CHAPTER 1

Q1.
Choose the best answer for these following questions:
1.What statement(s) do external and internal users of accounting information rely
on?
a. Income Statement
b. Statement of Retained Earnings
c. Balance Sheet
d. Statement of Cash Flows
e. All answers are correct.
2.Which of the following is an example of external users of accounting
information?
a. Directors
b. Managers
c. Owners
d. Employees
e. Analysts
3. Sara is the Chief Financial Officer for InfoTech Inc. Murray is the Chief
Lending Officer at the Bank where InfoTech has a large bank loan. Which
statement is true for both Sara and Murray, in connection with the accounting
information for InfoTech?
a. Both are external users.
b. Sara is an internal user and Murray is an external user.
c. Both are internal users.
d. Murray is an internal user and Sara is an external user.
4. What is the first step in the accounting cycle?
a) Recording the transaction
b) Preparation of financial statement

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c) Identification of information
d) Analysis and Interpretation of Information
5. What is the final step of the accounting cycle?
a) Recording the transaction
b) Preparation of financial statements
c) Communication of information
d) Analysis and interpretation of information
6. Book keeping is mainly concerned will:
a. Recording financial data reality to business
b. Designing for systems recording classifying & summarizing records data
c. Interpreting data for internal & external users
d. All of above
7. The pioneer of accounting is:
a. Arthor field house
b. Gitman
c. William pickles
d. Lucas pacioli
8. Which of following will not be recorded in the book of Account?
a) Sales of goods
b) Payment of salary
c) Quality of staff
d) Purchases of goods
9. Modern system of book keeping is
a) Single entry systems
b) Double entry system
c) British system
d) None of these

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10. Accounting records of a business enterprises is required by
a) Management of the business
b) Outsiders
c) All of above
d) None of these

Q2
Identify which events of these are economic events:
1/Jan/N Purchased goods: Total purchase price was $1000, paid the
supplier $800 by cash in bank.
5/Jan/N Interviewed three persons for the position of Chief Accountant
9/Jan/N Purchased equipment on account (to be paid in 30 days) for a total
cost of $4,800.
11/Jan/N Paid monthly salary for employees: $350
15/Jan/N Entered the Top 10 "high-quality consumer goods"
19/Jan/N Received a bill for $250 from the Daily News for advertising on
its online website but postpones payment until a later date
31/Jan/N Decided to increase the planned profit from $35,000 to $40,000

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Q3
Corinne Dunbar, M.D., maintains the accounting records of Dunbar Clinic on a
cash basis. During 2019, Dr. Dunbar collected $142,600 from her patients and paid
$60,470 in expenses. At January 1, 2019 and December 31, 2019, she had accounts
receivable, accrued expenses as follows (all long-lived assets are rented).
January 1, 2019 December 31, 2019
Accounts receivable $11,250 $15,927
( Các khoản phải thu )
Accrued expenses: Chi $3,435 $2,108
phí chờ thanh toán
Required:
Determine net income of Dunbar Clinic on an accrual basis for year 2019.

Q4: True or false

1.Users of financial statements are assumed to have no knowledge of business and
financial accounting matters by financial statement preparers.
2.Relevance and faithful representation are the two fundamental qualities that
make accounting information useful for decision making.
3.The idea of consistency does not mean that companies cannot switch from one
accounting method to another.
4.Timeliness and neutrality are two ingredients of relevance.
5.Verifiability and predictive value are two ingredients of faithful representation.
6.The historical cost principle would be of limited usefulness if not for the going
concern assumption.
7.The economic entity concept means that economic activity can be identified with
a particular legal entity.
8.Materiality is one of the basic assumptions of accounting
9.Timeliness is one of the basic assumptions of accounting.

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10. Revenues are recognized in the accounting period in which the performance
obligation is satisfied.
11.Companies consider only quantitative factors in determining whether an item is
material.
12.Companies must consider both quantitative and qualitative factors in
determining whether an item is material.

Q5
Situation 1: On 1/1/N, enterprise A purchased company B’s shares of $100, other
purchase cost: $2. On 31/12/N, the share’s market value was $110.
Required: How did A record the above investment on Financial Statements at
the year ended 31/12/N if:
A. Historical cost principle is applied
B. Market value principle is applied
C. “Lower of cost and market principle” is applied
Situation 2: On 15/3/N+1, enterprise A, in Situation 1, sold all company B’s
shares to the Chairman of Board of Directors of company B for $120, paid by cash
on hand, selling expense: $2.5
Required: Should company B record the above transaction? State the reason
for your answer.

Q6
Situation 1: On 20/12/N, company X sold goods to company Y for 150 million
VND. 50% of the amount was paid immediately by cash in bank. Company Y
agreed to pay the remaining amount on 10/1/N+1.
Required: Determine revenue of X for the year N and N + 1, if:
A. Cash accounting principle is applied
B. Accrual accounting principle is applied

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Situation 2: Continue with the event in Situation 1. Assume that in year N,
company X applied the accrual basis in revenue recognition.
Required: Applying the requirement for the comparability of accounting
information:
A. Determine applicable accounting principles to the year N+1 to ensure the
comparability;
B. Solve the above situation for the year N+1 in case that company X applied a
different accounting principle in recognition of revenue compared to the year N.

Q7
At Trading Company A, in December of the year N, the situation is as follows:
1. Purchased goods: Total purchase price was 100 million VND, paid the supplier
80 million VND by cash in bank. The remaining amount is to be paid in the
following period.
2. Calculated amount of monthly salary payable for employees: 12 million VND.
3. Paid advertising expense for December of the year N by cash on hand, the
amount was 5 million VND.
4. Paid monthly salary for employees by cash on hand, the amount was 10 million
VND.
5. Paid electricity bill by cash on hand, 2 million VND for last month’s unpaid
amount and 4 million VND for this month.
6. Paid this period’s rent by cash in bank: 5 million VND
7. Purchased minor equipment used for this month’s sales activities. The price
was 1 million VND; the amount is not yet paid for the suppliers.
8. Sold all purchased goods in (1): Total selling price was 140 million VND.
Buyers immediately paid 130 million VND by cash in bank. The remaining
amount is to be paid in the following period.
Required: Determine the income, expenses, and results that Company A
recognized for December of N if:

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A. Cash basis is applied
B. Accrual basis is applied

Q8
a/ In Jan/N, company CT incurred the following transactions (monthly accounting
period, currency unit: million VND):
1/ Prepayment to suppliers: 50
2/ Purchased goods: total price of 120, the remaining amount should be paid in
next accounting period
3/ Calculated employee salary payable for January N: 15. Paid in cash: 10
4/ Paid advertising expense for 12 months in N: 120
5/ Sold 2/3 total goods purchased in transaction 2: Total price of 200. Received
cash at bank: 100. The outstanding amount would be received in next month.
Required: Calculate revenue, expenses and net income if the company applied:
a. Cash basis
b. Accrual basis
b/ These following transactions were extracted from A Company’s accounting
records in Dec. of year N (CU: VND million)
1. Purchased goods of 250, paid by cash 210, the remaining amount would be by
next period.
2. Total payable to employees incurred in Dec/N: 41. Salary payments in cash: 35
3. Prepaid for 3-month insurance services cost starting from Dec/N by cash: 30
4. Electricity payments in cash: 36, including 24 for the payables from the previous
period and 12 for current period’s power usage.
5. Renting fee payments for Selling Department by cash in bank: 12
6. All goods purchased from transaction (1) were issued (sold) for cash sales: 320
and credit sales: 40
Required: Determine A Company’s business performance (revenue,
expenses and profit/loss) in Dec/N in some following cases:
(a). Cash basis accounting is applied

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 (b). Accrual basis accounting is applied

Q9
Company C signed contract with Company D: Total value of goods provided by C:
1000 tons, price: 1 millinon/ton. On 20 December 12 N, Co. C sent to customer
500 tons, cost of good sold: 800 thousand dong/ton. On 31 December N, Co. D
received 400 tons goods and commit to make payment within 5 days.
Required: Calculate revenue and expense recorded by Co. C’s accountant in
accordance with matching concept

Q10
Determine amount of revenue recorded if company applied cash basis and accrual
basis accounting principle (Accounting period: N, currency unit: million VND)
Main transaction: Cash Revenue
No Selling goods flow recognized in the
received period (N)
Amount
Delivery Receipt in the Accrual Cash
period period basis basis
period
(N)
1 N-1 100
2 N-1 N 150
3 N+1 300
4 N-1 450
5 N N 500
6 N+1 650
7 N-1 700
8 N+1 N 850
9 N+1 900

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 Total 4600

Q11
Determine amount of expenses recorded if company applied cash basis and accrual
basis accounting principle (Accounting period: N, currency unit: million VND)

Main transaction: Purchase Cash Expense

No goods Amount flow recognized in
out of the period
the
Selling Purchasing Paymen Accrual Cash
period
period period t period basis basis
1 N-1 100
2 N-1 N-1 N 200
3 N+1 300
4 N-1 100
5 N-1 N 200
6 N+1 300
7 N N-1 400
8 N N 500
9 N+1 600
10 N-1 700
11 N+1 N+1 N 800
12 N+1 900
Total 5100

REVIEW CHAPTER 1

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1. Which concept or principle states that the life of a business can be divided into
equal time periods?
2. Which accounting principle/concept allows accountants to ignore other
accounting principle/concept if the amount in question is immaterial?
3. A fixed asset costing $30,000 is depreciated over its estimated useful life of 15
years. Which concept/principle is this action related to?
4. Under the cash basis of accounting, when are revenues reported in the
accounting period?
5. In certain situations, companies might recognize losses but not gains. This
action belongs to which concept/principle?
6. The John Marketing Company provides advertising services to an investment
company in year A but receives advertising fee in year B. The John Marketing
Company recognizes this revenue in year A. This action of John Marketing
Company is justified by which concept/principle?
7. Which accounting concept or principle states that the transactions of a business
must be recorded separately from those of its owners or other businesses?
8. When the accountant has to choose between two acceptable alternatives, the
accountant should select the alternative that will report less profit, less asset
amount, or a greater liability amount. This is based upon which principle/concept?
9. A corporation pays its annual property tax bill of approximately $12,000 in one
payment each December 28. During the year, the corporation's monthly income
statements report Property Tax Expense of $1,000. This is an example of which
accounting principle/guideline?
10. A company sold merchandise of $8,000 to a customer in December. The
company's sales terms require the customer to pay the company in 30 days. The
company's income statement reported the sale in December. This is proper under
which accounting principle/concept?
11. A large company purchases a $250 digital camera and expenses it immediately
instead of recording it as an asset and depreciating it over its useful life. This
practice may be acceptable because of which principle/guideline?
12. The personal assets of the owner of a company will not appear on the
company's balance sheet because of which principle/guideline?

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13. Which principle/concept requires a company's balance sheet to report its land
at the amount the company paid to acquire the land, even if the land could be sold
today at a significantly higher amount?
14. Which principle/concept is associated with the assumption that the company
will continue on long enough to carry out its objectives and commitments?
15. Accountants might recognize losses but not gains in certain situations. For
example, the company might write-down the cost of inventory, but will not write-
up the cost of inventory. Which principle/concept is associated with this action?
16. Which principle/concept directs a company to show all the expenses related to
its revenues of a specified period even if the expenses were not paid in that period?
17. Accounting acts as a bridge between _____ transactions and users of the
accounting information
a. long-term b. petty c. daily
18. _____ are internal users.
a. investors b. customers c. employees
19. _____ are external users.
a. employees b. legal bodies c. partners
20. The branch of accounting dealing with internal users is called financial
accounting? True or False

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