CHAPTER 3: ACCOUNTS AND

DOUBLE ENTRY ACCOUNTING

Learning Objectives
 Identify and explain the elements of accounts.
 Describe the structure of asset, liability, equity, revenue, expenses accounts,
and a few special accounts;
 Identify the effect of debits and credit on each
 Describe Vietnam chart of accounts under the Vietnamese Accounting
Standard (VAS)
 Explain the concept and rules of double-entry bookkeeping
 Record business transactions in the accounts
Accounting Accounts

Accounting accounts shall be used to classify and systemize

economic and financial transactions in accordance with their
economic contents” (Law on Accounting, 2015).
An account is used to record the increase and decrease in each type
of asset, liability, equity, revenue, and expense.
An account illustrates the state of only one specific accounting
element item!!!
Accounting Accounts
Owner’s equity
Asset accounts Liability accounts Revenue accounts Expense accounts
accounts
• Cash account • Trade payables • Owner’s equity • Revenues account • COGS account
• Trade receivable account account • Financial income • Financial expense
account • Tax and other • Undistributed account account
• Merchandise payables account profit after tax • Revenue • Selling expenses
inventory account • Borrowings and account deductions account
• Raw materials finance lease account • General
account liabilities • …… administration
• Finished goods • Accrued Expense expenses account
account • …… • ………
• Tangible fixed
assets account
• Intangible fixed
assets account
• Depreciation
account
• Prepaid expense
account
• ……..
Elements of Accounting Accounts
Account name
Account code
Two sides of account
Account balance at the beginning
of period (Beginning balance -
SDDK)
Fluctuates (SPS)
Account balance at the end of
period (Ending balance - SDCK)
• Indicate a specific accounting item observed in the account
• Each separate account has a code to record and solve information
simply. VD: Cash on hand account - 111, Cash in banks account –
112,…
• Left-hand side is Debit side
• Right-hand side is Credit side
• Indicate the remainings of accounting item at the beginning of period,
which is the account balance at the end of previous period.
• Indicate the increases and decreases of accounting item recorded in
the account during the period:
• Increases: is normally recorded on the same side of the
beginning balance
• Decreases: is normally recorded on the other side of the
beginning balance
• Indicate the remainings of accounting item at the end of period. It is
determined by adding and subtracting the increases and decreases
in an account.
Ending balance = Beginning balance + Total increases – Total
decreases
 Account name
T- Account Debit means Debit
Account code
Credit
Credit means
Left Right

 T-Account  used in studying and teaching

 Debit is on the left side and Credit is on the right side
 Debit means only “place an amount of the left side of an account”, Credit means
only “place an amount on the right side of an account”.
 Each side records the changes in assets, liabilities, equity, revenue, and expense
following identified conventions.
 This order is always true for all accounting accounts  assets, liabilities, equity,
revenue, and expense
Accounting Accounts
In practice, each T-account means a ledger (accounting books)
SỔ CÁI
( dùng cho hình thức kế toán Nhật ký chung)
Năm:……
Tên tài khoản: Tiền mặt
Số hiệu: 111
Đơn vị tính: VNĐ
Ngày tháng ghi Chứng từ NKC Số hiệu TK đối Số tiền
Diễn giải
sổ Số hiệu Ngày tháng Trang số STT dòng ứng Nợ Có
A B C D E G H 1 2
- Số dư đầu tháng 100.000

Thu tiền bán hàng hóa 50.000

Chi tiền mặt mua hàng hóa 20.000

- Số phát sinh trong tháng 50.000 20.000

- Số dư cuối tháng 130.000
Accounting Accounts
ASSETS

Accounting
Accounts Liablities
CLAIMS
Accounting Owner’s equity
Elements
Expenses
Business process
Revenue and income
Structure of Assets and Claim Accounts
Debit ASSET Accounts Credit Debit CLAIM Accounts Credit
SDDK: SDDK:

Increases Decreases Decreases Increases

Total increases Total decreases Total decreases Total increases

SDCK: SDCK:
Opening Balance/ Closing Balance

SDCK = SDDK + Total increases – Total decreases

ASSETS increase on DEBIT, CLAIMS increase on CREDIT

Structure of Revenue and Expense Accounts
Debit EXPENSE Accounts Credit Debit REVENUE Accounts Credit

Increases Decreases Decreases Increases

CONTRAST OF OWNER’S JUST LIKE OWNER’S

EQUITY ACCOUNTS AND EQUITY ACCOUNTS BUT
WITHOUT BALANCE WITHOUT BALANCE

EXPENSES increase on DEBIT, REVENUES increase on CREDIT

STRUCTURE RULES

• Expenses, and Dividends cause equity to decrease.

Decreases in equity are always recorded as debits so as
expenses and dividends are realized, they are debited.
• Revenues cause equity to increase, so increases in
these account types are recorded as credits.
Permanent Accounts vs Temporary Accounts
PERMANENT ACCOUNTS
(Real Accounts)
 Reveal the current value of
accounting elements.
 Include balance sheet accounts, such
as assets, liabilities, and owner’s
equity.
 Transfer balances to the next period.
These accounts will not be set
back to zero at the beginning of the
next period; they will keep their
previous closing balances.
 Contain the results of all transactions
since the business started.
Opening/Closing Balance
TEMPORARY ACCOUNTS
(Nominal Accounts)
 Accumulate information for a
specific accounting period.
 Keep their balances during the
current accounting period and are set
back to zero when the period ends 
All net changes are transferred to
different accounts
 All accounts not on the balance sheet
 establish all key indicators in
Income Statements.
 Revenues (including contra-
revenues)
 Expenses
NO Opening/Closing Balance
 Example
 On 01/01/20X1, company A has an amount of cash on hand $10.000, borrowings and finance lease liabilities
$50.000. During the month of January, there are several business transactions related to cash on hand;
borrowings and finance lease liabilities as follows:
 Jan. 2 – collected cash for selling goods $1.500
 Jan. 5 – purchased raw materials, paying by cash $1.800
 Jan. 8 – borrowed $10.000 cash from the bank
 Jan. 15 – paid the bill for electricity used $1.200 by cash
 Jan. 18 – borrowed $5.000 from bank to pay employee salaries
 Jan. 21 – received $2.000 cash for service work done
 Jan. 25 - repaid the bank loan $2.000 by cash
 Required:
 Create a separate T-account for cash on hand; borrowings and finance lease liabilities account.
 Record the various transactions debits and credits into Acc. Cash on hand & Acc. Borrowings and finance lease liabilities.
 3. Calculate and record the ending balance for each Acc. Cash on hand & Acc. Borrowings and finance lease liabilities
Special Structure Accounts
Debit- Credit balance accounts

Special
structured Asset-adjusting accounts
Accounts Adjusting accounts
Equity-adjusting accounts
Not following
the previous rules Cost-distributed accounts
Work-in-process accounts
Processing accounts
Revenue deduction account
Income summary account
Debit-Credit Balance Accounts
Acc. Payables
Debit Acc. Receivables Debit Credit
Credit
Balance: Amount of Balance: Amount of
Balance: Amount of Balance: Amount of
prepayments to sellers at the payables at the beginning of
receivables at the deferred revenues at
beginning of period period
beginning of period beginning of period
- Receivables increase - Receivables decrease
- Payables decrease in period - Payables increase in
in period in period
period
- Deferred revenues - Deferred revenues
decrease in period increase in period - Prepayments to sellers - Prepayments to sellers
(when delivering (when receiving the increase in period (when decrease in period (when
goods/completing advanced payment paying to sellers before receiving goods/services in
services for customers from customer) receiving goods/services) accordance with the
in accordance with the prepayments)
advanced payment)
Balance: Amount of Balance: Amount of
Balance: Amount of Balance: Amount of
prepayments to sellers at the payables at the end of period
receivables at the end deferred revenues at
end of period
of period end of period
Debit-Credit Balance Accounts

Acc Receivables and Acc Payables:

Monitoring based on specific customers or suppliers  each
customers/suppliers has both receivables and payables
Owning both detailed balance and closing balance
Debit closing balance of Receivables  Assets; Credit closing balance of
Receivables  Liabilities
Debit closing balance of Payables  Assets; Credit closing balance of
Payables  Liabilities
 Adjusting Accounts

Be used in addition to one or several basic asset and owner’s equity accounts,
with the purpose to adjust the value of some special assets or equities
to ensure the reliability of accounting information

Asset-adjusting accounts
========================
- Make reduction
- Inversed to the adjusted
account structure.
========================
• Acc. Depreciation (Acc. 214)
• Acc. Allowances for impairment
of assets (Acc. 229)
Equity-adjusting accounts
========================
- Making reduction or increase
- Inversed to the adjusted account structure
if making reduction
- Same as the adjusted account structure
if making increase
========================
• Acc. Undistributed profit after tax (Acc. 421)
• Acc. Revaluation differences on asset (Acc. 412)
• Acc. Foreign exchange differences (Acc. 413)
  Calculate
the carrying

Adjusting Accounts amounts of

fixed assets.
Dr. Acc. Fixed assets Cr. Dr. Acc. Depreciation Cr.

Balance: Balance: Beginning-

period value of
depreciation

Increases Decreases
Decreases Increases
Balance: Balance: End-period
value of depreciation
of fixed assets

Net book value of Fixed assets at costs

= - Depreciation
fixed assets (Original/historical cost)
  Calculate
the net

Adjusting Accounts
realizable
value of
inventories

Dr. Acc. Inventories Cr. Dr. Acc. Allowances Cr.

Balance: Balance: Beginning

allowance for
impairment of assets.

Decreases: Increases: Creating

Increases Decreases Reverting negative allowances for
difference between impairment of assets
the allowance of in the period
Balance: this period and the Balance: Ending
unused allowance allowance for
of previous period; impairment of assets.

Net reliazable value Allowance against devaluation

= Historical costs of inventories -
of inventories of inventories
Adjusting Accounts
Acc. Owner’s equity Acc. Unallocated post-tax profit
Dr. Cr. Dr. (Acc. 421) Cr.
(Acc. 411)

Balance: Beginning
owner’s equity

Loss Profit
Increases
Decreases

Balance: Ending Balance: Ending loss Balance: Ending profit

owner’s equity
Distributed-cost Accounts
LIABILITY
ASSET

Debit Acc. Prepaid expenses Credit Debit Acc. Accrued expense Credit
(Acc. 242) (Acc. 335)
Balance: Beginning- Balance: Beginning-
period prepaid period accrued
expenses expenses
Increases: Decreases: Decreases: Increases:
Gathering all actual Distributing planned Actual accrued Recording planned
prepaid expenses prepaid expenses in expenses incurred in accrued expenses in
incur in the period period the period (paid in the period (even
cash) though not yet paid
in cash)

Balance: End-period
Balance: End-period
remaining prepaid
remaining accrued
expenses
expenses
Work-in-process Account
Acc. Work-in-process account (Acc. 154)
– an asset account used to report inventory items not yet completed; a component of inventory asset
account on balance sheet.
It refers to the raw materials, labor, and overhead costs incurred for products that are at various stages
of the production process. These costs are subsequently transferred to the finished goods account and
eventually to the cost of sales.

Acc. Work-in-process (WIP)

Balance: Beginning-period WIP

Increases: Gathering all Decreases: Finished goods
manufacturing costs occur in
period
Balance: End-period WIP
Revenue Deduction Account
Acc. Sales discount (5211)
– refers to a sale price reduction a seller offered a customer in exchange for purchasing large amounts.
Acc. Sales allowances (5212)
- refers to a sale price reduction a seller grants to a customer due to a problem with the sold product or service
such as a quality problem, a short shipment, or an incorrect price.
Acc. Sales returns (5213)
- Refers to reduction in the actual sales which occurs when a customer, for whatever reason, return the bought
products for a cash refund or a credit to his/her account.

Acc. Revenue deduction

Increases: Gathering revenue Decrease: Transfering revenue
deductions (sales discount, sales deductions to revenues accounts to
allowance, sales returns) in period determine net revenues in period
Income Summary
Acc. Income summary
(Acc. 911)

Transferred expenses to determine Transferred net revenues to

business financial performance determine business financial
(profit/loss) performance (profit/loss)

Transferred profit Transferred loss

(when total (when total
revenues > total revenues < total
expenses) expenses)
 Chart of Accounts

CHART OF ACCOUNTS (COA)

“A chart of accounts [system of book-keeping accounts] shall include all accounting accounts which are
required to be used… ” (Law on accounting, 2015)

- It is the pool of all accounts in the CATERGORIES OF COA

General Ledger that company uses
in accounting system. Balance sheet Accounts: Income Statement
- A basis Chart of Accounts includes Asset , Liabilities and Accounts: Revenue and
records of Assets, Liabilities, Owner’s Equity Accounts
Equity, Revenue, and Expenses Expense Accounts

Important points to be considered

- Each account has a specific name, a brief description, and identification codes (numeric).
- The balance sheet accounts are listed first, followed by the accounts in the income statement.
- Each general ledger account has a 3-digit-number code (known as sub-1), and they can be broken down further into
various subcategories (sub-2, sub-3,…).
- Usually, company sets a range for particular account type , basing on the general ledger account (sub-1 account).
Chart of Accounts
Roles of COA:
It serves as the foundation for the company’s record keeping system,
determining how a company’s accounting information is collected,
categorized, and stored for reporting purposes.
It provides a way to categorize all of the financial transactions that a
company conducted during a specific accounting period. Therefore, COA
makes it easy to prepare information for evaluating the financial
performance of the company at any given time.
It makes clear the accounting practices that a company follows
It makes it easier to follow financial reporting standards.
Chart of Accounts under Vietnamese Accounting Law

According to Article 22-23, Section 2, Law on Accounting

(2015):
Ministry of Finance (MOF) regulates in detail accounting accounts
and charts of accounts for all types of accounting entities regulated;
Accounting entities shall, based on the charts of accounts regulated
by the MOF, select one such chart for financial accounting purposes;
Accounting entities may sub-divide [itemize] their selected chart of
accounts in order to service their managerial requirements
 Chart of Accounts

Type1,2 Type Asset accounts

Type 3 Type Liability accounts Balance Sheet accounts

Type 4 Type Owner’s equity accounts

Type 5 Type Revenue accounts Revenue accounts

Type 7 Type Other income accounts
Type Cost of production and
Income
Type 6 Statement
business accounts Expenses accounts
Type 8 Type Other expenses accounts Accounts
Type 9 Type Income summary account
Chart of Accounts
Account Type Account Code
Assets 1XX (111-171) & 2XX (211-244)
Liabilities 3XX (331-357)
Owner’s equity 4XX (411-466)
Revenue 5XX (511-521)
Cost/Expenses of production and business 6XX (611-642)
Other income 7XX (711)
Other expenses 8XX (811)
Income summary 9XX (911)
Double Entry Bookkeeping
 Double Entry Bookkeeping:
 Each transaction is recorded in at least two accounts where the total debits ALWAYS
equal the total credits.
 The total amounts recorded as debits must be equal to the amounts recorded as credit
 For example: On 1.1.2021, Edward commenced business with £10,000 in cash.
Accounting object Account Debit Credit
Cash on hand Cash on hand (111) 10.000
Capital Owner’s equity (411) 10.000

Edward’s books of account

Acc. Cash on Acc. Owner’s equity Credit
Debit Credit Debit
hand
(1) 10,000 10,000 (1)

double – entry bookkeeping

Double Entry Bookkeeping

4 types of
dual- effect
transaction Double entry
bookkeeping is
to make a
debit entry on
one account
and a credit
entry to
another with
Structure of the same
Asset amounts
accounts and
Claim
accounts
Double Entry Bookkeeping
Double Entry Bookkeeping

Claims
(Ownership)

Expenses
Double Entry Bookkeeping

Steps to analyze a transaction:

What account affected? What type of accounts are?  Assets,
Liabilities, Equity, Revenues, Expenses.
Is that an Increase or Decrease? ==> identifying for each account.
What side of the account should it be recorded? (DR/CR?)
How much is recorded?  the total amounts recorded as debits is
equal to the total amounts recorded in credits
Double Entry Bookkeeping
Required: Post the following transactions to the appropriate accounts:

Jan. 1 – Big Dog Carworks Corp. issued 1,000 shares to Bob Baldwin, a shareholder, for a total of $10,000 cash.
Jan. 2 – Borrowed $3,000 from the bank.
Jan. 3 – Equipment is purchased for $3,000 cash.
Jan. 3 – A truck was purchased for $8,000; Big Dog paid $3,000 cash and incurred a $5,000 bank loan for the balance.
Jan. 5 – Big Dog Carworks Corp. paid $2,400 cash for a one-year insurance policy, effective January 1.
Jan. 10 – The corporation paid $2,000 cash to reduce the bank loan.
Jan. 15 – The corporation received an advance payment of $400 for repair services to be performed as follows: $300 in February
and $100 in March.
Jan. 31 – A total of $10,000 of automotive repair services is performed for a customer who paid $8,000 cash. The remaining
$2,000 will be paid in 30 days.
Jan. 31 – Operating expenses of $7,100 were paid in cash: Rent expense, $1,600; salaries expense, $3,500; and supplies expense
of $2,000. $700 for truck operating expenses (e.g., oil, gas) were incurred on credit.
Jan. 31 – Dividends of $200 were paid in cash to the only shareholder, Bob Baldwin.
Account Entry Accounting entry is a process of analyzing
a transaction to determine which debit accounts
and credit accounts it affect to, and the amounts of
money should be entered in a journal.

Simple entry Compound entry

 Entries with one debit and one  Entries require more than one debit
credit and/or one credit

Example: Jan. 1 – Big Dog Carworks Corp. Example: A truck was purchased for $8,000; Big
issued 1,000 shares to Bob Baldwin, a Dog paid $3,000 cash and incurred a $5,000 bank
shareholder, for a total of $10,000 cash. loan for the balance.
Dr. Acc. Cash on hand $10,000 Dr. Acc. Truck $8,000
Cr. Acc. Capital $10,000 Cr. Acc. Cash on hand $3,000
Cr. Acc. Bank loan $5,000
RECORDING TRANSACTION AND DOUBLE-ENTRY
BOOKKEEPING

Other terms:
Entering the transactions in a journal is called journalizing
nevertheless they are simple or complex accounting entries.
The process of coping the debits and credits from the journal to the
ledger is known as posting. All amounts entered in the journal must
be posted to the general ledger accounts.
RECORDING TRANSACTION AND DOUBLE-ENTRY
BOOKKEEPING
VTC has the following transactions:
1. VTC purchased goods for $500 paid in cash
2. VTC received goods which have been sold for $400 in cash from customers

Which of the following double entries are correct to record these transactions?

A. Dr. Cash $500 B. Dr. Sale returns $400

Cr. Purchase $500 Cr. Cash $400
C. Dr. Sales £500 D. Dr. Cash $ 400
Cr. Receivables $ 500 Cr. Sale returns $ 400
QUESTIONS???