9/8/2022

Financial statements:
Compulsory financial statement
Balance sheet: Bang can doi ke toan (USA - GAAP) – the statement of financial
position – Bao cao tinh hinh tai chinh (UK, Europe – IFRS)
income statement (USA) – The statement of profit or loss (P/L statement – UK): Bao
cao ket qua kinh doanh
statement of cash flows: Bao cao luu chuyen tien te
notes to financial statement: Thuyet minh bao cao tai chinh
Additional financial statements
retained earnings statement (USA)
The statement of changes in equity (UK)
Worldwide accounting standards (chuan muc ke toan)
IAS (international accounting standard)/IFRS (international financial reporting
standard) -> Applied by about 130 countries
US GAAP (generally accepted accounting principles)  USA
Vietnamese accounting standard (VAS) – developed on the basis of IAS/IFRS in 2004
– 2006  applied IFRS fully in 2025

LO1:
Accounting consists of three basic activities – it identifies, records, and
communicates the economic events of an organization to interested users. 
Step by step accounting activities:
Step 1: Accountant identifies an economic event (1) (2) (4)
Ex1: Owners invest $10000 cash into the company  Affect equity capital (von chu
so huu) & asset (tai san)
Ex2: The company borrows $5000 cash from the bank  Affect liability (no phai tra)
& asset (tai san)
Ex3: The company hires 2 new employees
Ex4: The company sells products for $1000 cash  Affect asset (tai san) & revenue
(doanh thu)
 Characteristic of economic event:
 (1) Expressed in terms of money
(2) Affect the company’s financial statements
Step 2: Record economic events in the accounting book (Journal, Ledger)
Recording step refers to bookkeeping.
In order to record, accountant needs to collect accounting document (chung tu ke
toan) (Evidence to ensure that the economic event is factual – VAT invoice, cash
receipt – phieu thu, cash payment - phieu chi, bank statement, goods dispatching
notes…)
Rule of recording: chronological order & consistent monetary unit
Step 3: Communicate financial information to the interested users through financial
statements  Accountant prepares and interprets financial statements (FS)  FS is
audited (kiem toan) independently by another audit company  Publishing to
exchange market

Who are the interested users to FS?

Internal users (2) (3)
External users (1)
Corporation (Tap doan) – Joint stock company (Cong ty co phan)
1. Conference of shareholders (stockholders) – owners ≠ stakeholders: everyone that
relevant to company including shareholder, director, manager, employees…
Meet usually 4 times/year
2. Board of directors (BOD): Hoi dong quan tri (5 – 11 members) – Role: Make
business strategy for long term and set the goals for the year
3. Board of Management (BOM): Ban giam doc – Role: Manage company day by day
align with BOD strategy
Purchase on credit/on account

Comparison Financial accounting Management accounting

Users Internal & external (mainly) Internal
Report Financial statements quarterly Internal management report
& annually whenever management ask for
Content of General format (by accounting Special, no format
 report rule)
Verification Audit indepentdently No audit
LO2:
Ethics
Measurement principles:
On Jan 1 2022, the company purchased a vehicle for $10000 cash. Registration fee is
$1000. Installment and testing fee is $500. The company made a cash payment for all
the fees => Always apply the historical cost to record value of asset at the date of
purchased => Cost of vehicle = Purchase price + other costs = $11500
“Costs include all expenditures necessary to acquire the assets and make it ready for
intended use”
On Dec 31 2024, the market value (fair value) of vehicle increase to be $13000
If company follows historical cost principle, keep value of vehicle (in the accounting
book) at cost $11500
If company follows fair value principle, increase the value of vehicle to be fair value
$13000

Reality: Most companies choose to apply historical cost principle.

Active trade market: stock and bond
Inactive trade market: property (hire appraisal company  expense)
=> Evaluate between cost (evaluate market value of assets) and benefit (increase of
assets)
Corporation (Joint
Proprietorship Partnership LLC
stock company)
2 or more owners 2 or more owners
1 owner Unlimited
(no more than 50) (no more than 50)
Unlimited Unlimited
Limited liabilities Limited liabilities
liabilities liabilities

Unlimited liabilities: the owner receives any profit but also suffers from any losses,
and personally liable for all debts of the company. If the company goes bankrupt,
owners have to use personal assets to cover liabilities of company
Limited liabilities: the owners are not personally liable for the debts of the corporation.
If the company goes bankrupt, the max owners loss is the $ investment into the
company.
LO3:
A & B open a coffee shop. A: $10000 & B: $20000 cash
Jan 1 2022 date of opening: accounting for coffee shop
Assets = Owners’ equity
Cash $30000  Share capital $30k
Jan 2 2020, the shop borrows $15000 from the bank
Assets = Owners’ equity + liabilities
Cash $45000  Share capital $30k + Bank borrowing $15k

Assets: cash (at bank in checking account), petty cash ($bill – tien mat), note
receivable (cash in saving account), inventory (hang ton kho – raw materials, work in
process, finished goods, goods),
Finished goods (thanh pham): manufacturing company. Raw material  production 
...
Goods (hang hoa): merchandising company buy the finished goods without production
and resale the goods

16/8/2022
Supplies: tools or machines with small value
PPE (property, plant, equipment): land, building, machine (large value), vehicle
Financial investment: invest other company’s stock and bond, invest in property,
money saving at bank
Account receivable (phai thu khach hang): the right to collect cash from customer
when selling goods/service on account
Assets: resources a business owns + bring the benefit to the company (cash, future
cash flows, the right to do smt)
Liabilities: existing debts and obligations
Usually end with word “payable”: account payable (when company buys
goods/service on account)  obligation to pay to supplier >< account receivable
Note payable: the company borrows money from bank
Salaries and wages payable, Utilities payable (electric, water, internet, phone…),
interest payable, dividend payable…
Unearned revenue: company receives cash in advance and has the obligation to
provide goods/service

Equity = Assets – Liabilities

Share capital: ownership as stock
Retained earnings: accumulated profit/loss since the beginning day of operation
Example: a company starts business in Jan 1, 2020. During 2020, profit of $1000
RE at 31/12/2020 = 1000
During 2021, loss = 500
RE at 31/12/2021 = 1000 – 500 = 500
RE is the source for (1) pay dividend when RE is positive (2) retained in the business...

(1) Assets = Liabilities + Equity

Cash 100000 Share capital 100000
(2) Assets = Liabilities + Equity
Cash 100000 Share capital 120000
Equipment 20k
(3) Assets = Liabilities + Equity
Cash 50k Share capital 120000
Equipment 20k
Building 50k
(5)Assets = Liabilities + Equity
Cash 110k NP 60k Share capital 120000
Equipment 20k AP 20k
Building 50k
Inventory 20k
(6) Assets = Liabilities + Equity
Cash 65k NP 20k Share capital 120000
Equipment 20k AP 15k
Building 50k
Inventory 20k

EQUITY:
Profit/loss = + Revenues – Expenses  Income statement
Revenues: are the gross increases in equity resulting from business activities (normal
day to day activities are selling goods and provide service) entered into for the purpose
of earning income. Revenues usually result in an increase in an asset (cash or account
receivable). 
- Sales revenue: selling goods
- Service revenue: provide service
- Rent revenue
- Interest revenue: from money saving and investment in bond
- Dividend revenue from stock investment
Expense: are the cost of assets consumed or services used in the process of earning
revenue
- Assets consumed expense: when the company buys smt, record it as an assets.
Use of assets become expense
Ex1: Jan 1, 2020 the company buys an equipment for $1200 cash
Cash – 1200, equipment + 1200
When using, equipment is depreciated  Depreciation expense: chi phi khau hao
Estimate that useful lives of equipment is 2 years
Depreciation expense for a month = 1200/24 = 50$
Ex2: Jan 1, 2020 the company buys goods for $1000 cash
Cash – 1000, inventory + 1000
The company consumes inventory by selling to customer for $1300 cash
Sales revenue + 1300 & cash +1300
Inventory – 1000 & cost of goods sold + 1000
Profit/loss = Sales revenue +1300 - cost of goods sold + 1000 = 300
- Service used expense: human service (salaries & wages expenses), electric,
water, internet… (utilities expense), advertise service (advertising expense),
 shipping service (delivery expense), bank service (bank service charge
expense), miscellaneous expense…
If company spends money to smt, is it an expense? No  Expenditure
An expenditure can become an asset (capital expenditure - chi phi von hoa) or
expense (revenue expenditure – chi phi tao doanh thu)
Profit/loss = + Revenues – Expenses = revenue – revenue expenditure
 Matching principles
Dividends: are distribution of cash or other assets to shareholders. They are not an
expense.
Closing RE = Opening RE + Income of the period – Dividend = Opening RE +
Revenues – expense – dividend
Ex:
RE at 31/12/2020 = 1000
Revenue of 2021 = 5000
Expense of 2021 = 3500
Dividend of 2021 = 600
RE at 31/12/2021 = RE at 31/12/2020 + Revenue of 2021 - Expense of 2021 -
Dividend of 2021

Asset = liabilities + equity

Cash 5000 Share capital 5000
(1) Cash 0 = share capital 5k
Inventory 5k
(2) Cash 6000 = Share capital 5k
Inventory 0 Sales revenue 6k
- Cost of goods sold 5k
(3) Cash 000 = Share capital 5k
Inventory 6000 Sales revenue 6k
- Cost of goods sold 5k
(4) Cash 4500 = Share capital 5k
Inventory 0 Sales revenue 10500
- Cost of goods sold 11k
Profit/loss = sales revenue 10500 – cost of goods sold 11000= -500

L04:
Economic event = business transactions
(1) Express in terms of money
(2) Affect the accounting equation

Dual effect of business transaction in accounting equation:

(1) An asset increases, another asset decrease
(2) Liability/equity increases, another L/E decreases
(3) An asset increases, a L/E increases
(4) An asset decreases, a L/E decreases

19/8/2022
Equity change = + additional invetsment – dividends – expenses + revenues
Equity at the year beginning + equity equity change in a year = equity at the year
ending
Equity at the year beginning + additional invetsment – dividend – expenses + revenues
= equity at the year ending

Chapter 2: The recording process

Opening balance + increase – decrease = closing balance
Slide 19:
Ex1: Equipment +5000, Cash -2000, AP +3000
Journal entry:
Dr Equip 5000
Cr cash 2000
Cr AP 3000
Ex2: Material +1000, Supplies + 500, Cash – 1500
Dr material 1000
Dr supplies 500
Cr cash 1500
Ex3: Cash - 3000, AP – 1000, NP – 2000
Dr AP 1000
Dr NP 2000
Cr cash 3000
Dr AP 1000
Cr cash 1000
Dr NP 2000
Cr cash 2000

Dr cash 1000
Cr AR 1000

P2.2:
Journalize the transaction
Apr 1:
Dr Cash 20k
Cr share capital 20k
Apr 1: hire a receptionist  not business transaction
Apr 2:
Dr rent expense 1100
Cr cash 1100
Apr 3
Dr supplies 4k
Cr AP 4k
Apr 10
Dr AR 5100
Cr Servcie revenue 5100
Apr 11: Cash +1k, unearned revenue (liability) + 1k
Dr cash 1k
Cr unearned revenue 1k
Apr 20
Dr cash 2100
 Cr servece revenue 2100
Apr 30
Dr SW expense 2800
Cr cash 2800
Apr 30
Dr AP 2400
Cr cash 2800
b) Post to leadger
Dr Cash Cr
OB: 0
20K (Apr 1) 1100 (Apr 2)
1000 (apr 11) 2800 (apr 30)
2100 (apr 20) 2400 (apr 30)
CB: 16800

Dr Account payable Cr
OB: 0
2400 (Apr 30) 4000 (Apr 30)
CB:

Dr Share capital Cr
OB: 0
2400 (Apr 30) 20000 (Apr 1)
CB: 20000

Dr Rent expense Cr
1100 (Apr 2)

Total: 1100

Dr Supplies Cr
 OB: 0
4000 (Apr 3)
CB: 4000

Dr AR Cr
OB: 0
5100 (apr 10)
CB: 5100

Dr Service revenue Cr
5100 (Apr 10)
2100 (Apr 20)
OB: 7200

Dr Unearned revenue Cr
OB: 0
1000 (Apr 11)
CB: 1000

Dr SW expense Cr
2800 (Apr 30)

Total: 2800

Expense, revenue, dividend: No balance

RE at the begin + Revenue – expense – dividend = RE at the end
Dr Retained earnings Cr
OB
Expense Revenue
Dividend
CB:
 Trial balance
Apr 30
Account title Debit Credit
Cash 16800
AR 5100
Supplies 400
AP 1600
Unearned revenues 1000
Share capital 20k
Service revenue 7200
SW expense 2800
Rent expense 1100
Total 29800 29800

Accrural basis
1. Dr AR 5000
Cr Service revenue 5000
2. Dr Advertising expenses 1000
Cr AP 1000
3. Last month
Dr Utility expense 75
Cr AP 75
This month
Dr AP 75
Cr Cash 75
4. Dr AR 1000
Cr Service revenue 1000
This month
Dr cash 1000
Cr ar 1000
Net income of August = Revenues – expenses = 5000 – 1000 = 4000
Net change in cash = Cash inflows – cash outflows = 1000 – 75
Cash basis
1. No entry
2. No entry
3. Cr cash Dr utility expenses
4. Dr cash, Cr service revenue
Net income of August = Revenues – expenses = 1000 – 75
Net change in cash = Cash inflows – cash outflows = 1000 – 75

Net income in income statement and net change in cash in the statement of cashflows

Oct 5 date of purchase:

Dr supplies 2500
Cr cash/AP 2500
Oct 31 supplies on hand is 1000
Supplies have been used during the month = 1500
Dr supplies expense 1500
Cr supplies 1500

Oct 4
Dr prepaid insurance (assets) 600
Cr cash 600
Oct 31 Insurance expired for 1 month
Dr insurance expense 600/12 = 50
Cr prepaid insurance 50
Nov 30, dec 31…

Depreciation applied for fixed asset (ppe) which is buiding, equipment, machine,
vehicle…
Intangible assets – amortization
Example: 1/1/2020 u bought an iphone 12 for 30M you expense to use for 3 years.
Straight line method of depreciation, you record your iphone depreciated 10M/year
Actual value (market value) of used iphone 12 in market at Dec 31 2020 is 15M
Book value Dec 31 2020 is 20M

Historical cost when purchase: include all expenditure to acquire the assets and make
it ready for intended use
Management estimates:
(1) Salvage values = residual value
(2) Useful lives

Formula:
Depreciable cost = historical cost – salvage value
Annual depreciation expense = depreciable cost/useful lives
Monthly depreciation expense = annual depreciation expense/12 months
Date of purchase is Jan 10th
 not necessary to calculate for daily depreciation expense  round up the first
month and omit the last month pf depreciation  material (qualities characteristics)
depends on the size
P3.2:
3) Dr Depreciation
Cr Accumulated Depreciation – Building
Cr Accumulated Depreciation – Equipment
P3.3:
c) $100 = $10k . 12% . time

Temporary accounts = income statement

Permanent accounts = Balance sheet

Slide 10:
1) Dr AR 1000, Cr Service revenue 1000
2) Incur salaries and wages expense but not yet paid
Dr expenses 600, Cr payable 600
RE can have either debit or credit balance
RE debit  negative number in balance sheet
RE credit  positive…
Ch05:
Merchandising: buy goods and resale for profits without production
Service: provide service for profits (food and beverage, hotel, transportation)
Manufacturing: buy raw materials, produce, get finished goods and sale the finished
goods
Sales revenues = Sale price - Cost of goods sold = purchase price = gross profit
Flow of costs = beginnign inventory + cost of goods purchased = cost of goods
available for sale – cost of goods sold = ending inventory
Ledger of inventory
Dr Inventory Cr
OB: Beginning
Purchase Cost of goods sold
CB: Ending
Journal entry when purchase inventory
Dr inventory, Cr Cash or AP
When inventory is sold
Dr
Perpertual system: Everytime making purchase and sale inventory, record in the book
Purchase inventory: purchase price in the bill
Sale inventory: sale price in the bill (sales revenues)  determine cost of goods sold
every time make sale  determine inventory on hand at any point of time
Formula: Beginning inventory + purchase – COGS = Ending inventory
Periodic system: Only record when purchase inventory, not record when sale inventory
(only record sales revenues)  not record COGS
Ending inventory is determined by physical count
Beginning inventory + Purchases – Ending inventory = Cost of goods sold
Disad of perpetual: Accountants have more work to do
L02:
Value added tax (VAT)
Company A  Company B  Customer C
Sale $100 Sale $150
VAT 10% VAT 10%
Government receive $15 VAT total. Customers C is the tax payer
Customer C pays company B 15$ VAT and company B remit the tax to the
government
Company B pays company A $10 VAT
 Company B remits $5 to the government
 Company B makes $50 profit
 Tax is levied on the value added of product in the supply chain
Journal entry for company B
Purchase goods for 100, VAT 10%
Dr Inventory 100, Dr VAT 10, Cr Cash/AP 110
Sale goods to customer C for 150, VAT 10%
Dr cash/AR 165, Cr sales revenues 150, Cr VAT 15
Sales tax (USA)
Company A  Company B  Customer C
Sale $100 Sale $150
No sale tax sale tax 9%
Journal entry for com B
Purchase
Dr inventory 100, Cr cash/AP 100
Sale
Dr cash/AR 163,5
Cr sales revenue 150, cr sales tax 13,5
Remit tax to the state …
No tax for invenory and revenues

Freight in: add to inventory historical cost

Freight out: delivery expense or shipping expense (operating expense)

Discounts only apply for the amount paid

Date of discounts
Date of purchase is Jan 1st
Last day of

Apr 5: FOB shipping point: who owns the goods? Harwick

Dr inventory 23k, Cr AP 23k
Apr 6:
Dr inventory 1000, Cr cash 1000
Apr 8
Dr AP 3000, Cr inventory 3000
How much Harwik has to pay to Botham? 20k
Apr 10 discount 2% of amount paid $15k
Dr AP 15k
Cr cash 98%x 15k
Cr inventory 2%x15k
The remaining amount due to Botham is 5k
Apr 20 No discount
Dr AP 5k, Cr Cash 5k
Sales return and allowance account = contra revenue: Debit if increase and credit if
decrease, total on debit  close … account to income summary  zero balance

March 12 Dr AR 800, Cr Sales revenue 800

FOB shipping point: Hudson paid 1000 for shipping
Dr cogs 500, Cr inventory 500
March 15 Dr sales return and allowance 80, cr AR 80
Dr inventory 50, cr cogs 50
March 21 discount 1%
Dr cash 99%x500, Dr sales discount 1%x500
Cr AR 500
March 23 no discount
The remaining amount due to Kimmy is 220 (credit balance of AR)
Dr cash 220, Cr Ar 220
Ch06:
Merchandise Inventory = goods (hang hoa)
Perpetual System: Keep track of inventory when purchase and sale. At the point of
sale, determine the COGS.
At the end of the accounting period, calculate ending inventory (in the accounting
book) = begin inventory + purchase – COGS
At the end of the accounting period, do physical count of actual inventory on hand 
make sure inventory in the accounting book = inventory on hand (adjusting entry
involves inventory and COGS)
Periodic system:

36:
Initially at the date of purchase, inventory is recorded at historical cost (follow
historical cost principle)
At the date of financial statement, company evaluate inventory. If the value of
inventory < its cost:
Inventory: high tech or fashion easily to drop down in value
Companies must “write down” inventory to its net realizable value (NRV: gia tri thuan
co the thuc hien duoc)  follow conservatism/prudence principle (Nguyen tac than
trong) (companies do not overstate assets and revenue, and do not understate expense
and liability; do not understate expense  do not understate inventory loss)
Net realizable value (NRV): Amount that company expects to realize (receive from the
sale of inventory)
NVR=Estimate selling price – cost to sale
Lower cost or market (LCM)
NT$155,800 = ending inventory
Ending inventory at cost = 162500
Journal entry: reduce ending inventory at cost to be ending inventory at LCM
Dr inventory loss/COGS (expense), Cr inventory/aloowance for reduce inventory
(contra asset) 6700

Average inventory = (begin inventory + end inventory)/2

Inventory turnover – the higher the better
For management, calculate inventory turnover for each kind of inventory  liquidity
for each kind of inventory  know which inventory is sold faster than others
Days in inventory – the lower the better
Ch14:
Financial statements
- Multiple step income statement: Revenue – Expense = profit/Loss
- Classified balance sheet: Assets = Equity + Liabilities
- Statement of cash flows:
Cash inflows – Cash outflows = Net change in cash
Cash at the begin + Net change in cash = Cash at the end = Cash item (under
assets in the balance sheet)
Importance of cash:
- Entity’s ability to generate future cash flows: Investor can predict about the
amount, time and the risk of future cash flows better than they only have
income statement
- Entity’s ability to pay dividends and meet obligations: Company must use cash
to pay cash dividend and to pay off liabilities. Investor or shareholder and
creditors are particularly interest in company’s cash flows
- Reasons for difference between net income and net cash provided (used) by
operating activities: Net income (income statement) is prepared under accrural
basis accounting. Income statement includes non cash revenue and non cash
expense. Net income is different from net change in cash by operating
activities. Net income is less reliable than net change in cash by operating
activities.
For example: If company sales on account, an uncertainty increase due to the
ability to collect cash from customer in the case that customer goes bankrupt,
run away or dead…
- Cash investing and financing transactions during the period
Investing activities: invest in PPE, long term investment (other company’s nond
and stock)
 Financing activities: How does the company finance the assets? Refer to the
capital: equity and long term liabilities
Does the company invest more to spread out the business? Or does the
company sell off assets to minimize the business? Where does the capital come
from?
Slide 12:
Net increase (decrease) in cash (1+2+3)
Cash at the beginning of period: from the balance sheet at the beginning day of period
Cash at the end of period: from the balance sheet at the last day of period

Which cash flows activities affected in the transaction?

1. Company buys inventory for 500$ by cash – Operating
2. Company buys an equipment for 5000$ on account – Non cash
3. Company declares cash dividends for shareholder for $10000 – Non cash
(declare – not yet paid)
Dr cash dividend, Cr dividend payable

c) investing
d) financing
e) operating – revenues, expenses
f) non cash
g) Receipt – receive by cash, payment – paid by cash: operating
h) operating
i) non cash
j) financing

Operating activities: direct or indirect method

Investing, financing activities: direct method
Direct method: use the Ledger of cash (t account of cash), debit cash means cash
inflows, credit cash means cash outflows
Indirect method: use income statement and balance sheet. Adjust net income to net
change in cahs by operating activities
Net income = Revenue – Expense
Net income = Cash revenue + Non cash revenue – cash expense – non cash expense
Remove non cash item from net income