Chapter 1 covers four core areas of Introduction to Accounting.
1. Roles of Accounting and Accountants (Syllabus 1.1)
- Accounting provides financial information for stakeholders to make informed decisions.
- Accountants set up and maintain the accounting information system, and act as stewards of the business's financial resources.
- They must observe two key professional ethics:
- Integrity — straightforward and honest in all professional relationships.
- Objectivity — not allowing bias, conflict of interest, or undue influence from others to affect their professional judgement.
2. Stakeholders and Their Decision Needs (Syllabus 1.2)
- Stakeholders are people who use accounting information to make decisions.
- Each stakeholder has a specific decision:
- Lenders — whether to grant loans, depending on the business's ability to repay.
- Suppliers — whether to sell on credit, depending on the business's ability to pay.
- Government — whether the business complies with tax regulations, and the amount of tax to collect.
- Competitors — how to improve their own performance.
- Always state the specific decision — vague answers do not earn marks.
- Stakeholders use both accounting information (from financial records) and non-accounting information (not found in financial records).
3. Types of Businesses (Syllabus 2.1)
- A trading business buys and sells physical goods — it has inventory and cost of sales.
- A service business provides services — it has neither inventory nor cost of sales.
- The key question to ask: does the business sell physical goods to customers?
4. Forms of Business Ownership (Syllabus 2.2)
- Sole proprietorship (G2 and G3) — one owner with unlimited personal liability: the owner must pay all business debts using personal assets.
- LLP (G3 only) — two or more partners with limited liability, where only the partner whose wrongful actions caused the debt bears personal liability.
- Pte Ltd (G3 only) — 1–50 shareholders with limited liability; shareholders lose only their investment, not their personal assets.
Accounting Theories (Syllabus 3.1) are covered in their own standalone chapter.