Chap 1 : Introduction to Accounting

I- Accounting process
- Accounting consists of 3 basic activities – it
+ identifies: select economic events(transaction_giao dịch)
+ recording : record, classify,and summarize
+ communicates: prepare accounting reports
( the accounting process includes the bookkeeping function)(analyze and interpret
giảithích for users)
The economic events of an organization to interested users.
- Who uses accounting data:
+ Internal users(người dùng nội bộ) : Marketing , management, finance, human
resources, may be employees.
+ External users (người dùng bên ngoài): investors( is general electric earning
satisfactory), creditors (chủ nợ), ngoai ra government and agency

EXAMPLE 1: Indicate whether the following statements are true or false.

The three steps in the accounting process are identification, recording,
and communication. True
Bookkeeping encompasses all steps in the accounting process.
Bookkeeping is part of accounting record False
Accountants prepare, but do not interpret, financial reports. False
Thuộc analyze finacial report
The two most common types of external users are investors and company
officers. False
company officers is internal users
Managerial accounting activities focus on reports for internal users
True

II- The regulations of accounting (quy định về kế toán)

1. Ethics in financial reporting
- Recent financial scandals include: Enron, Worldcom, HealthSouth, AIG, and other
companies.
- Regulators and lawmakers concerned that the economy would suffer if investors lost
confidence in corporate accounting. In response,
+ congress passed Sarbanes-Oxley Act (SOX)
- Effective financial reporting depends on sound ethical behavior.
2. Generally accepted accounting principles:

Various users Financial Statements

need financial  Balance Sheet
 Income Statement
 Statement of Owner's Equity
 Statement of Cash Flows
 Note Disclosure

The accounting profession Generally Accepted

has developed standards that Accounting
Principles (GAAP)
are generally accepted and
universally practiced.
a) Measurement principles.
- Historical cost principle giá gốc(or cost principle) dictates that companies
record assets at their cost.
- Fair value principle : states that assets and liabilities should be reported at
fair value gt phù hợp ( the price received to sell an asset or settle a liability)
Selection of which principle to follow generally relates to trade-offs between
relevance and faithful representation
b) Assumptions.(giả định)
- Monetary unit assumption (giả định tiền tệ): requires that companies include in
the accounting records only transaction data that can be expressed in terms of
money.
- Economic entity assumption (giả định thực thể kinh doanh): requires that
activities of the entity be kept separate (tách) and distinct (riêng biệt) from the
activities of its owner and all other economic entities.

 Forms of business ownership

- Soler trader:
+ owned by one person
+ owner is often manager/operator
+ owner receives any profits, suffers, any losses, and is personally liable for
debts
- Partnership:(qh đối tác)
+ owned by two or more persons
+ often retail(bán lẻ) and service-type businesses
+ generally unlimited personal liability
+ partnership agreement
- Company:
+ ownership divided into shares of stock(cổ phiéu)
+ separate legal entity organized under state corporation law
+ limited liability

III- Accounting equation

Assets = Liabilities + Owner’s Equity
Basic accounting equation:
- Provides the underlying framework for recording and summarizing economic events.
- Assets are claimed(bồi thường) by either creditor(chủ nợ)or owners
- If a business is liquidated(thanh lí), claimed of crediors must be paid before
ownership claim
a) Assets (tài sản)
-Resources a business owns.
- provide future services or benefits
- cash, supplies, equipment,…
b)Liabilities
- claims against assets (debts nợ and obligations nghĩa vụ)
- creditors ( party to whom money is owned)
- accounts Payable (tk phải trả), Notes Payable, Salaries and Wages Payable,…
c) Owner's Equity (vốn chủ sở hữu)
- ownership claim on total assets
- referred to as residual equity
- investment by owners and revenues(+)
- drawings and expenses(-)
Increases in owner's equity : Profit tăng => revenue tăng => owner’s equity tăng
- Investments by owner: are the assets the owner puts into the business
- Revenues: result from business activities entered into for the purpose of earning
income:
+ common sources if revenues are: sales, fees, services, commissions, interest,
interest, dividends, royalties, and rent.

Decrease in owner’s equity:

- Drawings (rút):An owner may with draw cash or other assets for personal use.
- Expenses(phí) are the cost of assets consumed or services used in the process of
earning revenue.
+ Common expenses are: salaries expense, rent expense, utilities expense, tax
expense, etc.

IV- The main financial statement (báo cáo tài chính)

Companies prepare four financial statements:
+ statement of profit and loss (báo cáo kq kinh doanh: thể hiện về doanh thu, chi
phí lợi nhuận)
+ statement of change in equity (thể hiện về vốn: có ai góp vốn, rút vốn,)
+ statement of financial position (báo cáo cân đối kế toán)
+ statement of cash flows(báo cáo dòg tiền)
1. Statement of financial position
a) Assets
- Current asset (tài sản ngắn hạn): are expected to be converted into cash within
one year
+ Cash
+ Items owned by the business with the intention of turning them into cash in a
short time: Inventory (hàng tồn kho)
o Trade and other receivables
o Short-term investments
o Prepayments ( prepaid expenses)chi phí trả trước
- Non-current asset: are acquired for long-term use within the business
+ property(tài sản), plant and equipment(thiết bị) ( tangible assets tài sản hữu
hình– PPF)
+ intangible non-current assets(ko có hình thái vật chất)
+ long-term investments
b) Capital – equity (vốn- vốn chủ sở hữu)
Capital ( sole trader):
£ £
Capital at the beginning of the reporting period

(ie capital brought forward) X

Add additional capital introduced during the period X
X
Add profit earned during the period (or less losses incurred in the X
period)
Less drawing (X )
Retained profit for the period X
Capital as at the end of the reporting period (ie capital carried X
forward)

Closing captital (at the end) = opening capital + additional + profit – less drawing
Equity (company)
c) Liabilities (nợ phải trả)
- Current liabilities: are debts which are payable within one year
+ Loans (khoản vay): repayable within one year, including element of a long term
loan that is repayable within one year
+ Bank overdraft (repayable on demand)
+ Trade payable (accout table xuất hiện khi mua chịu…)
+ Taxation payable
+ Accruals, other payables,…
- Non-current liabilities (nợ dài hạn): are debts which are payable after one year
+ loans: not repayable for more one year, ie. Bank loan, loan from individual or
business.
+ Loans stock or debentures (limited company)
NET assets: Assets less liabilities
2. Statement of profit and loss
a) Income/Expense
- Revenue
- Cost of sales: the purchase or production cost of the goods sold
- Gross profit = Revenue – Cost of Sales
- Profit for the year = Gross profit – expense + non-trading income

Gross profit XXXX

Plus any other income from source other than the sale of goods X
Minus other business expense not included in the cost of good sold (XX)
XXX

Income from other source: Business expense, other than COS:

- Profit on disposals (xử lí) of non- - Distribution costs/selling espense:
current assets (bán 1 tài sản dài Salaries, wages, commision of employees;
hạn) marketing costs, depreciation
- Divideds or interest receive from - Administrative (hành chính) costs/expense:
investments Management& office staff salaries, rent,
- Rental income from property owned but insurance, telephone and postage…
not otherwise used by the business - Finance costs/financial expense: interest
- Amounts due in respect of insurance on loans, bank overdraft interest
 claim

Question1:
Which one of the following can the accounting equation can be rewritten as?
a) Assets + profit – drawings – liabilities = closing capital
b) Assets – liabilities – drawings = opening capital + profit
c) Assets – liabilities – opening capital + drawings = profit
d) Assets – profit – drawings = closing capital – liabilities
Question 2:
The profit earned by a business in 20X7 was $72,500. The proprietor injected new
capital(additional) of $8,000 during the year and withdrew goods for his private use
which had cost (drawing) $2,200. If net assets at the beginning (opening capital) of
20X7 were $101,700, what were the closing net assets (closing capital)?
a) $35,000
b) $39,400
c) $168,400
d) $180,000
net asset = total assets
Closing captital (at the end) = opening capital + additional + profit – less drawing
72500+8000-2200+101700=180000
Question 3:
A sole trade borows $10,000 from a bank. Which elements of the accounting equation
will change due to this transaction?
a) Assets and liabilities
b) Assets and capital
c) Capital and liabilities
d) Assets only
vay tien trong ngan hang se xuat hien : liability
Do di vay nen co them 10000 tien . Tien cua mk thuoc loai Asset vi tien tang
2 The capital of a sole trader would change as a result of:
A. a credit customer paying by bank transfer
(hinh thanh khoan trade receivable thuoc Asset. Hinh thanh tu ki truoc => trade
receivable giam xuong chi anh huong de 1 tai san tang len va 1 taii san giam xuong)
B. raw materials being purchased on credit
(nguyen vat lieu thuoc inventory_hang_ton_kho ma inventory thuoc asset, mmua ma chua
tra tien thi hinh thanh khoan phai tra laf trade payable, maf trade payable laf
khoan liability. Anh huong den thu khac ko a/h capital)
C. non-current assets being purchased on credit
D. personal petrol being paid for out of the business's petty cash
(anh chu so huu di lai và đổ xăng, anh ta dùng tiền công ty => xuất hiện drawing
và ảnh hưởng đén capital khiên capital giảm đi)

Chapter 2: Accounting transactions

1. Type of transactions.
- Credit transactions (credit sale/ credit purchase)
Giao dịch tín dung ( bán/mua tín dụng)
- Cash transactions (cash sale/ cash purchase) giao dịch tiền mặt
- Petty cash transactions (giao dịch tiền mặt nhỏ)
- Payroll (tiền lương)
2. Accounting documents

Credit sale Credit purchase

Sales
Receive sales order order
from customer (received Purchase Send purchase order
from order to supplier
customer)

Prepare goods and delivery

Delivery Receive goods with supplier’s
Goods
Phân phối note Delivery note; prepare goods
received
Note; deliver to customer
received note (GRN) note

Prepare sales invoice

and send to customer
Received purchase invoice
SOURCE DOCUMENT Sales
From supplier, and match Purchase
to
FOR ACCOUNTING invoice invoice
GRN
SYSTEM ( received
SOURCE DOCUMENT
FOR ACCOUNTING from
SYSTEM supplier

Invoice (hóa đơn) là do người bá cho người mua, sales invoice chính là short
document
 a) Credit transaction document.
- An invoice may relate to a sales or purchase order => source documents
Khi invoice có vấn đề thì phải sửa, khi đó ta cần debt note
- Credit note (negative invoice): A document issued to a customer relating to
returned goods, or refunds when a customer has been overcharged for whatever
reason =>source documents
- A debit note: requesting a credit note from supplier ( do người request ra) =>NOT
source documents ( đề thông báo invoice bị sai)
b) Cash at bank transaction documents
- Source documents: transaction report downloaded from electric banking, cheque,
bank transfer,...
- Bank transactions are recorded manually(thủ công) on cash book => then will be
reconciled(đối chiếu) to bank statement(sao kê ngân hàng)at the end of month
- Bank transactions are computerized, reconciled to bank statement (transaction
report) daily. The unknown transaction will be recored in a temporary account as
suspense and reported on an exception report
c) Petty Cash (quỹ tiền mặt)
- Source documents: petty cash book: record all payment out and receipts into petty
cash (firstly, manual system -> then computerized)
- Keep an agreed sum of of petty cash (small amount) for staff refreshment,
postage, taxi fares => called imprest system
- Must be topped up from time to time

Cash still held in petty cash + vouchers for payment = imprest system amount

d) The payroll
- Source document: the payroll: record employee wages and salaries (firstly, manual
system -> then computerized máy tính hóa)
- Gross pay to employees (tổng lương)
Net pay (cash paid to employees)
Employee pension contribution (deductions)đóng góp lương hưu
Employee NI(national insurance)contribution (deductions khấu trừ)
PAYE income tax (deductions)
- Additional cost:
Employer NI contribution
Employer pension contribution

Gross pay + Additional cost = Total payroll cost

3. Computerised accounting systems

- Standing data: does not redularly(đỏ) change: name, address, payment term,...
- Real time processing: at the point at which the transaction takes place
- Batch processing: process a number of transactions together in a group or batch

Question 1 : when a purchase invoice is received from a supplllier which two of

following documents would the invoice be checked to?
A. Sales order
B. Purchase order
C. Remittance advice
D. Good received note
E. Credit note
18/2
Question3:a business has the following payroll costs for a month:
£
Gross pay 112,450
Income tax deducted 15,800
Employees’ national insurance 9,810
Employer’s national insurance 11,200
What is the net amount paid to employees for the month?
A. £75,640
B. £91,440
C. £102,640
D. £86,840

112,450-15,800-9,810 = 86840