CHAPTER 3: THE INCOME STATEMENT AND STATEMENT OF CASH FLOWS

1. INCOME STATEMENT
1.1. CONCEPTS
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1.2. ELEMENTS (BY VAS 01)

- Income:
o Increases in economic benefits during the accounting period in the form of
inflows or enhancements of assets or decreases of liabilities that result in
increases in equity, other than those relating to contributions from equity
participants.
o Includes revenues (income that arises in the course of the ordinary activities of
an entity) and gains
- Expense Decreases in economic benefits during the accounting period in the form
of outflows or depletions of assets or incurrences of liabilities that result in
decreases in equity, other than those relating to distributions to equity participants.
=> COULD BE IN NEGATIVE FORM (--) ON THE INCOME STATEMENT
1.3. STRUCTURE
- The income statement lists revenues first, followed by expenses.
 - Then, the statement shows net income (or net loss).
- When revenues exceed expenses, net income results.
- When expenses exceed revenues, a net loss results.
- The income statement DOES NOT include investment and dividend transactions
between the shareholders and the business in measuring net income.

Notes – Ĩncome Statement has 2 parts:

- Operating Activities include Rev. and Exp. directly related to the principal Rev. –
generating activities of the company.
- Nonoperating Activities include gains and losses and Rev. and Exp. related to
peripheral or incidental activities of the company.
- In the illustration, Exp. are classified by FUCTION (regulated by VAS), not by
NATURE ( as chapter 1 illustration)

Income statement have 2 steps:

- Single- step ( include Rev. & Gains, Exp.& Losses)
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- Multiple- step ( include gross profit, operating Exp., Nonoperating Exp.)

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DEPENDS ON CIRCULAR 200

1 Rev. from sales and service rended 01
 02 seller
Dr 521
Dr 333
Cr 131
Rev. deductions
- trade discount (khấu hao thương mại - số lượng ) buyer
- sales return (hàng bị trả lại- lỗi quá nghiêm trọng) con số này Dr 331
- sales allowance (hàng giảm giá - lỗi nhưng ko quá nghiêm âm là để Cr 152,153,156
2 trọng ) nhấn mạnh Cr 133
3 Net Rev. from sales and service rended (1) -(2) 10
4 COGS 11
5 Gross profit (3) - (4) 20
Financial Income Operating 21 Dr 331
- payment discount (buyer) Activity Cr 515,112
- interest income
- gains on sales of investment ( chưa học)
6 - gain of foreign exchange
Financial Exp. 22 Dr 635
- payment discount ( seller) Dr 112
- interest exp. Cr 131
- loss of investment
- loss foreign exchange ( chưa học)
- sale deduction ( 1/10, n/30) - thanh toán sớm - Depend on
7 Receiveable
in which: Interest Exp. => trình bày 2 lần ( để nhấn mạnh con 23
só này)
Selling Exp. 25
- mặt bằng
8 - advertisement
9 General administration Exp. 26
(5+6)- 30
10 Net operating profit (7+8+9)
Other Income 31
11 -gain/loss on sales of P.P.E
Non- operating
Other Exp. Activities 32
12 - penalty income/ loss
13 Net Other Income/ Exp. (11)-(12) 40
14 Total net profit before tax ( EBT) (10)+ (13) 50
Current corporate income tax Exp. = (14) x thuế suất thuế 51
15 TNDN
16 Deffered corporate income tax Exp. 52
17 Profit after enterprise income tax (EAT) (14-15-16) 60
18 lãi cơ bản trên cổ phiếu 70
19 lãi suy giảm trên cổ phiếu 71

THE STATEMENT OF CASH FLOW- SCF

- Concepts
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- Provides relevant information about a company’ s cash receipts and cash
disbursements.
- Helps investors and credits to assess.
o Future net cash flows
o Liquidity (short-term)
o Long-term solvency ( Tính thanh khoản)
- Required for each income statement period reported.
- Provides information on the cash receipts and payments for a specific period of
time.
1.4. Structure
The statement of cash flows reports in this order:
- Operating activities
- Investing activities
- Financing activities
- The net increase or decrease in cash during the period. Noncash Investing
+ Activities and Financing
Activities
- The cash amount at the end of the period.
= cash on the SOFP
Cash flows from Operating Activities:
+ Inflows from
- Sales to customers
-Outflows for:
- Purchase of inventory
- Salaries, wages, and other operating Exp.
- Interest on debt
- Income taxes.
 Include 2 method:
o Direct method (cash in- cash out)
o Indirect method (start with Accrual Income on IS and then converts to cash
basic by +/- adjustment)
Some basic items of adjustments:
 Non cash Exp. +
 Non cash Income -
 Receivables increase -
 Payable increase +

- VAS investing activities and financing activities are always direct method:
- Investing Activities
 Inflows from
o Sale of PPE used in the business.
o Sale of investment securities (share and bonds); or collection of nontrade
receivables.
o Interest or dividends received from investments. (real payment)
 Outflows for
o Purchase of PPE assets used in the business.
o Purchase of investment securities (share and bonds) or loans to other entities.
 - Financing Activities
 Inflows from
o Issuing share to owners.
o Borrowing from creditors
 Outflows for
o Owners for the repurchase or reacquisition of shares previous sold.
o Owners in the form of dividends.
o Creditors for the repayment of the principal amounts of debt.

SPECIAL CASE: Noncash Investing and Financing Activities

Significant investing and financing transactions not involving cash also are reported.