POA (7087) Chapter 1-4 Notes

Chapter1Typesofbusiness ●Tradingbusiness:buygoodsfromsuppliertoselltocustomers ○E.g,Bookshops,Supermarkets ●ServiceBusiness:providesservicetocustomers ○E.g,Medicalservices,Cleaningservices,Bankingservices Formsofbusinessownership Soleproprietorship(SP),Limitedliabilitycompany(LLP),Privatelimites company(PLC) Features ●Ownership ●Accesstofunds ●Risk ●LevelofControl ●Lifespan ●Transferabilityofownership ●Formalitiesandprocedures Stakeholders →groupsofpeoplewhowillmakeuseofinformationaboutthebusiness tomakedecisions ●Owners&shareholders:Contributecapitalansexpectprofit distributioninreturn ○E.g,whethertocontinuetoinvestinthebusiness ●Managers:Workforbusiness,Devisestrategicplanstorun businesseffectively ○E.g,considerwaystoimproveperformanceofbusiness ●Employees:Workforbusiness,Performexecutiveduties ○considerworkingatthebusiness ●Lenders:Makemonetavailabletobusiness,Expectittobefully repaidwithinterest ○E.g,whethertograntloastothebusiness ●Suppliers:Supplygoodsand/orservicestobusiness ○E.g,whethertoselltobusinessoncredit ●Customers:Buygoodsand/orservicesfrombusiness ○E.g,whethertobuyfrombusiness ●Government:Enforcetaxregulations ○E.g,decidestheamountoftaxtocollect ●Competitors:sellsimilargoodsand/orservicesasthebusiness ○E.g,whethertheyarecomparabletocollectfrombusiness →Stakeholdersrelyonbothaccountinginformation(e.g,costof inventory)andnon-accountinginformation(e.g,consumerpreference) Rolesofaccounting Accountingisaninformationsystemthatprovidesaccountinginformation forstakeholderstomakeinformeddecisionsregardingthemanagementof resourcesandperformanceofbusiness. Rolesofaccountants Accountantsprepareandprovideaccountinginformationfor decision-making.Theysetupanaccountinginformationsystem(AIS)and becomestewardsofthebusiness. Professionalethics ➔Integrity ◆Tohaveintegrityistobestraightforwardandhonestinall professionalrelationships ➔Beingobjective ◆Tonotletbias,conflictofinterestortheundueinfluenceof othersoverridetheirprofessionaljudgement

Chapter2Transactions 1.Cashtransactions a.Paymentismadeatthesametimeorimmediatelyduringa cashsaleorpurchase 2.Credittransactions a.Paymentisdelayedorpostponedtoalaterdateduringa creditsaleorpurchase(Payable) AccountingEntityTheory –Theactivitiesofabusinessareseparatefromtheactionsofthe owner.Allbusinesstransactionsarerecordedfromthepointofviewof thebusiness MonetaryTheory –Onlybusinesstransactionsthatcanbemeasuredinmonetaryterms arerecorded Accountingcycle 1.Identifyandrecord a.Sourcedocuments→journal&ledgers 2.Adjust a.Ledger’sendingbalance→trialbalance b.Adjustingentriesrecorded→journal&ledger c.Accountsareadjustedatleastonceayear 3.Report a.Trialbalance→financialstatements b.Financialstatementsarepreparedatleastonceina financialyear 4.Close a.Income,expenses,incomesummary,drawingsand dividends→closed b.Accountsareclosedonceattheendofthefinancialyear AccountingInformationSystem BusinessusesAIStocollect,storeandprocessaccountingdata Sourcedocuments→Journals→Ledgers→Trialbalance→Financial statements Sourcedocumen