TOPIC 5: ACCOUNTING SYSTEM AND

CONTROLS
 The
accounting
process

Accounting
“links” decision
makers with Accounting
Economic
economic
activities information
activities  and
with the results of
their decisions.

Actions
(decisions) Decision
makers
 TOPIC 5: ACCOUNTING SYSTEM AND
CONTROLS

Accounting System
A system of collecting and processing transactions data to
be accounting information and communicate the
information to the interested users.

Control:
Functioning as internal control of the business in
producing more reliable financial information
Objectives of Accounting
System
 To process information efficiently (low
cost).
 To obtain reports quickly.
 To ensure a high degree of accuracy.
 To minimize possibility of theft or fraud.
DESIGNING ACCOUNTING SYSTEM
Factors to be Considered:
1. Nature of the activity and the associated product
 Records kept are influenced by nature of activity
 (manufacturing, merchandising/trading or service business)
2. Size of the business
 Size of the business has important effects:
The numbers of accounts varies between firms
 manual or computerized?
the type and form of journals used differs.
control over internal procedures may differ
between large and small firms.
the type of recording system maintained (single
entry system versus double entry system)
DESIGNING ACCOUNTING SYSTEM
Factors to be Considered:
3. Location and Dispersions
 If a business has many branches or
subsidiaries located throughout the
country, accounting system must be
designed to collect information from
branches or subsidiaries.
 Reports should highlight the activities of
branches/subsidiaries and the organization
as a whole.
DESIGNING ACCOUNTING SYSTEM
Factors to be Considered:
4. Management
 Information required by management
should be readily/easily obtained.
 Eg: management wants to know sales of
different department or sales of every
salesman, the sales journal and sales account
must be designed to provide this information.
Factors to be Considered:
5. Ownership
 Sole proprietorship/partnership or company
 Certain legal provision dictate the
information a company must give its
shareholders and this influence what is
recorded.
 Accountants need to take into account the
number and type of accounts, the method of
profit sharing and information required by
owners.
Factors to be Considered:
6. Effects of Law
 Company Act 1965 (business incorporated under Act)
 Income Tax Act (all business enterprises with assessable
income)
 Approved Accounting Standard (all reporting enterprises)
 Guidelines of Securities Commission (all public company
listed or unlisted)
 KLSE listing Requirements (companies listed under KLSE)
 Guidelines of Central Bank (Banks and Financial Institution
licensed under BAFIA)
Accounting System
 Consists of:
 Journals
 book of original entry
 All transactions are originally recorded chronologically
 Contains accounts and amounts to be debited and
credited.
 Ledgers.
 A book of financial accounts
 Recorded by account type
 Charts of accounts
 Rules for using them.
Accounting System
 Manual, computerized, or anything
between.
 In a computerized system:
 Bookkeeping steps are done electronically.
DESIGNING THE ACCOUNTING SYSTEM

REPORTS

LEDGER

JOURNALS

DOCUMENTS
 DESIGN OF REPORTS:

Reports prepared for 2 groups of users;

• External users – creditors, shareholder, government.
• Internal users – management
An examination of all reports required will indicated what
information is to be presented in them
 Requirements of the various legislation may have to be considered
(eg. Co. Act 1965)

DESIGN OF THE LEDGER:

 Information to be presented in the reports must be contained in the
ledger as the final reports are prepared from the ledger.

DESIGN OF JOURNALS:
 Journals collect information for posting to the ledger. Decide which
journals are needed (General Journal and Specialized Journals) and
their format.
 CHART OF ACCOUNTS AND CLASIFICATION OF
ACCOUNTS

Definition :

 Chart of account is a listing of the complete account

titles and their related numbers, and is maintained in
both manual and computerized systems. (Simple
numbering system and flexible numbering system)
 How many? Depends on information needs
The General Ledger
DESIGN OF SOURCE OF DOCUMENTS:
 Source documents provide the input into the system. The content
and usefulness of the final report depends on these data.
 Forms should be easy to complete and contain all the necessary
information (often the people who fill out the documents are not
trained in clerical procedures)
 Consideration in designing source of documents:
size and color
number of copies each
format
 CONTROL IN ACCOUNTING
Purpose:

i) To safeguard asset or resources against waste and

fraud and inefficiency
ii) To enhance the accuracy and reliability of
accounting data
iii) To promote operational efficiency
iv) To encourage adherence to prescribed managerial
policies.
 Types of control
1) Internal Control
internal control consists of the plan of organization
and all the related methods and measures adopted
within a business to:
safeguard its assets from theft and unauthorized
use.
enhance the accuracy and reliability of its
accounting records by reducing the risk of errors
and irregularities in the accounting process.
 performed by company’s staff to be
presented/reported to management as internal
report, and not publicly disclosed
 Types of control
2) External Control
 external control done by outside entity (bodies)
that are responsible to review the financial
statement either it’s follow the standard and act or
not.
 performed by the Independent bodies and certified public
accountant.
Principles of Internal Control
 Establishment of responsibility
control is more effective when only one person is
responsible for given task this includes the authorization
and approval of transactions.
 Segregation of duties
the responsibility for related activities should be assigned to
different individuals.
the responsibility for keeping the records of assets should
be separate from the physical custody of the assets. Eg:
Sales activity.
Deliver  Billing  Receive Payment
 Principles of Internal Control
Documentation Procedures
documents should be pre-numbered and all documents should
be accounted for, as the documents provide evidence that
transaction and events have occurred.
the documents should be promptly forwarded to ensure timely
recording of the transaction and event.
Mechanical, physical and electronic control
make a physical count to safeguard the assets.
mechanical and electronic control require the business to
prepare time clock, television monitor and safety alarm.
Independent internal verification
steps in making verification involves the review, comparison and
reconciliation of data prepared by one or several employees.
It’s done periodically or surprise basis. Eg: reconciliation the
cash register tape with of cash collected for the day.
Internal Accounting Controls
 Basic Principle: make it as difficult as is
practical for people to be dishonest or
careless.
 Activities that reduce possibility of theft,
or intentional or unintentional mistakes.
Example of Question on Topic 2 & 3
1.Bandingkan tiga bentuk perniagaan. Bincangkan kelebihan dan
kelemahan setiap bentuk perniagaan.
2. Terangkan apa yang dimaksudkan dengan analisis KKPA (SWOT
analysis). Bagaimanakah analisis ini dapat membantu seorang pengusaha
pada peringkat penubuhan perniagaan?
3. Bincangkan faktor yang perlu dipertimbangkan dalam mereka bentuk
sistem perakaunan untuk sebuah firma bersaiz kecil.
4. Apa yang dimaksudkan carta akaun? Adakah carta akaun perlu
disediakan oleh semua perniagaan? Jika ya/tidak mengapa?
5. Dengan ringkas terangkan kepentingan kawalan dalaman dalam
sesebuah organisasi. Bincangkan dengan ringkas ciri-ciri utama satu
sistem kawalam dalaman yang baik. Bincangkan juga limitasi sistem
kawalan dalaman. Siapakah yang bertanggungjawab ke atas kawalan
dalaman sesebuah perniagaan?
6. Zaidah telah melantik kawan lamanya, Mina sebagai kerani akaun di Gagah Sdn
Bhd, iaitu sebuah syarikat yang baru diambil alih olehnya dari ayahnya. Oleh
kerana syarikat ini kecil, ia tidak mempunyai ramai pekerja, dan Mina telah
ditugaskan untuk menjalankan pelbagai kerja. Selepas setahun, prestasi syarikat
didapati merosot. Atas nasihat ayahnya, Zaidah telah melantik anda sebagai
akauntan untuk mengenalpasti masalah kewangan syarikat yang kian meruncing.
Anda mendapati:
a) Mina telah mengambil duit dari jualan harian untuk tujuan peribadinya sebelum
duit tersebut didepositkan ke bank, kadang-2 duit tersebut tidak dipulangkannya
semula dan dia telah merekodkan amaun tersebut tidak dapat dipungut.
b) Cek yang diterima dari pelanggan yang tidak berpalang telah diambil oleh
Mina. Ia cuba menyembunyikannya dengan mengkreditkan akaun penghutang
yang betul dan mengdebitkan akaun penghutang palsu untuk memastikan akaun
adalah seimbang.
c) Terdapat 18 keping cek yang telah dikeluarkan kepada pemiutang palsu yang
mana semua cek tersebut atas nama Mina.
d) Duit dalam dana runcit telah diambil oleh Mina dengan menulis baucer bagi
berbagai perbelanjaan yang kononnya telah dibuat oleh syarikat, tanpa apa-apa
dokumen sokongan, dan terdapat juga perbelanjaan yang dijelaskan lebih dari
sekali.