Chapter 1: Accounting in Action

LO 1 Identify the activities and users associated

with
accounting.

Who use accounting data:

1. Internal Users
 Finance
 Marketing
 Human Resources
 Management
2.External Users
 Investors
 Creditors (Chủ nợ)

LO 2 Explain the building blocks of accounting:

ethics, principles, and assumptions.
1.Ethics (đạo đức)
  Effective financial reporting depends on sound
ethical behavior
2.Principles
2.1. GAAP

2.2.Standard-setting bodies:
• Financial Accounting Standards Board (FASB)
• Securities and Exchange Commission (SEC)
• International Accounting Standards Board (IASB)

2.3.Measurement Principles:
a) Historical Cost Principle (or cost principle)
• Record assets at their cost.
b) Fair Value Principle
 • Assets and liabilities should be reported at fair value
(nguyên giá) (the price received to sell an asset or settle
a liability)
c) Relevance (thích hợp) and Faithful Representation (sự
trình bày trung thực)
3.Assumptions

Cty Tư Nhân Cty Cổ Phần Cty Tập Đoàn

 LO 3 State the accounting equation, and define its
components.

Assets Liabilities Owner’s Equity

• Resources a • Claims against • Ownership claim
business owns total assets (debts on total assets
• Provide future and obligations) • Referred to as
services or benefits • Creditors (party to residual equity (vốn
• Cash, Supplies, whom money is sở hữu)
Equipment, etc. owed) • Investment by
• Accounts Payable, owners and
Notes Payable, revenues (+)
Salaries and Wages • Drawings and
Payable, etc. expenses (-)

Increases and Decreases in Owner’s Equity

1.Increase in Owner’s Equity
• Investment by Owner: Assets the owner puts into the
business
• Revenues: Increases in assets or decreases in liabilities
resulting from sale of goods or performance of services in
normal course of business
2.Decrease in Owner’s Equity
• Drawings (rút vốn): A withdrawal of cash or other
assets for personal use
• Expenses: Cost of assets consumed or services used in
the process of earning revenue

LO 4 Analyze the effects of business transactions

(giao dịch) on the accounting equation.
LO 5 Describe the four financial statements and
how they are prepared.

• Reports revenues and expenses for a specific

period of time
• Lists revenues first, followed by expenses
Income
• Shows net income (or net loss)
Statement • Does not include investment and withdrawal
transactions between owner and business in
measuring net income
 Owner’s • Reports changes in owner’s equity for a specific
period of time
Equity • Time period is the same as that covered by the
Statement income statement
• Reports assets, liabilities, and owner's equity at a
specific date
• Lists assets at top, followed by liabilities and
owner’s equity
Balance
• Total assets must equal total liabilities and owner's
Sheet equity
• Snapshot of company’s financial condition at a
specific moment in time (usually month-end or
yearend)
• Information on cash receipts and payments for a
Statement specific period of time
• Answers the following:
of Cash o Where did cash come from?
Flows o What was cash used for?
o What was change in cash balance?
 Chapter 2: The Recording Process
LO 1 Describe how accounts, debits, and credits
are
used to record business transactions.
Debit Credit
(vị trí đến) (vị trí nguồn)
(sử dụng vốn) (nguồn vốn)

Double-entry system (ghi sổ kép):

Normal Balances:
 Asset (D+) – Liabilities (C+)
 Owner’s Capital (C+) – Owner’s Drawing (D+)
 Revenues (C+) – Expenses (D+)
LO 2 Indicate how a journal is used in the recording
process.

• Journal (Nhật ký): thông tin theo thứ tự thời gian

• Compound Entries (bút toán kép)

LO 3 Explain how a ledger and posting help in the

recording process.

• Ledger (sổ cái): tập hợp các danh sách tài khoản bên
trong
1. Investment of Cash by Owner
2. Purchase of Office Equipment
3. Receipt of Cash for Future Service

4. Payment of Monthly Rent

5. Payment of Insurance
6. Purchase of Supplies on Credit
7. Receipt of Cash for Services Performed
8. Payment of Salaries
9. Withdrawal of Cash by Owner
Journalizing and Posting Summary
An Example of the General Ledger

LO 4 Prepare a trial balance (bản cân đối tài

chính).
Limitation of a Trial Balance:
Trial balance may balance even when:
1. A transaction is not journalized.
2. A correct journal entry is not posted.
3. A journal entry is posted twice.
4. Incorrect accounts are used in journalizing or posting.
5. Offsetting errors are made in recording the amount
of a transaction.
Errors in a trial balance generally result from:
• Mathematical mistakes,
• Incorrect postings,
• Or simply transcribing data incorrectly.
Dollar Signs
• Do not appear in journals or ledgers
• Typically used only in trial balance and financial
statements
• Shown only for first item in column and for the total of
that column
Underlining
• Single line is placed under column of figures to be
added or subtracted
• Totals are double-underlined

Chapter 3: Adjusting the Accounts

LO 1 Explain the accrual basis of accounting and
the reasons for adjusting entries.

• Accountants divide the economic life of a business into

artificial time periods (Time Period Assumption).
• Monthly and quarterly time periods are called interim
periods (giai đoạn tạm thời)
• Most large companies must prepare both quarterly
and
annual financial statements
• Fiscal Year = Accounting time period that is one year in
length
• Calendar Year = January 1 to December 31
Accrual Accounting Cash-Basis Accounting
(kế toán dồn tích) (kế toán dòng tiền)
• Transactions recorded in the • Revenues recognized when
periods in which the events cash is received
occur • Expenses recognized when
• Companies recognize cash is paid
revenues when they perform • Cash-basis accounting is not
services (rather than when in accordance with generally
they receive cash) accepted accounting
• Expenses are recognized principles (GAAP)
when incurred (rather than
when paid)
• In accordance with
generally accepted
accounting principles (GAAP)

Revenue Recognition Principle: Recognize revenue in the

accounting period in which the performance obligation is
satisfied
Expense Recognition Principle: Companies recognize
expenses in the period in which they make efforts
(consume assets or incur liabilities) to generate revenue.

The Need/Reason for Adjusting Entries:

• Ensure that the revenue recognition and expense
recognition principles are followed.
• Necessary because the trial balance may not contain
up-to-date and complete data.
• Required every time a company prepares financial
statements.
• Will include one income statement account and one
balance sheet account.
LO 2 Prepare adjusting entries for deferrals. (tiền
đến trước)

Deferrals (trì hoãn) are expenses or revenues that are

recognized at a date later than the point when cash was
originally exchanged. There are two types:
2.1. Prepaid expenses (chi phí trả trước)
Payments of expenses that are recorded as an asset to
show the service or benefit the company will receive in
the future. (trả trước tiêu sau)

Cash Payment BEFORE Expense

Recorded

Prepayments often occur in regard to:

• insurance • advertising • equipment
• supplies • rent • buildings
Adjusting Entries for Prepaid Expenses (điều chỉnh tiền
sử dụng tài sản Asset->Expense)
• Expire either with the passage of time or through use
• Adjusting entry:
o Increase (debit) to an expense account
o Decrease (credit) to an asset account

+ Adjustment for Supplies

+ Adjustment for Insurance (S26/Chapter 3)

• Depreciation (khấu hao) is the process of allocating
(phân bổ) the cost of an asset to expense over its useful
life
• Depreciation does not attempt to report the actual
change in the value of the asset
 + Allocation concept (phân bổ), not a valuation
(định giá) concept

Balance Sheet Presentation of Accumulated

Depreciation
• Accumulated Depreciation (khấu hao lũy kế) is a contra
asset account (credit)
• Offsets (bù trừ) related asset account on the balance
sheet
• Book value (giá trị ghi sổ) is the difference between
the cost of any depreciable (có thể khấu hao) asset and
its accumulated depreciation
2.2. Unearned revenues (doanh thu chưa thực hiện)
Receipt of cash that is recorded as a liability because the
service has not been performed. (nhận trước làm sau)

Unearned revenues often occur in regard to:

• Rent • Magazine subscriptions
• Airline tickets • Customer deposits

Adjusting Entries for Unearned Revenues (điều chỉnh

tiền hoàn thành doanh thu đã nợ Un.Rev->Rev)
• Adjusting entry is made to record the revenue for
services performed during the period and to show the
liability that remains at the end of the period
• Adjusting entry:
+ Decrease (debit) to a liability account
+ Increase (credit) to a revenue account
LO 3 Prepare adjusting entries for accruals. (tiền
đến sau)

Accruals (dồn tích) are made to record:

3.1. Accrued Revenues (doanh thu dồn tích)
Revenues for services performed but not yet received in
cash or recorded. (làm trước nhận sau)

Accrued revenues often occur in regard to:

• Rent • Interest • Services

Adjusting Entries for Accrued Revenues (điều chỉnh

dạng tài sản A.Rec->Cash)
• Adjusting entry records the receivable that exists and
records the revenues for services performed.
• Adjusting entry:
+ Increases (debits) an asset account
+ Increases (credits) a revenue account
3.2. Accrued Expenses (chi phí dồn tích)
Expenses incurred but not yet paid in cash or recorded.
(tiêu trước trả sau)
Expense Recorded BEFORE Cash
Payment

Accrued expenses often occur in regard to:

• Rent • Interest • Taxes • Salaries
Adjusting Entries for Accrued Expenses (điều chỉnh
tiền phải trả Lia->Exp)
• Adjusting entry records the obligation and recognizes
the expense.
• Adjusting entry:
+ Increase (debit) an expense account
+ Increase (credit) a liability account
LO 4 Describe the nature and purpose of an
adjusted trial balance.

• Prepared after adjusting entries are journalized and

posted
• Proves equality of debit and credit balances
• Basis for the preparation of financial statements
Adjusted Trial Balance
Income Statement and Owner’s Equity Statement
from the Adj. Trial Balance

Balance Sheet from the Adjusted Trial Balance

Chapter 4: Completing the Accounting Cycle
LO 1 Prepare a worksheet.
• Multiple-column form used in preparing financial
statements
• Not a permanent accounting record
• May be a computerized worksheet
• Prepared using a five step process
• Use of worksheet is optional
Step 1—Trial Balance
Step 2—Enter the Adjustments
Step 3—Enter Adjusted Balances in the Adjusted Trial
Balance Columns
Step 4—Extend Adj. Trial Bal. Amounts to
Appropriate Financial Statement Columns
Step 5—Total the Statement Columns, Compute the
Net Income (or Net Loss), and Complete the
Worksheet
LO 2 Prepare closing entries and a post-closing trial
balance.
Closing entries formally recognize in the ledger the
transfer of:
• Net income (or net loss) to owner’s capital
• Owner’s drawings to owner’s capital
-Produce a zero balance in each temporary account.
-Companies generally journalize and post closing entries
only at end of the annual accounting period.
-Permanent accounts are not closed.
LO 3 Explain the steps in the accounting cycle and
how to prepare correcting entries.
LO 4 Identify the sections of a classified balance
sheet.

Classified Balance Sheet

1. Current Assets (tài sản ngắn hạn)
• Assets that a company expects to convert to cash or
use up within one year or the operating cycle, whichever
is longer
• Operating cycle is the average time that it takes to
+ Purchase inventory,
+ Sell it on account,
+ Collect cash from customers

• Accounts are usually listed in order of liquidity

2. Long-Term Investments (đầu tư dài hạn)
• Investments in stocks (cổ phiếu) and bonds (trái phiếu)
of other companies
• Investments in long-term assets such as land or
buildings that are not currently being used in operating
activities
• Long-term notes receivable

3. Property, Plant, and Equipment

• Long useful lives
• Currently used in operations
• Depreciation - allocating the cost of assets to a number
of years
• Accumulated depreciation - total amount of
depreciation expensed thus far in the asset’s life
• Sometimes called fixed assets or plant assets

4. Intangible Assets (tài sản vô hình)

• Long-lived assets that do not have physical substance

5. Current Liabilities (nợ ngắn hạn)

 • Obligations company is to pay within coming year
or its operating cycle, whichever is longer
• Usually list notes payable first, followed by
accounts payable, other items follow in order of
magnitude (kích cỡ)
• Common examples are accounts payable, salaries
and wages payable, notes payable, interest payable,
income taxes payable current maturities of long-term
obligations
• Liquidity (tính thanh khoản): ability to pay
obligations expected to be due within the next year

6. Long-Term Liabilities (nợ dài hạn)

• Obligations a company expects to pay after one year.

7. Owner’s Equity
• Proprietorship (tư nhân) - one capital account
• Partnership (cổ phần) - capital account for each partner
• Corporation (tập đoàn) - Common Stock and Retained
Earnings
 Chapter 5: Accounting for Merchandising
Operations

LO1: Describe merchandising operations (hoạt động

buôn bán) and inventory systems (hệ thống hàng
tồn kho)
Business Types
Services Co Merchandise Co Manufacture Co
Example -Grab -The Gioi Di Dong -Hoa Phat Group
-Banks -Bach Hoa Xanh -Vinamilk
-Hospital -Vin Group
Inventory No inv/limited -Large inv -New finished goods
-External finished
goods
Sales 1000
COGS 400
Gross profit 600

 Adv expense
 Insur expense
 Rent exp
 Interest exp (không được tính vào operating
expense)
 Salaries exp
 Suppliers expense

CGS (giá vốn hàng bán) = BI + CGP – EI

LO2: Record purchases under a perpetual inventory
system (hệ thống hàng tồn kho liên tục)

Freight Costs

PURCHASE – When Merchandise is Buyer

Purchase Return Purchase Purchase

(trả hàng) Allowance Discount (giảm
(chiết khấu) giá)
Return goods for May choose to keep Seller can grant a
credit if purchase merchandise if seller
 was made on will grant a cash discount to
credit, or for a cash reduction from encourage buyer to
refund if purchase purchase price pay earlier. It show
was for cash credit terms on
ther invoice
Acc.Pay XX Acc.Pay XX Acc.Pay XX
Inv Inv Inv
XX XX XX
Cash XX

LO3: Record sales under a perpetual inventory

system

SALES – When Merchandise is a Seller

Sales Returns Sales Allowances Sales Discount
Refer to inventory Refer to Offered to
that customers reductions in the customers to
return to the selling price of encourage them
seller after a sale inventory sold to pay earlier to the
 customers due date
Sales Returns, Sales Allowances, Sales Discount are
Contra-Revenue Accounts

LO4: Apply the steps in the accounting cycle to a

merchandising company

LO5: Prepare a multiple-step income statement

Multiple-Step Income Statement

 Chapter 6: Inventories
LO 1 Discuss how to classify and determine
inventory.
Merchandising Manufacturing
Company Company
One Classification: Three Classifications:
• Inventory • Raw Materials
• Work in Process
• Finished Goods

Determining Inventory Quantities

•Physical Inventory taken for two reasons:
Perpetual System (hệ thống liên tục)
1. Check accuracy (sự chính xác) of inventory records.
2. Determine amount of inventory lost due to wasted
raw materials, shoplifting, or employee theft.
Periodic System (hệ thống định kỳ)
1. Determine the inventory on hand.
2. Determine the cost of goods sold for the period.
Taking a Physical Inventory
Companies often “take inventory”
• when business is closed or business is slow
• at the end of accounting period
Determining Ownership of Goods
Goods in Transit (quá cảnh)
• Purchased goods not yet received
• Sold goods not yet delivered
• Included in inventory of company that has legal title to
goods
Consigned Goods (hàng ký gửi)
- To hold the goods of other parties and try to sell the
goods for them for a fee, but without taking ownership of
the goods.
- Many car, boat, and antique dealers sell goods on
consignment to keep their inventory costs down and to
avoid the risk of purchasing an item that they will not be
able to sell.
-No recognition for goods in transit and consigned goods
in term of inventory (chỉ ghi nhận khi sở hữu)

LO 2 Apply inventory cost flow methods and

discuss their financial effects.

Inventory is accounted for at cost

• Includes all expenditures necessary to acquire goods
and place them in a condition ready for sale
• Unit costs are applied to quantities to compute total
cost of inventory and cost of goods sold using the
following costing methods:
 Specific identification (thực tế đức danh)
 First-in, first-out (FIFO)
  Last-in, first-out (LIFO)
 Average-cost (bình quân gia quyền)
=> Cost Flow Assumption
• Stock-taking (kiểm kê kho)
Inventory Methods and Financial Effects
1. Specific Identification Method (nhập giá nào bán
giá đó)
Costing method in which items still in inventory are
specifically costed to arrive at the total cost of the ending
inventory.
• Practice is relatively rare (chỉ dành cho công ty nhỏ)
• Most companies make assumptions (cost flow
assumptions) about which units were sold

2. First-In, First-Out (FIFO) (nhập trước xuất

trước)
• Costs of earliest goods purchased are first to be
recognized in determining cost of goods sold
• Often parallels actual physical flow of merchandise
• Companies determine cost of ending inventory by
 taking unit cost of most recent purchase and working
backward until all units of inventory have been
costed

3. Last-In, First-Out (LIFO) (nhập sau xuất trước)

• Costs of latest goods purchased are first to be
recognized in determining cost of goods sold
• Seldom coincides (ít trùng hợp) with actual physical
flow of merchandise
• Exceptions include goods stored in piles, such as coal
or hay
• Not allow for IFRS
4. Average-Cost (phương pháp bình quân gia quyền)
• Allocates cost of goods available for sale on basis of
weighted-average unit cost incurred
• Applies weighted-average unit cost to units on
hand to determine cost of ending inventory
Balance Sheet Effects
• A major advantage of the FIFO method is that in a
period of inflation, costs allocated to ending inventory
will approximate their current cost
• A major shortcoming of the LIFO method is that in a
period of inflation, costs allocated to ending inventory
may be significantly understated in terms of current cost
Tax Effects
• Both inventory and net income are higher when
companies use FIFO in a period of inflation
• LIFO results in the lowest income taxes (because of
lower net income) during times of rising prices
• A tax rule requires that if companies use LIFO for
tax purposes they must also use it for financial
reporting purposes (LIFO conformity rule)
LO 3 Indicate the effects of inventory errors on the
financial statements.
Common Cause:
• Failure to count or price inventory correctly
• Not properly recognizing the transfer of legal title to
goods in transit
Errors affect both the income statement and balance
sheet.
Effects of Inventory Errors
Inventory errors affect the computation of cost of goods
sold and net income in two periods.

3.1. Income Statement Effects

 3.2. Balance Sheet Effects

LO 4 Explain the statement presentation and

analysis of inventory.
4.1. Presentation
Balance Sheet - Inventory classified as current asset.
Income Statement - Cost of goods sold subtracted from
sales
There also should be disclosure of
1. major inventory classifications
2. basis of accounting (cost or LCNRV)
3. costing method (FIFO, LIFO, or average-cost)
Lower-of-Cost-or-Net Realizable Value
When the value of inventory is lower than its cost
• Companies must “write down” inventory to its net
realizable value
• Net realizable value: Amount that company expects to
realize (receive from the sale of inventory)
• Example of conservatism
 4.2. Analysis
Inventory management is a double-edged sword
Inventory Turnover (chỉ số vòng quay hàng tồn kho)

Days in Inventory (
LO6 Describe the two methods of estimating
inventories.
There are two widely used methods of estimating
inventories: (1) the gross profit method, and (2) the
retail inventory method.
6.1. Gross profit (lợi nhuận) method
6.2. Retail (bán lẻ) Inventory Method Formulas