Asset Debit
Liability Credit
Capital Credit
Drawing Debit
Revenue Credit
Expense Debit
Thank You
 BBAW2103
Financial Accounting

Topic 3 : Recording
Process

Prepared by Liana Mohamad

[email protected]
Learning Outcomes

• Journal
• Ledger
• Trial Balance
Journalising and Posting Transactions

Assets = Liabilities + Equity

T- Account
(Left side) (Right side)
Debit Credit

Step 1: Analyze
Step 2: Apply double-entry
transactions and source
accounting
documents.

ACCOUNT NAME: ACCOUNT No.

Date Description PR Debit Credit Balance GENERAL JOURNAL G123

Post.
Date Description Ref. Debit Credit

Step 4: Post entry to ledger

Step 3: Record journal entry
Steps in Recording Process

Column
T-Account
Ledger

Posting
to Ledger

Trial
Journal Ledger
Balance
Rules of Debits and Credits

Assets = Liabilities + Equity

ASSETS LIABILITIES EQUITIES

Debit Credit Debit Credit Debit Credit

+ - - + - +
Rules of Debits and Credits

Equity
Owner’s Capital _ Owner’s _
Withdrawals + Revenues Expenses

Capital Withdrawals Revenues Expenses

Debit Credit Debit Credit Debit Credit Debit Credit

- + + - - + + -
Journalising Transactions

1. Transaction Date 2. Titles of Affected Accounts

GENERAL JOURNAL G1
Date Description REF Debit Credit
2019
Dec. 1 Cash 30,000
Taylor, Capital 30,000
Investment by owner

Dec. 2 Supplies
4. Transaction 3. Dollar2,500
amount of
explanation debits and credits
Cash 2,500
Purchased store supplies
Posting to T-accounts

A T-account represents a ledger account and is a tool used

to understand the effects of one or more transactions.

T- Account
(Left side) (Right side)
Debit Credit
Analysing Transactions – An Illustration

Chuck Taylor invested $30,000 in FastForward on 1

Transaction: Dec.
Analysis:

Assets = Liabilities + Equity

Cash Capital
30,000 30,000

Double entry:

(1) Cash 101 30,000

C. Taylor, Capital 301 30,000
Posting:
Cash 101 C. Taylor, Capital 301
(1) 30,000 (1) 30,000
Analysing Transactions – An Illustration

FastForward purchases supplies by paying $2,500

Transaction: cash.
Analysis:

Assets = Liabilities + Equity

Cash Supplies Capital
(2,500) 2,500

Double entry:

(2) Supplies 126 2,500

Cash 101 2,500
Posting:
Supplies 126 Cash 101
(2) 2,500 (1) 30,000 (2) 2,500
Analysing Transactions – An Illustration

FastForward purchases equipment by paying $26,000

Transaction: cash.
Analysis:

Assets = Liabilities + Equity

Cash Equipment Capital
(26,000) 26,000

Double entry:

(3) Equipment 167 26,000

Cash 101 26,000
Posting:
Equipment 167 Cash 101
(3) 26,000 (1) 30,000 (2) 2,500
(3) 26,000
Analysing Transactions – An Illustration

Transaction: FastForward purchases $7,100 of supplies on credit.

Analysis:

Assets = Liabilities + Equity

Supplies Accounts Payable Capital
7,100 7,100

Double entry:

(4) Supplies 126 7,100

Accounts payable 201 7,100
Posting:
Supplies 126 Accounts Payable 201
(2) 26,000 (4) 7,100
(4) 7,100
Analysing Transactions – An Illustration

FastForward provides consulting services and

Transaction: immediately collects $4,200 cash.
Analysis:

Assets = Liabilities + Equity

Cash Revenue
4,200 4,200

Double entry:

(5) Cash 101 4,200

Consulting Revenue 403 4,200

Posting:
Consulting Revenue 403 Cash 101
(5) 4,200 (1) 30,000 (2) 2,500
(5) 4,200 (3) 26,000
Balancing T-accounts

Compare the total debit DR and credit CR

Place the bigger amounts as total amount in both

Dr and Cr sides.

Deduct the amount on the smaller side.

Different in balance will be transferred to the

bottom.

This balance will be brought forward to the

opposite side.
Sample - Trial Balance

FastForward
Trial Balance
31 December 2019
Debits Credits The trial balance lists all
Cash RM 3,950 account balances in the
Accounts receivable - general ledger. If the books
Supplies 9,720 are in balance, the total
Prepaid Insurance 2,400 debits will equal the total
Equipment 26,000 credits.
Accounts payable RM 6,200
Unearned consulting revenue 3,000
C. Taylor, Capital 30,000
C. Taylor, Withdrawals 600
Consulting revenue 5,800
Rental revenue 300
Salaries expense 1,400
Rent expense 1,000
Utilities expense 230
Total RM 45,300 RM 45,300
Posting to Column Ledger

T-accounts are useful illustrations,

but balance column ledger accounts are used in
practice.

CASH ACCOUNT No. 101

Date Description REF Debit Credit Balance

2019
Dec. 1 Investment by owner 30,000 30,000
Dec. 2 Purchased supplies 2,500 27,500
Dec. 3 Purchased equipment 26,000 1,500
Dec. 10 Collection from customer 1,900 3,400
Analysing Transactions – An Illustration

Chuck Taylor invested $30,000 in FastForward on 1

Transaction: Dec.
Analysis:

Assets = Liabilities + Equity

Cash Capital
30,000 30,000

Double entry:

(1) Cash 101 30,000

C. Taylor, Capital 301 30,000
Posting to Column Ledger

GENERAL JOURNAL G1
Date Description REF Debit Credit
2019
Dec. 1 Cash 30,000
C. Taylor, Capital 30,000
Investment by owner

1
Dec. 2 Identify
Suppliesthe account. 2,500
Cash 2,500
CASH ACCOUNT No. 101
Purchased store supplies
for cash
Date Description REF Debit Credit Balance
2019

Dec. 3 Purchased equipment G1 20,000.00 ########

 Posting to Column Ledger

GENERAL JOURNAL G1
Date Description REF Debit Credit
2019
Dec. 1 Cash 30,000
C. Taylor, Capital 30,000
Investment by owner

Enter the date.

2Dec. 2 Supplies 2,500
Cash 2,500
CASH Purchased store supplies ACCOUNT No. 101
for cash
Date Description REF Debit Credit Balance
2019
Dec. 1

Dec. 3 Purchased equipment G1 20,000.00 ########

Posting to Column Ledger

GENERAL JOURNAL G1
Date Description REF Debit Credit
2019
Dec. 1 Cash 30,000
C. Taylor, Capital 30,000
Investment by owner

Enter the amount and description.

Dec. 2 Supplies 3
2,500
Cash 2,500
CASH Purchased store supplies ACCOUNT No. 101
for cash
Date Description REF Debit Credit Balance
2019
Dec. 1 Investment by owner 30,000

Dec. 3 Purchased equipment G1 20,000 (20,000)

Posting to Column Ledger

GENERAL JOURNAL G1
Date Description REF Debit Credit
2019
Dec. 1 Cash 30,000
C. Taylor, Capital 30,000
Investment by owner

Dec. 2 Supplies Enter the journal reference. 4 2,500

Cash 2,500
CASH Purchased store supplies ACCOUNT No. 101
for cash
Date Description REF Debit Credit Balance
2019
Dec. 1 Investment by owner G1 30,000

Dec. 3 Purchased equipment G1 20,000 (20,000)

Posting to Column Ledger

GENERAL JOURNAL G1
Date Description REF Debit Credit
2019
Dec. 1 Cash 101 30,000
C. Taylor, Capital 30,000
Investment by owner

Dec. 2 Supplies Enter the ledger reference.

2,500
6
Cash 2,500
CASH Purchased store supplies ACCOUNT No. 101
for cash
Date Description REF Debit Credit Balance
2019
Dec. 1 Investment by owner G1 30,000 30,000

Dec. 3 Purchased equipment G1 20,000 (20,000)

Posting to Column Ledger

GENERAL JOURNAL G1
Date Description REF Debit Credit
2019
Dec. 1 Cash 101 30,000
C. Taylor, Capital 30,000
Investment by owner

Dec. 2 Supplies Enter the ledger reference.

2,500
6
Cash 2,500
CAPITAL Purchased store supplies ACCOUNT No. 301
for cash
Date Description REF Debit Credit Balance
2019
Dec. 1 Investment by owner G1 30,000 30,000

Dec. 3 Purchased equipment G1 20,000 (20,000)

Analysing Transactions – An Illustration

Continue posting the journal entries to the

column ledger for the following transactions
Analysing Transactions – An Illustration

FastForward purchases supplies by paying $2,500

Transaction: cash.
Analysis:

Assets = Liabilities + Equity

Cash Supplies Capital
(2,500) 2,500

Double entry:

(2) Supplies 126 2,500

Cash 101 2,500
Analysing Transactions – An Illustration

FastForward purchases equipment by paying $26,000

Transaction: cash.
Analysis:

Assets = Liabilities + Equity

Cash Equipment Capital
(26,000) 26,000

Double entry:

(3) Equipment 167 26,000

Cash 101 26,000
Analysing Transactions – An Illustration

Transaction: FastForward purchases $7,100 of supplies on credit.

Analysis:

Assets = Liabilities + Equity

Supplies Accounts Payable Capital
7,100 7,100

Double entry:

(4) Supplies 126 7,100

Accounts payable 201 7,100
Analysing Transactions – An Illustration

FastForward provides consulting services and

Transaction: immediately collects $4,200 cash.
Analysis:

Assets = Liabilities + Equity

Cash Revenue
4,200 4,200

Double entry:

(5) Cash 101 4,200

Consulting Revenue 403 4,200
Sample - Trial Balance

FastForward
Trial Balance
31 December 2019
Debits Credits The trial balance lists all
Cash RM 3,950 account balances in the
Accounts receivable - general ledger. If the books
Supplies 9,720 are in balance, the total
Prepaid Insurance 2,400 debits will equal the total
Equipment 26,000 credits.
Accounts payable RM 6,200
Unearned consulting revenue 3,000
C. Taylor, Capital 30,000
C. Taylor, Withdrawals 600
Consulting revenue 5,800
Rental revenue 300
Salaries expense 1,400
Rent expense 1,000
Utilities expense 230
Total RM 45,300 RM 45,300
Searching for and Correcting Errors
If the trial balance does not balance, the
error(s) must be found and corrected.

Make sure the trial balance columns Recompute each account

are correctly added. balance in the ledger.

Make sure account balances are Verify that each journal entry is
correctly entered into the ledger. posted correctly.

See if debit or credit accounts are

Verify that each original journal
mistakenly placed on the trial
entry has equal debits and credits.
balance.
Thank You
 BBAW2103
Financial Accounting

Topic 4 Adjusting Entries

Before We Start….

• Let’s see the whole process of Accounting Cycle

Learning Objectives

• Describe the types of adjusting entries

• Prepare the Adjusted Trial Balance
Accrual Basis vs. Cash Basis

Accrual Basis Cash Basis

Revenues are recognized Revenues are recognized
when earned and expenses when cash is received and
are recognized when expenses recorded when
incurred. cash is paid.

Accrual vs Cash Basis

The Accounting Period

• Calendar year- reporting period of 12 months covering from 1

January to 31 December

• Fiscal year- reporting period consisting of any 12 consecutive

months, in which the starting month is not necessarily beginning
from 1 January. Eg. 1 April 2019 to 31 March 2019
Recognising Revenues and Expenses

We have delivered the

product to our customer,
so I think we should record
the revenue earned.

Summary Now that we have

of Expenses recognized the revenue,
Rent RM1,000 let’s see what expenses
Gasoline 500
Advertising 2,000
we incurred to
Salaries 3,000 generate that revenue.
Utilities 450
and . . . . ....
Adjusting Accounts

An adjusting entry is recorded to bring an asset or liability account

balance to its proper amount.

Framework for Adjustments

Adjustments

Paid (or received) cash before Paid (or received) cash after
expense (or revenue) recognized expense (or revenue) recognized

Prepaid Unearned Accrued Accrued

(Deferred) (Deferred) expense revenues
expenses* revenues
*including depreciation
Prepaid Insurance
On 1 December 2019, Scott Company paid RM12,000 to cover insurance
for December 2019 through May 2020. Scott recorded the
expenditure as Prepaid Insurance on 1 December. What adjustment is
required?

Dec. 31 Insurance Expense 2,000

Prepaid Insurance 2,000
To record first month's expired insurance

Prepaid Insurance 637 Insurance Expense 128

Dec. 1 12,000 Dec. 31 2,000 Dec. 31 2,000
Bal. 10,000
Supplies

During 2019, Scott Company purchase RM15,500 of supplies. Scott

recorded the expenditures as Supplies. At 31 December a count of the
supplies indicated RM2,655 on hand. What adjustment is required?

Dec. 31 Supplies Expense 12,845

Supplies 12,845
To record supplies used during 2019

Supplies 126 Supplies Expense 652

Bought 15,500 Dec. 31 12,845 Dec. 31 12,845
Bal. 2,655
Depreciation
Depreciation is the process of computing expense from allocating
the cost of plant and equipment over their expected useful
lives.

Straight-Line Asset Cost - Salvage Value

Depreciation =
Expense Useful Life
Depreciation

On 1 January 2019, Barton, Inc. purchased equipment for RM62,000

cash. The equipment has an estimated useful life of 5 years and
Barton expects to sell the equipment at the end of its life for RM2,000
cash.
Let’s record depreciation expense for the year ended 31 December
2019.

2019 RM62,000 - RM2,000

Depreciation = = RM12,000
Expense 5
Depreciation
On 1 January 2019, Barton, Inc. purchased equipment for RM62,000
cash. The equipment has an estimated useful life of 5 years and
Barton expects to sell the equipment at the end of its life for RM2,000
cash.
Let’s record depreciation expense for the year ended 31 December
2019.

Dec. 31 Depreciation Expense 12,000

Accumulated Depreciation - Equipment 12,000
To record equipment depreciation

Accumulated depreciation is
a contra asset account.
Depreciation

Dec. 31 Depreciation Expense 12,000

Accumulated Depreciation - Equipment 12,000
To record equipment depreciation

Equipment Depreciation Expense

1/1 62,000 31/12 12,000

Accumulated Depreciation
31/12 12,000
Depreciation

Barton, Inc.
Partial Balance Sheet
At 31 December 2019

Assets
Fixed Assets: RM
Equipment $ 62,000
Less: Acc Dep-Equipment (12,000) 50,000 Equipment is shown
net of accumulated
Current Assets: depreciation.
Cash $ -
Total Assets
Adjusting Unearned (Deferred) Revenues

On 1 October 2019, Ox University sold 1,000 season tickets to its 20

home basketball games for RM100 each. Ox University makes the
following entry:

Oct. 1 Cash 100,000

Unearned Revenue 100,000
Basketball revenue received in advance

Unearned Revenue
Oct. 1 100,000
Adjusting Unearned (Deferred) Revenues

On 31 December, Ox University has played 10 of its regular home

games, winning 2 and losing 8.

Dec. 31 Unearned Revenue 50,000

Basketball Revenue 50,000
To recognized 10-game basketball revenue

Unearned Revenue Basketball Revenue

Oct. 1 100,000 Dec. 31 50,000 Dec. 31 50,000
Bal. 50,000
Adjusting for Accrued Expenses

Barton, Inc. pays its employees every Friday. Year-end, 31/12/2019,

falls on a Wednesday. As of 31/12/2019, the employees have earned
salaries of RM47,250 for Monday through Wednesday of the week
ended 2/01/2020.

Last pay Next pay

date date
26/12/2019 2/01/2020

1/12/04 31/12/2019 Record adjusting

Year end journal entry.
Adjusting for Accrued Expenses

Barton, Inc. pays its employees every Friday. Year-end, 31/12/2019,

falls on a Wednesday. As of 31/12/2019 the employees have earned
salaries of RM47,250 for Monday through Wednesday of the week
ended 2/01/2020.

Dec. 31 Salaries Expense 47,250

Salaries Payable 47,250
To accrue 3-days' salary
Salaries Expense Salaries Payable
Other salaries Dec. 31 47,250
657,500
Dec. 31 47,250
Bal. 704,750
Adjusting for Accrued Revenues

Smith & Jones, CPAs, had RM31,200 of work completed but not yet
billed to clients. Let’s make the adjusting entry necessary on 31
December 2019, the end of the company’s fiscal year.

Dec. 31 Accounts Receivable 31,200

Service Revenue 31,200
To accrue revenue earned
Accounts Receivable Service Revenue
Other receivables Other revenues
1,325,268 6,589,500
Dec. 31 31,200 Dec. 31 31,200
Bal. 1,356,468 Bal . 6,620,700
Illustration
FastForward
Trial Balance
31 December 2019
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 3,950
Accounts receivable -
Supplies 9,720
Prepaid insurance 2,400
Equipment 26,000
Accum. depr. - Equip. -
Accounts payable 6,200
First, the initial
Salaries payable -
Unearned revenue 3,000 unadjusted amounts
Chuck Taylor, Capital 30,000 are added to the
Chuck Taylor, Withdrawals 600
Consulting revenue 5,800
worksheet.

Rental revenue 300

Depr. expense -
Salaries expense 1,400
Insurance expense -
Rent expense 1,000
Supplies expense -
Utilities expense 230
Totals 45,300 45,300
Illustration
FastForward
Trial Balance
31 December 2019
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 3,950
Accounts receivable - f 1,800
Supplies 9,720 b 1,050
Prepaid insurance 2,400 a 100
Equipment 26,000
Next,
Accum. depr. - Equip. - c 375 FastForward’s
Accounts payable 6,200 adjustments
Salaries payable - e 210
are added.
Unearned revenue 3,000 d 250
Chuck Taylor, Capital 30,000
Chuck Taylor, Withdrawals 600
Consulting revenue 5,800 d 250
f 1,800
Rental revenue 300
Depr. expense - c 375
Salaries expense 1,400 e 210
Insurance expense - a 100
Rent expense 1,000
Supplies expense - b 1,050
Utilities expense 230
Totals 45,300 45,300 3,785 3,785
 Illustration
Finally, the totals FastForward
are determined. Trial Balance
31 December 2019
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 3,950 3,950
Accounts receivable - f 1,800 1,800
Supplies 9,720 b 1,050 8,670
Prepaid insurance 2,400 a 100 2,300
Equipment 26,000 26,000
Accum. depr. - Equip. - c 375 375
Accounts payable 6,200 6,200
Salaries payable - e 210 210
Unearned revenue 3,000 d 250 2,750
Chuck Taylor, Capital 30,000 - 30,000
Chuck Taylor, Withdrawals 600 600
Consulting revenue 5,800 d 250 7,850
f 1,800
Rental revenue 300 300
Depr. expense - c 375 375
Salaries expense 1,400 e 210 1,610
Insurance expense - a 100 100
Rent expense 1,000 1,000
Supplies expense - b 1,050 1,050
Utilities expense 230 230
Totals 45,300 45,300 3,785 3,785 47,685 47,685
Thank You
 BBAW2103
Financial Accounting

Topic 5: Completing the

Accounting Cycle
Prepare Financial Statements

Point in Point in
Time Period of Time Time

Income Statement
Statement of Owner’s Equity
Income Statement of
Beginning Cash Flows Ending Balance
Balance Sheet Sheet
Income Statement

FASTFORWARD
Income Statement
For the Month Ended 31 December 2019
Revenues:
Consulting revenue $ 5,800
Rental revenue 300
Total revenues $ 6,100
Less:
Expenses:
Rent expense 1,000
Salaries expense 1,400
Utilities expense 230
Total expenses 2,630
Net income $ 3,470
 Statement of Owner’s Equity
FASTFORWARD
Statement of Owner's Equity
For the Month Ended 31 December 2019
C. Taylor, Capital, 1 December 2019 $ -
Add: Investment by owner $ 30,000
Net income 3,470 33,470
33,470
Less: Withdrawals by owner 600
C. Taylor, Capital, 31 December 2019 $ 32,870

FASTFORWARD
Income Statement
For the Month Ended 31 December 2019
Revenues:
Consulting revenue $ 5,800
Rental revenue 300
Total revenues $ 6,100
Expenses:
Rent expense 1,000
Salaries expense 1,400
Utilities expense 230
Total expenses 2,630
Net income $ 3,470
 Balance Sheet
FASTFORWARD
Balance Sheet
FASTFORWARD
31 December 2019
Statement of Owner's Equity Fixed Assets:
For the Month Ended 31 December 2019 Equipment 26,000
C. Taylor, Capital, December 1, 2019 $ -
Add: Investment by owner $ 30,000 Current Assets:
Net income 3,470 33,470 Cash $ 3,950
33,470 Supplies 9,720
Less: Withdrawals by owner 600 Prepaid insurance 2,400
C. Taylor, Capital, 31 December 2019 $ 32,870 $ 16,070
Less: Current Liabilities:
Accounts payable $ 6,200
Unearned revenue 3,000
Working Capital 6,870
32,870
Financed by:
Owner's Equity
C. Taylor, Capital 32,870
$ 32,870
Illustration
FastForward
Trial Balance
31 December 2019
Debits Credits
Cash RM 3,950
Accounts receivable -
Supplies 9,720
Prepaid Insurance 2,400
Equipment 26,000
Accounts payable RM 6,200
Unearned consulting revenue 3,000
C. Taylor, Capital 30,000
C. Taylor, Withdrawals 600
Consulting revenue 5,800
Rental revenue 300
Salaries expense 1,400
Rent expense 1,000
Utilities expense 230
Total RM 45,300 RM 45,300
Closing Entries
Step 1

Step 2

Step 3

Step 4
Close Close Close Close
Revenue Expenses Revenue Drawing
Account Account Summary Account
Thank You
 BBAW2103
Financial Accounting

Topic 7: Trading
Business Environment
Operating Cycle for a Trader

Cash Sale Credit Sale

Cash
Purchases collection Purchases

Merchandise
Cash Account
inventory
sales receivable

Merchandise
inventory Credit sales
Important Transactions

Purchases Sales Discounts

Return and Transportation

Allowances cost
Quantity Discounts

Used by manufacturers and wholesalers to offer better

prices for greater quantities purchased.

Example Quantity sold 1,000

Matrix, Inc. offers a 30% trade Price per unit $ 5.25
discount on orders of 1,000 Total 5,250
units or more of their popular Less 30% discount (1,575)
product Racer. Each Invoice price $ 3,675
Racer has a list price of RM5.25.
Cash Discounts

2/10,n/30
Number of
Days Otherwise,
Discount Discount Is Net (or All) Credit
Percent Available Is Due Period
Cash Discounts

A deduction from the invoice price granted to induce

early payment of the amount due.

Terms

Time Discount Period Credit Period

Due
Full amount Full amount due
less discount

Purchase or Sale
Sales / Purchase Discounts

The terms for when payments for

merchandise are to be made are
called credit terms.

If buyer is allowed an
amount of time to pay, it is
known as the credit period.
Sales / Purchase Discounts

Credit Terms

If invoice is paid
within 10 days of
invoice date Invoice for
RM1,500
Terms:
2/10, n/30

RM1,470 paid (less 2%

as a cash discount)
Sales / Purchase Discounts

Credit Terms

If invoice is NOT
paid within 10 days
Invoice for of invoice date
RM1,500
Terms:
2/10, n/30

RM1,500 PAID
Sales / Purchase Return and Allowance
(Return Inward/Outward)

Merchandise that is returned to the vendor is referred to

as a sales return.

If there is a defect in the product or the wrong item was

shipped, the seller may reduce the initial price at which
the goods were sold. This is known as a sales
allowance.
Transportation Costs

Transportation
Costs
Transportation Costs

• The terms of a sale should

indicate when the ownership of
the merchandise passes to the
buyer.

• This point determines which

party, the buyer or the seller must
pay the transportation costs.
FOB Shipping Point

Buyer pays freight costs

Fruit
Express

A shipping term that means that the buyer is responsible for all freight
costs while the goods are in transit.
FOB Destination

Seller pays freight costs

Fruit
Express

A shipping term that means that the seller is responsible for all freight
costs until the goods reach their destination.
Balance Sheet

Merchandising Company
Balance Sheet
31 December 2019
Assets Liabilities
Cash $ 10,200 Accounts payable $ 1,200
Merchandise Inventory 1,200 Notes payable 4,000
Equipment 16,000 Total liabilities $ 5,200
Equity 22,200
Total assets $ 27,400 Total liabilities and $ 27,400
Thank You
 BBAW2103
Financial Accounting

Topic 10: Financial

Statement Analysis
Learning Objectives

• Explain the purpose of financial statement analysis.

• Explain the sources of financial information.
• Discuss the basic of item comparison in a financial
statement.
• Explain the three techniques of financial statement
analysis.
• Differentiate between Horizontal analysis and Vertical
analysis on evaluating financial statements.
Learning Objectives

• Explain the importance of financial ratios in analysing

and interpreting accounting information.
• Calculate and interpret the financial ratios that can be
used to measure profitability, liquidity, efficiency and
debt management.
• Explain the purposes and effectiveness of financial
ratios to evaluate liquidity, profitability and debt
management.
 Purpose of Analysis

Financial statement analysis helps users make better decisions.

Internal Users
Managers
Officers
Internal Auditors

External Users
Shareholders
Lenders
Customers
Information for Analysis

Income Statement Notes

Management
Balance Sheet
Discussion

Statement of Auditor’s Report

Changes in
Shareholders’ Equity

Statement of Cash
Flows
Basis for Comparison

To help me interpret our financial

statements, I use several
standards of comparison.

1. Within company
2. Between companies
3. Industry Average
Basis for Comparison

Analysis Technique

Horizontal Analysis Vertical Analysis Ratio Analysis

Within Within Between Within Between Industry

Company Company Companies Company Companies Average
Horizontal Analysis

Now, let’s look

at some ways to
use horizontal
analysis.

Time

The term horizontal analysis arises from left-to-right

(or right-to-left) movement of our eyes as we review
comparative financial statements across time.
Comparative Statements

Calculate Change in Dollar Amount

Dollar Base Period

Current Period
Change = Amount – Amount

Since we are measuring the amount of

the change between 2003 and 2004, the
dollar amounts for 2003 become the
“base” period amounts.
Comparative Statements

Calculate Change as a Percent

Percent Dollar Change

Change =
Base Period Amount × 100%
Illustration
CLOVER CORPORATION
Comparative Balance Sheets
31-Dec
Dollar Percent
2019 2018 Change Change*
Assets
Current assets:
Cash and equivalents $ 12,000 $ 23,500 $ (11,500) (48.9)
Accounts receivable, net 60,000 40,000 20,000 50.0
Inventory 80,000 100,000 (20,000) (20.0)
Prepaid expenses 3,000 1,200 1,800 150.0
Total current assets $ 155,000 $ 164,700 $ (9,700) (5.9)
Property and equipment:
Land 40,000 40,000 - 0.0
Buildings and equipment, net 120,000 85,000 35,000 41.2
Total property and equipment $ 160,000 $ 125,000 $ 35,000 28.0
Total assets $ 315,000 $ 289,700 $ 25,300 8.7
* Percent rounded to first decimal point.
 Illustration
CLOVER CORPORATION
Comparative Balance Sheets
31-Dec
Dollar Percent
2019 2018 Change Change*
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 67,000 $ 44,000 $ 23,000 52.3
Notes payable 3,000 6,000 (3,000) (50.0)
Total current liabilities $ 70,000 $ 50,000 $ 20,000 40.0
Long-term liabilities:
Bonds payable, 8% 75,000 80,000 (5,000) (6.3)
Total liabilities $ 145,000 $ 130,000 $ 15,000 11.5
Shareholders' equity:
Preferred shares 20,000 20,000 - 0.0
Common shares 60,000 60,000 - 0.0
Additional paid-in capital 10,000 10,000 - 0.0
Total paid-in capital $ 90,000 $ 90,000 - 0.0
Retained earnings 80,000 69,700 10,300 14.8
Total shareholders' equity $ 170,000 $ 159,700 $ 10,300 6.4
Total liabilities and shareholders' equity $ 315,000 $ 289,700 $ 25,300 8.7
* Percent rounded to first decimal point.
Trend Analysis

Trend analysis is used to reveal patterns in data covering

successive periods.

Also called trend percent analysis or index number trend

analysis.

Trend Analysis Period Amount

= × 100%
Percent Base Period Amount
 Trend Analysis

Berry Products
Income Information
For the Years Ended 31 December
Item 2019 2018 2017 2016 2015
Revenues $ 400,000 $ 355,000 $ 320,000 $ 290,000 $ 275,000
Cost of sales 285,000 250,000 225,000 198,000 190,000
Gross profit 115,000 105,000 95,000 92,000 85,000

2019 2018 2017 2016 2015

105% 100%
104% 100%
108% 100%
(290,000 ¸ 275,000) ´ 100% = 105%
(198,000 ¸ 190,000) ´ 100% = 104%
(92,000 ¸ 85,000) ´ 100% = 108%
 Trend Analysis

Berry Products
Income Information
For the Years Ended 31 December
Item 2019 2018 2017 2016 2015
Revenues $ 400,000 $ 355,000 $ 320,000 $ 290,000 $ 275,000
Cost of sales 285,000 250,000 225,000 198,000 190,000
Gross profit 115,000 105,000 95,000 92,000 85,000

Item 2019 2018 2017 2016 2015

Revenues 145% 129% 116% 105% 100%
Cost of sales 150% 132% 118% 104% 100%
Gross profit 135% 124% 112% 108% 100%

How would this trend analysis

look on a line graph?
Vertical Analysis

V
Vertical Analysis is also called as common- e
r
size analysis t
i
c
a
l
A
n
a
l
The term vertical analysis arises from the up-down (down-up) y
movement of our eyes as we review common-size financial s
statements. i
s
Vertical Analysis

Calculate Percent
Analysis Amount
Percent = Base Amount × 100%

Financial Statement Base Amount

Balance Sheet Total Assets
Income Statement Revenues
 Illustration
CLOVER CORPORATION
Comparative Balance Sheets
31-Dec
Common-size
Percents*
2019 2018 2019 2018
Assets
Current assets:
Cash and equivalents $ 12,000 $ 23,500 3.8% 8.1%
Accounts receivable, net 60,000 40,000 19.0% 13.8%
Inventory 80,000 100,000 25.4% 34.5%
Prepaid expenses 3,000 1,200 1.0% 0.4%
Total current assets $ 155,000 $ 164,700 49.2% 56.9%
Property and equipment:
Land 40,000 40,000 12.7% 13.8%
Buildings and equipment, net 120,000 85,000 38.1% 29.3%
Total property and equipment $ 160,000 $ 125,000 50.8% 43.1%
Total assets $ 315,000 $ 289,700 100.0% 100.0%
* Percent rounded to first decimal point.
Illustration
CLOVER CORPORATION
Comparative Balance Sheets
31-Dec
Common-size
Percents*
2019 2018 2019 2018
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 67,000 $ 44,000 21.3% 15.2%
Notes payable 3,000 6,000 1.0% 2.1%
Total current liabilities $ 70,000 $ 50,000 22.2% 17.3%
Long-term liabilities:
Bonds payable, 8% 75,000 80,000 23.8% 27.6%
Total liabilities $ 145,000 $ 130,000 46.0% 44.9%
Shareholders' equity:
Preferred shares 20,000 20,000 6.3% 6.9%
Common shares 60,000 60,000 19.0% 20.7%
Additional paid-in capital 10,000 10,000 3.2% 3.5%
Total paid-in capital $ 90,000 $ 90,000 28.6% 31.1%
Retained earnings 80,000 69,700 25.4% 24.1%
Total shareholders' equity $ 170,000 $ 159,700 54.0% 55.1%
Total liabilities and shareholders' equity $ 315,000 $ 289,700 100.0% 100.0%
* Percent rounded to first decimal point.
Illustration
CLOVER CORPORATION
Comparative Income Statements
For the Years Ended 31 December
Common-size
Percents*
2019 2018 2019 2018
Revenues $ 520,000 $ 480,000 100.0% 100.0%
Less: Costs and expenses:
Cost of sales 360,000 315,000 69.2% 65.6%
Selling and admin. 128,600 126,000 24.7% 26.3%
Interest expense 6,400 7,000 1.2% 1.5%
Income before taxes $ 25,000 $ 32,000 4.8% 6.7%
Less: Income taxes (30%) 7,500 9,600 1.4% 2.0%
Net income $ 17,500 $ 22,400 3.4% 4.7%
Net income per share $ 0.79 $ 1.01
Avg. # common shares 22,200 22,200
* Rounded to first decimal point.
Ratio Analysis

Liquidity Profitability Efficiency Debt

Management
Liquidity

Current
Quick
Ratio
Ratio

Working
capital
Efficiency

Accounts
Receivable Inventory
Turnover Turnover

Asset
Average
Turnover Collection Period
Debt Management

Debt Debt to Equity

Ratio Ratio

Equity Interest
Ratio Coverage Ratio
Profitability

Dividend payout
ratio
Net Profit Earnings per
Margin Share

Gross Profit Price Earning

Margin Ratio

Return on Return on Owner’s

Assets Equity

Return on Owner’s
Dividend Yield
Equity Ordinary
Shares
Formula of Ratio Analysis
Formula of Ratio Analysis
Formula of Ratio Analysis
Thank You
 BBAW2103/SAMPLE

REMINDER: READ CAREFULLY THE INSTRUCTIONS ON THE FRONT PAGE.

PERINGATAN: BACA DENGAN TELITI ARAHAN PADA MUKA SURAT HADAPAN.

1. What are the main characteristics of relevance information?

A. Feedback value, forecast value and timeliness.

B. Verifiable, objective and trustworthy.

C. Reliable, consistent and comparable.

2. Which is the correct accounting equation?

A. Assets = Liabilities + Owner’s equity

B. Assets = Liabilities - Owner’s equity

C. Assets = Liabilities / Owner’s equity

3. What are the steps in recording process?

A. Trial Balance → Journal → Ledger

B. Journal → Ledger → Trial Balance

C. Ledger → Trial Balance → Journal

4. Which accounts are needed to be adjusted?

A. Prepaid expenses, unearned revenues, accrued expenses and accrued

revenues.

B. Revenues, expenses, capital and drawings.

C. Assets, liabilities and owner’s equity

1/7
 BBAW2103/SAMPLE

5. What is the definition of cash or trade discount?

A. A price reduction for purchases made in bulk.

B. A price reduction for prompt payment made within the credit period.

C. A price reduction for prompt payment made within the discount period.

6. How do you interpret credit term 2/10, n/30?

A. 30% discount will be given if the amount is paid within 10 days from the
date of invoice, while the payment is due in 30 days without discount.

B. 10% cash discount will be given if the amount is paid within 10 days from
the date of invoice, while the payment is due in 30 days without discount.

C. 2% cash discount will be given if the amount is paid within 10 days from
the date of invoice, while the payment is due in 30 days without discount.

7. A company has purchased merchandise amounting to RM4,000. The

transportation cost was RM350. The company returned RM275 of the
merchandise and paid the invoice within the 2% cash discount period. What is
the total amount paid for the merchandise purchased?

A. RM3,725.00

B. RM4,000.50

C. RM3,993.50

What is the purpose of conducting horizontal analysis of evaluating financial

8.
statement?

To evaluate items in the financial statement for a sequential

A.
period.

To evaluate items in the financial statement by stating each of the

B.
items of percentage as compared to the base amount.

To evaluate the trend of the items in the financial statement in

C.
terms of the amount or the percentage of fluctuation.

2/7
 BBAW2103/SAMPLE

9. What is the formula used to compute the percent change in horizontal analysis?

Subtracting the base period amount from the analysis amount, then
A.
dividing the result by the analysis period amount.

Subtracting the base period amount from the analysis period amount,
B. dividing the result by the base period amount, then multiplying that amount
by 100.

Subtracting the analysis period amount from the base period amount,
C. dividing the result by the base period amount, then multiplying that amount
by 100.

10. What is meant by FOB Destination in terms of goods ownership?

The ownership of the goods will be transferred from the seller to the buyer
A.
when the goods reach the buyer’s warehouse.

The ownership of the goods will be transferred from the seller to the buyer
B.
when the goods are sent by the seller to the transportation company.

The ownership of the goods will be transferred from the seller to the buyer
C. when the goods are at the seller’s warehouse before sent to the
transportation company.

What are the main activities of cash flow that are reported in the cash flow
11.
statement?

A. Operating activities, Financing activities, Investing activities

B. Financing activities, Expenditure activities, Investing activities

C. Operating activities, Investing activities, Administrative activities

3/7
 BBAW2103/SAMPLE

12. What are the steps in preparing closing entries?

Revenue accounts will be debited and revenue summary account will be

credited.
Expenses accounts will be credited and revenue summary account will be
A. debited.
Transfer balance from revenue summary account into capital account.
Drawings account will be credited and capital account will be debited.

Revenue accounts will be credited and revenue summary account will be

debited.
Expenses accounts will be credited and revenue summary account will be
B. debited.
Transfer balance from revenue summary account into capital account.
Drawings account will be credited and capital account will be debited.

Revenue accounts will be debited and revenue summary account will be

credited.
Expenses accounts will be debited and revenue summary account will be
C. credited.
Transfer balance from revenue summary account into capital account.
Drawings account will be credited and capital account will be debited.

13. What is the difference between Accrued revenue and Unearned revenue?

Accrued revenue refers to cash that is received in advance before goods

A. or services are provided while Unearned revenue refers to the revenue that
is earned but there is no cash received.

Unearned revenue refers to cash that is received in advance before goods

B. or services are provided while Accrued revenue refers to the revenue that
is earned but there is no cash received.

Unearned revenue refers to cash that is received after goods or services

C. are provided while Accrued revenue refers to the revenue that is earned
and the cash is received.

4/7
 BBAW2103/SAMPLE

14. What is the difference between current asset and non-current asset?

Non-current and Current asset are expected to be used in a period of one

A. year or in one operating cycle period but expected to be exchanged for
cash or sold for more than one year.

Current asset is expected to be exchanged for cash or sold or used in a

period of one year or in one operating cycle period and non-current asset
B.
is expected to be exchanged for cash or sold or used for more than one
year.

Non-current asset is expected to be exchanged for cash or sold or used in

C. a period of one year or in one operating cycle period and current asset is
expected to be exchanged for cash or sold or used for more than one year.

15. What are the contents of non-financial information?

A. Statement of Comprehensive Income, Statement of Financial Position,

Statement of Changes in Equity, Statement of Cash Flow, Notes to the
Accounts and Accounting Policies.

B. Summary of Financial Information, Auditor’s Report, Chairman’s Report,

Statement of Corporate Governance, Statement of Corporate Social
Responsibility and Notice of Annual General Meeting.

C. Statement of Comprehensive Income, Statement of Financial Position,

Statement of Changes in Equity, Statement of Cash Flow, Statement of
Corporate Governance and Statement of Corporate Social Responsibility.

16. A company has inventory of 10 units at a cost of RM10 each on 1 June. On 3

June, the company purchased another 20 units at RM12 each. On 5 June, 12
units were sold.

What is the cost of goods sold and cost of ending inventory using Perpetual
Last In First Out (LIFO)?

A. Cost of Goods Sold is RM124, Cost of Ending Inventory is RM216

B. Cost of Goods Sold is RM144, Cost of Ending Inventory is RM196

C. Cost of Goods Sold is RM136, Cost of Ending Inventory is RM136

5/7
 BBAW2103/SAMPLE

17. How the purchase return and allowances for a trading company is recorded if the
company uses perpetual inventory system?

A. Purchase return and allowances will be recorded in the inventory account.

B. Purchase return and allowances will be recorded in the cost of goods

purchased.

C. Purchase return and allowances will be recorded in the purchase return

and allowances account.

18. When will inventories be updated under Periodic inventory system?

A. The inventories will be updated physically once a year or once a month.

B. The inventories will be updated for each inventory’s transactions.

C. The inventories will be updated at the end of accounting period.

19. Which ratios could measure the profitability of a company?

A. Current ratio and Working capital.

B. Asset turnover and Inventory turnover.

C. Return on assets and Return on owner’s equity.

6/7
 BBAW2103/SAMPLE

20. On 1 November 2016, SMS Furniture Trading set up a petty cash fund for RM500.
On 28 November, the petty cashier requested to reimburse the fund and
submitted the following vouchers and receipts:
RM
Mileage claim 30
Supplies 56
Postage and Courier 90
Refreshment 74
What is the journal entry on 28 November 2016?

A. RM RM
November 28 Dr Cash 250
Cr Milage claim 30
Cr Supplies 56
Cr Postage and courier 90
Cr Refreshment 74

B. RM RM
November 28 Dr Milage claim 30
Dr Supplies 56
Dr Postage and courier 90
Dr Refreshment 74
Cr Cash 250

C. RM RM
November 28 Dr Petty cash 500
Cr Cash 500

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