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TRƯỜNG ĐẠI HỌC KINH TẾ - ĐẠI HỌC ĐÀ NẴNG

CHAPTER 1
- ACCOUNTING OVERVIEW-
 LEARNING OBJECTIVES

LO1 Explain the essence and role of Accounting;

LO2 Identify Users of Accounting information.

Identify Accounting profession oportunities and

LO3
the important of accounting ethic
LO4 Compare financial accounting with management
accounting ;
LO5
Describe accounting process

Identify and explain the General Accepted

LO6
Accounting Principles (GAAP);
 Accounting scandals

Company Faud Results

Ø Shareholders losing $74 billion,
thousands of employees and investors
Enron Hiding debts losing their retirement accounts.
Ø Many employees losing their jobs.
Ø It filed for bankruptcy in 12/2001
Ø Over 30,000 people losing their jobs
Inflated revenues
Worldcom and investors losing over $180bn
and assets
Ø WC filed for bankruptcy in 7/2002
Xerox early revenue
Ø It was fined $10million
Corporation recognition
to turn a business
Bong Bach Tuyet from loss into profit Ø Delisting
in firm 2004-2008
 Enron scandal

Ø These financial scams took shares from being traded at over USD 90
in 2000 to just USD 1, down 99% in one year, after it came to light
that the company was altering or making up accounting records to
mislead its shareholders.
Ø All the financial misrepresentations trickled out, and it was learned
that the company accumulated debts of USD 30,000 million, and
after declaring bankruptcy, at least 20,000 employees lost their jobs.
The scandal also led to the disappearance of Arthur Andersen, one of
the world's five largest audit and accounting firms.
Ø After the scandal of financial fraud, it was legally established in the
United States and other countries that company auditors had to be
independent of their customers, and requirements and penalties were
also made stricter. Now, every board of directors of a company has
the responsibility to analyze and be aware of its accounting.
 WHAT IS ACCOUNTING?

v “Accounting is the process of identifying,

measuring, recording, and communicating
information to permit informed judgements and
decisions by users of the information.”
-American Accounting Assiciation (AAA)-
v The Accounting system: the flow of information:
Accountants
Business prepare report to
People make
transactions show the result of
decisions
occur business
operations
 Who use accounting information?
Users of reports Purpose
Stockholders To know their profit, risk capital
Government legal purposes of tax calculations, collect state and
a country-level data
Banker to evaluate potential lenders determine the

External
borrower’s ability to meet scheduled payments.
This evaluation includes a projection of future
operations, which is based on accounting
information.
Competitors to launch a new strategy, building and equipment
to purchase, how much merchandise inventory to
keep on hand..etc..
Employees to manage their bank accounts, to evaluate job
prospects, to make investments and to decide

Internal
whether to continue or change a job/position.
Managers to plan, to evaluate the firm performance and
manage risks, to build a new strategy, to make a
decision...
.......
 Financial accounting -
Management accounting

Financial Accounting Management Accounting

accounting information is used accounting information is used

for outside of organizations for inside of organizations

Must follow various of Not required by laws or any

accounting law, accounting
standards....
Look to the past to examine
financial results-> historically
focused
Use monetary measurement
accounting standard.
Look to the future with
forecasting
Use many different
measurements
 Accounting Profession

vPublic accountants: Serve the general

public as Government agencies, non-
profit organizations, State audit...
vPrivate accountants: General accounting,
accountants....
v Tax accounting
v Accounting consulting
 Accounting career paths

Accounting
Audit Taxation
Career
Paths

Managerial
Accounting Consulting
Financial
Planning/
accounting
 Accounting ethic
v Accounting ethics refers to the principles
and values that govern the behavior of
accountants in their professional
practice.
v Accounting ethics include integrity,
objectivity, confidentiality, and
professional competence.
=> help to maintain the trust of
stakeholders in the financial information
provided by accountants.
 Accounting ethic-Integrity
v Accountants should always act with
integrity. They should avoid conflicts of
interest, disclose any potential conflicts,
and act in the best interests of clients.
 Accounting ethic-Objectivity
v Accountants should be impartial and
unbiased in their professional judgments.
They should not allow personal interests
or relationships to influence their
decisions or actions
 Accounting ethic-confidentiality
v Accountants have access to sensitive
financial information and should maintain
the confidentiality of this information.
They should not disclose confidential
information to unauthorized parties or
use it for personal gain.
Accounting ethic-Professional competence

v Accountants should maintain their

professional competence through
ongoing education and training. They
should only provide services that they
are qualified to provide and should not
make misrepresentations about their
qualifications or experience.
 Questions

Q1-The annual reports are to be prepared and

published for the external user such as
__________.
A. Company, competitors, contributors and colleagues
B. Customers, creators, collaborators and contractors
C. Government, competitors, owners and top
management
D. Shareholders, investors, bankers, debenture holders
and creditors
 Questions

1. Accounting aimed at communicating

information to internal users is..........
2. Accounting aimed at communicating
information to external users is..........
 Accounting process

Identifying Recording Communicating

How do
What information
What do accountants accountants record accounting provided,
collect? financial how, who?
=========== transactions? ==========================

Identify, copy, reflect ============ Financial reports are

financial and According to timeframe u s e d t o g e n e r a t e ,
monetary transactions and object, financial analyse, explain and
based on accounting transactions disseminate finanical
documents are tracked, evaluated, information.
and saved
 Generally Accepted Accounting principles
Business
entity
concept
An organization or a
section of an organization
that stand apart from other
organizations and
individuals as a separate
economic unit.
Going
concern
The resources needed to
continue
operating indefinitely
until it provides evidence
to the contrary
 Generally Accepted Accounting principles

Assets and
services that are
Monetary acquired should
unit be recorded at
their actual cost
Only transactions
that can be Historical
expressed in Cost
monetary terms
are to be recorded
 Generally Accepted Accounting principles

The trading and profit

and loss account
should only include
the income earned
a n d e x p e n s e s Accounting
incurred for the period
current financial year An accounting period
Accrual is a span of time
during the fiscal
basic
or calendar year in
Accounting
which accountants
perform functions
(Month, quater, year..)
 Generally Accepted Accounting principles

The revenue
should be reported
and recorded at the
Matching time when goods/
service are realised
A business must
keep a record of
Revenue
expenses along Recognition
with earned
revenues .
 Generally Accepted Accounting principles

Transactions
should always be
recorded in the
s a m e ( o r
Materiality consistent) way.

F o c u s o n
transactions that are Consistency
involving important
information on
Financial- reporting
Generally Accepted Accounting principles

I f t h e r e i s
uncertainty in a
potential financial
estimate, a company
should err on the
side of caution and
report the most
conservative amount

Conservatism
 Question & answer

1. A small storage shed was purchased

from a IKEA (a home supply store) at a
discount sale price of $5,000 cash. The
clerk recorded the asset at $5,500, which
was the regular price.
A Monetary unit
B Historical Cost
C Realisation
D Going concern
 Question & answer

2. An owner of a small car repair shop

purchased shop supplies for cash of
$2,200, which will be used over the next
six months. The transaction was recorded
as a debit to shop supplies (asset) and will
be expensed as they are used?
A Matching
B Historical cost
C Realisation
D Going concern
 Question & Answer

3. Which of the following factor is not

considered while selecting accounting
policies?
a. Consistency
b. Accountancy
c. Matching
d. Conservatism
 Question & Answer

4. An owner of a milk tea chain in Danang,

sold his mother’s house where he lives
with his family. The clerk recorded this
transaction in a milk tea’ bookkeeping.
A. Consistency
B. Business entity
c. Matching
d. Conservatism
 Question & Answer

5. At the end of each year, a business

owner looks at his estimated net income
for the year and decides which
depreciation method he will use in an effort
to reduce his business income taxes to the
lowest amount possible.
A. Consistency
B. Business entity
c. Matching
d. Conservatism