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Accounting Theory Issues Essay

5360 words - 22 pages

Company Background
Cahaya Ilmu Enterprise is a enterprise business which established since 2006 located at Bukit Kayu Hitam. But the business had moved to Changlun on December 2010. Mr. Abdul Razak bin Mahamud is the owner of Cahaya Ilmu Enterprise and he is also a teacher at Sekolah Kebangsaan Bukit Tangga. Cahaya Ilmu Enterprise main activity is selling Islamic products such as Al-quran, Tafsir, CD of Islamic talk and Islamic children, minyak ‘atar, buah tin dates, air syifa’ and etc. All of the products are Halal. Besides, there also provide Photostat service. Furthermore, the business opens a tuition centre and Al-quran class there. Mr. Abdul Razak starts his business by using his own ...view middle of the document...

Cahaya Ilmu Enterprise keep the sales receipts for the whole day and record in into the book at the end of the day. The sales are record according to the date and types of accounts. For example, if it is a sale of books transaction it will be recorded as sales in book’s file as well as in sales ledger. The same thing goes to inventory. Each and every inventory that arrived and had been taken out will be updated in the same book.
At the end of the day, the owner will come to the shop and review the accounts of the day. It is to make sure that the workers record transactions properly. After all the transactions had been recorded manually in the book, it will be transferred into computer system. The shop used Microsoft Excel to record their accounts. They create a template for each book, for instance, all transactions that they record in CD file they will create a template for that particular file in the Excel.
In addition, the cash are managed by the workers who are on duty but if the workers want to use the cash they have to inform the owner and record it in the books. At the end of the month there is a friends of the owner will come to the shop and audit all the accounts and files. This is to make sure that the workers record the transactions based on the right nature of the transactions.

Problem
After we have the interview session, the main problem from Cahaya Ilmu Enterprise is no proper authorization in recording, cash holding, and asset holding. Proper authorization or establish responsibilities should done to ensure that all activities adhere to establish guide lines , responsibility for a task is clearly establish and assigned to one person. When a problem occurs in a company where responsibility is not identified, determining who is at fault is difficult. We have ask them about whether they have any department or unit or worker that do the account, the company’s transaction was recorded by the workers at the end of the day. In another word, any worker can do the record for that day. Then the owner will go and check all the transaction and number of cash available is equal with the invoices or receipts and the cash available. The problem is, when there is a mistake, is hard to find out who is responsibility on the particular transaction.
All the workers do not have accounting qualification, no any experience in the accounting work, and no any knowledge about the basic of accounting, They are only assists by a friend of the owner who is an accounting teacher. They cannot maintain adequate records with their limited experience. The owner refuse to outsource the service from SMP because he want to save cost and he think that is not necessary to use this kind of service. Reliable records are a source of information that managers use to monitor company activities. Adequate documents and records provide evidence that financial statements are accurate. Controls designed to ensure adequate recordkeeping include the creation of invoices...

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