Items in Each Component of the Income Statement and Statement of Financial Position

Explanation

Content Standard 2.2 breaks down the items that make up each component of the two main financial statements, namely the Income Statement (Penyata Pendapatan) and the Statement of Financial Position (Penyata Kedudukan Kewangan). There are five basic components students must know. Revenue (hasil) is the inflow of economic benefits arising from business activities such as the sale of goods or services, which increases owner's equity. Expenses (belanja) are outflows of economic benefits or costs incurred to earn revenue, which reduce owner's equity. Assets (aset) are economic resources owned or controlled by the business that are expected to provide future benefits. Liabilities (liabiliti) are obligations of the business to outside parties that must be settled in the future. Owner's equity (ekuiti pemilik) is the owner's interest or claim over the net assets of the business, namely capital plus net profit less drawings and net loss.

Revenue and expenses are reported in the Income Statement and must be classified into operating and non-operating categories. Operating revenue (hasil operasi) comes from the main activity of the business, for example Sales (Jualan) for a trading business or Service Revenue (Hasil Perkhidmatan) for a service business. Non-operating revenue (hasil bukan operasi) is incidental income that is not the core activity, such as Discount Received (Diskaun Diterima), Rent Received (Sewa Diterima), Interest Received (Faedah Diterima) and Commission Received (Komisen Diterima). Operating expenses (belanja operasi) relate directly to running the main business, such as Salaries (Belanja Gaji), Rent (Belanja Sewa), Utilities (Belanja Utiliti), Advertising (Belanja Pengiklanan) and Depreciation (Susut Nilai). Non-operating expenses (belanja bukan operasi) are unrelated to the core operation, such as Interest on Loan (Faedah atas Pinjaman) and Discount Allowed (Diskaun Diberi). This separation helps the owner assess the performance of the core business.

Assets in the Statement of Financial Position are classified into non-current assets and current assets based on the period of benefit and the degree of liquidity. Non-current assets (aset bukan semasa) are held for long-term use beyond one accounting period and are not intended for resale, for example Land and Buildings (Tanah dan Bangunan), Vehicles (Kenderaan), Fittings (Lengkapan), Furniture (Perabot) and Office Equipment (Alatan Pejabat). Current assets (aset semasa) are easily converted to cash or used within an accounting period, usually one year or less, such as Inventory (Inventori), Debtors (Penghutang), Bank, Cash (Tunai) and Prepaid Expenses (Belanja Terdahulu). Current assets are usually listed in a consistent order of liquidity (increasing or decreasing), for example Inventory, Debtors, Bank and Cash.

Liabilities are classified into non-current liabilities and current liabilities based on the settlement period. Non-current liabilities (liabiliti bukan semasa) are obligations settled beyond one year, for example long-term Bank Loan (Pinjaman Bank) and Mortgage (Gadai Janji). Current liabilities (liabiliti semasa) must be settled within one year or less, such as Creditors (Pemiutang), Bank Overdraft (Overdraf Bank) and Accrued Expenses (Belanja Terakru). Owner's equity consists of opening Capital (Modal) plus Net Profit (Untung Bersih) less Drawings (Ambilan); if the business makes a net loss, that amount is deducted from capital. The basic equation linking all of these is Assets = Liabilities + Owner's Equity (Aset = Liabiliti + Ekuiti Pemilik).

The core skill for this standard is correctly classifying an item into its matching component. Students must be able to read a mixed list of items and place each one under the correct label, namely revenue, expense, non-current asset, current asset, non-current liability, current liability or owner's equity. Common mistakes include confusing Prepaid Expenses (Belanja Terdahulu, a current asset) with Accrued Expenses (Belanja Terakru, a current liability), or treating Drawings (Ambilan) as an expense when it is an adjustment to owner's equity. This classification skill is the foundation for preparing complete financial statements in later chapters.

Worked examples

Practice

Exam tips

Key terms

Revenue (Hasil)

Inflow of economic benefits from business activities that increases owner's equity, e.g. Sales and Rent Received.

Non-current assets (Aset bukan semasa)

Assets held for long-term use beyond one accounting period and not intended for resale, e.g. Vehicles and Buildings.

Current liabilities (Liabiliti semasa)

Business obligations that must be settled within one year or less, e.g. Creditors and Accrued Expenses.

Owner's equity (Ekuiti pemilik)

The owner's interest in the net assets of the business, namely Capital plus Net Profit less Drawings.

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 4

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